<PAGE>
                       SECURITIES AND EXCHANGE COMMISSION

                             WASHINGTON, D.C. 20549

                                    FORM 10-Q


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


For the quarterly period ended January 31, 2002


                                       OR


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

For the transition period from              to
                               ------------    ------------

Commission file number 000-19608

                           ARI Network Services, Inc.

             (Exact name of registrant as specified in its charter.)


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


               330 E. Kilbourn Avenue, Milwaukee, Wisconsin 53202
               --------------------------------------------------
                     (Address of principal executive office)


Registrant's telephone number, including area code (414) 278-7676


Indicate by check mark whether the registrant (1) has filed all reports required
to be filed by Section 13 or 15(d) of The Securities Exchange Act of 1934 during
the preceding twelve months (or for such shorter period that the registrant was
required to file such reports), and (2) has been subject to such filing
requirements for the past ninety days.

         YES     X                                         NO
             --------                                         --------

As of March 13, 2002 there were 6,223,342 shares of the registrant's shares
outstanding.


                                        1
<PAGE>
                           ARI NETWORK SERVICES, INC.

                                    FORM 10-Q

                   FOR THE THREE MONTHS ENDED JANUARY 31, 2002

                                     INDEX
<TABLE>
<CAPTION>
PART I - FINANCIAL INFORMATION
                                                                                                    Page
                                                                                                    ----
<S>                                                                                                 <C>

   Item 1        Financial statements

                     Condensed balance sheets - January 31, 2002 and
                         July 31, 2001                                                               3-4

                     Condensed statements of operations for the three and six months
                         ended January 31, 2002 and 2001                                               5

                     Condensed statements of cash flows for the six months ended
                         January 31, 2002 and 2001                                                     6

                     Notes to unaudited condensed financial statements                                 7

   Item 2        Management's discussion and analysis of financial condition and results
                 of operations                                                                      7-15


PART II - OTHER INFORMATION

   Item 3        Defaults upon senior securities                                                      16

   Item 4        Submission of matters to a vote of security holders                                  16


Signatures
</TABLE>


                                       2
<PAGE>
                           ARI NETWORK SERVICES, INC.
                                 BALANCE SHEETS
                 (IN THOUSANDS, EXCEPT SHARE AND PER SHARE DATA)
                                   (Unaudited)
<TABLE>
<CAPTION>
                            ASSETS                                         JANUARY 31        JULY 31
                                                                             2002             2001
                                                                            ------           -------
<S>                                                                        <C>              <C>
Current assets:
   Cash                                                                     $   490          $   313
   Trade receivables, less allowance for doubtful accounts of $601
     at January 31, 2002 and $757 at July 31, 2001                            1,978            2,084
   Prepaid expenses and other                                                   108              140
                                                                            -------          -------
Total current assets                                                          2,576            2,537

Equipment and leasehold improvements:
   Computer equipment                                                         4,394            4,394
   Leasehold improvements                                                       239              239
   Furniture and equipment                                                    1,000            1,000
                                                                            -------          -------
                                                                              5,633            5,633
   Less accumulated depreciation and amortization                             5,394            5,293
                                                                            -------          -------
Net equipment and leasehold improvements                                        239              340

Goodwill, less accumulated amortization of $60 at January 31,
   2002 and $54 at July 31, 2001                                                  9               15

Deferred financing costs, less accumulated amortization of $266 at
   January 31, 2002 and $203 at July 31, 2001                                   144              207

Capitalized software development                                             23,963           23,533
   Less accumulated amortization                                             20,367           19,572
                                                                            -------          -------
Net capitalized software development                                          3,596            3,961
                                                                            -------          -------
                              TOTAL ASSETS                                  $ 6,564          $ 7,060
                                                                            =======          =======
</TABLE>


                                       3
<PAGE>
                           ARI NETWORK SERVICES, INC.
                                 BALANCE SHEETS
                 (IN THOUSANDS, EXCEPT SHARE AND PER SHARE DATA)
                                  (Unaudited)

<TABLE>
<CAPTION>
                     LIABILITIES AND SHAREHOLDERS' DEFICIT                                JANUARY 31           JULY 31
                                                                                             2002               2001
                                                                                          --------            ---------
<S>                                                                                       <C>                 <C>
Current liabilities:
   Current portion of notes payable to shareholder                                        $     199           $     333
   Current portion of notes payable                                                           3,121               2,902
   Current portion of line of credit to shareholder                                              --                 200
   Accounts payable                                                                             770                 951
   Deferred revenue                                                                           4,982               4,811
   Accrued payroll and related liabilities                                                    1,463               1,487
   Other accrued liabilities                                                                  1,193               1,499
   Current portion of capital lease obligations                                                  84                 173
                                                                                          ---------           ---------
Total current liabilities                                                                    11,812              12,356

Long term liabilities:
   Notes payable to shareholder                                                                  --                  15
   Notes payable                                                                                 30                  78
   Capital lease obligations                                                                    158                 158
   Accrued restructuring costs                                                                  303                 303
                                                                                          ---------           ---------
Total long term liabilities                                                                     491                 554

Shareholders' deficit:
   Cumulative preferred stock, par value $.001 per share, 1,000,000 shares
      authorized; 20,350 shares issued and outstanding at January 31, 2002 and
      July 31, 2001                                                                              --                  --
   Common stock, par value $.001 per share, 25,000,000 shares authorized;
       6,223,342 and 6,184,281 shares issued and outstanding at January 31, 2002
       and July 31, 2001, respectively                                                            6                   6

   Common stock warrants and options                                                          2,459               2,459

   Additional paid-in-capital                                                                91,811              91,797
   Accumulated deficit                                                                     (100,015)           (100,112)
                                                                                          ---------           ---------
Total shareholders' deficit                                                                  (5,739)             (5,850)
                                                                                          ---------           ---------

                TOTAL LIABILITIES AND SHAREHOLDERS' DEFICIT                               $   6,564           $   7,060
                                                                                          =========           =========
</TABLE>


See notes to unaudited condensed financial statements.


Note: The balance sheet at July 31, 2001 has been derived from the audited
balance sheet at that date but does not include all of the information and
footnotes required by accounting principles generally accepted in the United
States for complete financial statements.


                                       4
<PAGE>
                           ARI NETWORK SERVICES, INC.
                            STATEMENTS OF OPERATIONS
                      (IN THOUSANDS, EXCEPT PER SHARE DATA)
                                   (UNAUDITED)
<TABLE>
<CAPTION>
                                                                             THREE MONTHS ENDED         SIX MONTHS ENDED
                                                                                 JANUARY 31                JANUARY 31
                                                                          2002          2001          2002          2001
                                                                         -------       -------       -------      --------
<S>                                                                      <C>           <C>           <C>          <C>
Net revenues:
    Subscriptions, support and other services fees                       $ 2,228       $ 2,550       $ 4,683      $  5,102
    Software licenses and renewals                                           671           842         1,491         1,601
    Professional services                                                    419           694           964         1,525
                                                                         -------       -------       -------      --------
                                                                           3,318         4,086         7,138         8,228
Operating expenses:
    Cost of products and services sold:
       Subscriptions, support and other services fees                        (58)          317           151           690
       Software licenses and renewals *                                      423           907           819         1,874
       Professional services                                                 152           402           360           904
                                                                         -------       -------       -------      --------
                                                                             517         1,626         1,330         3,468
    Depreciation and amortization (exclusive of amortization of
       software products included in cost of products and
       services sold)                                                         53           370           107           770
    Customer operations and support                                          291           409           594           813
    Selling, general and administrative                                    1,660         2,200         3,517         4,433
    Software development and technical support                               541           830         1,187         1,675
                                                                         -------       -------       -------      --------
Operating expenses before amounts capitalized                              3,062         5,435         6,735        11,159
    Less capitalized portion                                                (172)         (508)         (430)         (940)
                                                                         -------       -------       -------      --------
Net operating expenses                                                     2,890         4,927         6,305        10,219
                                                                         -------       -------       -------      --------
Operating income (loss)                                                      428          (841)          833        (1,991)
Other expense:
    Interest expense                                                        (411)         (396)         (740)         (767)
    Other, net                                                                17            21             4            20
                                                                         -------       -------       -------      --------
Total other expense                                                         (394)         (375)         (736)         (747)
                                                                         -------       -------       -------      --------
Net income (loss)                                                        $    34       $(1,216)      $    97      $ (2,738)
                                                                         =======       =======       =======      ========
Average common shares outstanding                                          6,197         6,168         6,190         6,168

Basic and diluted net income (loss) per share                            $  0.01       ($ 0.20)      $  0.02      ($  0.44)
                                                                         =======       =======       =======      ========
</TABLE>


See notes to unaudited condensed financial statements.


    *  Includes amortization of software products of $405, $793, $795 and
       $1,672 and excludes other depreciation and amortization shown separately


                                       5
<PAGE>
                           ARI NETWORK SERVICES, INC.
                            STATEMENTS OF CASH FLOWS
                                 (IN THOUSANDS)
                                   (UNAUDITED)
<TABLE>
<CAPTION>
                                                                                  SIX MONTHS ENDED
                                                                                    JANUARY 31
                                                                              2002              2001
                                                                             -------           -------
<S>                                                                          <C>               <C>
OPERATING ACTIVITIES
   Net income (loss)                                                         $    97           $(2,738)
   Adjustments to reconcile net income (loss) to net cash provided
     by operating activities:
         Amortization of network platform                                         --               286
         Amortization of software products                                       795             1,672
         Amortization of goodwill                                                  6               329
         Amortization of deferred financing costs and debt discount              473               476
         Depreciation and other amortization                                     101               155
         Net change in receivables, prepaid expenses and other
           current assets                                                        138               239
         Net change in accounts payable, deferred revenue and
           accrued liabilities                                                  (340)            1,304
                                                                             -------           -------
   Net cash provided by operating activities                                   1,270             1,723

INVESTING ACTIVITIES
   Purchase of equipment and leasehold improvements                               --               (10)
   Software product costs capitalized                                           (430)             (940)
                                                                             -------           -------
   Net cash used in investing activities                                        (430)             (950)

FINANCING ACTIVITIES
   Repayments under line of credit                                              (200)               --
   Payments under notes payable                                                 (388)             (405)
   Payments of capital lease obligations                                         (89)              (82)
   Debt issuance costs incurred                                                   --               (39)
   Proceeds from issuance of common stock                                         14                --
                                                                             -------           -------
   Net cash used in financing activities                                        (663)             (526)
                                                                             -------           -------
Net increase in cash                                                             177               247
Cash at beginning of period                                                      313               563
                                                                             -------           -------
Cash at end of period                                                        $   490           $   810
                                                                             =======           =======
Cash paid for interest                                                       $   267           $   291
                                                                             =======           =======

NONCASH INVESTING AND FINANCING ACTIVITIES
Capital lease obligations incurred for:
   Computer equipment                                                        $    --           $   141
</TABLE>


See notes to unaudited condensed financial statements.


                                       6
<PAGE>
                     NOTES TO CONDENSED FINANCIAL STATEMENTS
                                   (UNAUDITED)
                                JANUARY 31, 2002

1.       BASIS OF PRESENTATION

The accompanying unaudited financial statements have been prepared and reviewed
in accordance with accounting principles generally accepted in the United States
for interim financial information. Accordingly, they do not include all of the
information and footnotes required by accounting principles generally accepted
in the United States for fiscal year end financial statements. In the opinion of
management, all adjustments (consisting of normal recurring accruals) considered
necessary for a fair presentation have been included. Operating results for the
three and six months ended January 31, 2002 are not necessarily indicative of
the results that may be expected for the fiscal year ending July 31, 2002. For
further information, refer to the financial statements and footnotes thereto
included in the Company's annual report on Form 10-K for the year ended July 31,
2001.

2.       BASIC AND DILUTED NET INCOME (LOSS) PER SHARE

The weighted average number of shares outstanding used to calculate basic and
diluted earnings per share result in the same earnings per share amount.

3.       PREFERRED STOCK

The Series A preferred stock accrues dividends on a quarterly basis,
cumulatively, at a rate per annum equal to the product of the stated value
thereof and 2% above the prime rate (minimum dividend rate of 10% and maximum of
14%). All Series A preferred stock must be redeemed at $100 per share plus
accrued and unpaid dividends prior to any payment of dividends on, or
repurchases by the Company of, the Company's common stock. Prior to August 1,
2002, dividends, if declared by the Board of Directors, can be paid in either
cash or additional shares of Series A preferred stock. The total amount of
dividends in arrears on the Series A preferred stock is $1,160,000 at January
31, 2002.

4.       NOTES PAYABLE

The convertible debentures, issued on April 27, 2000, and accrued interest
thereon are convertible into common stock at a rate of $4 per share, subject to
certain adjustments. Concurrent with the issuance of the debentures, the Company
issued the investors 600,000 common stock purchase warrants expiring April 27,
2005 and 800,000 investment options which expired October 27, 2001. Each of the
warrants are exercisable for one share of common stock at a price of $6 per
share. The warrants and options, which were originally estimated to have a value
of $2,354,000, less accumulated amortization, reduce the carrying amount of the
debt.


                MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
                       CONDITION AND RESULTS OF OPERATIONS

                              RESULTS OF OPERATIONS

Total revenue for the quarter ended January 31, 2002 decreased $768,000 or 19%
compared to the same period last year, primarily due to the expected decline in
non-Equipment Industry revenue and a decrease in new customers in the Equipment
Industry. Earnings improved 103% from a net loss of $1,216,000, or $0.20 per
share for the quarter ended January 31, 2001 to net income of $34,000 or $0.01
per share for the quarter ended January 31, 2002. Management believes that, due
to the restructuring in the fourth quarter of fiscal 2001 which focused the
Company on our core catalog business and reduced both cash and non-cash expenses
to bring them in line with our revenues, we will continue to generate enough
cash from operations to fund investment and debt, although earnings may be
negative for the remainder of fiscal 2002. See "Forward Looking Statements."


                                       7
<PAGE>
                   CRITICAL ACCOUNTING POLICIES AND ESTIMATES

General

The Company's discussion and analysis of its financial condition and results of
operations are based upon its financial statements, which have been prepared in
accordance with accounting principles generally accepted in the United States.
The preparation of these financial statements requires the Company to make
estimates and judgments that affect the reported amounts of assets, liabilities,
revenues and expenses, and related disclosure of contingent assets and
liabilities. On an on-going basis, the Company evaluates its estimates,
including those related to customer contracts, bad debts, intangible assets,
financing instruments, restructuring and other accrued revenues and expenses.
The Company bases its estimates on historical experience and on various other
assumptions that are believed to be reasonable under the circumstances, the
results of which form the basis for making judgments about the carrying values
of assets and liabilities that are not readily apparent from other sources.
Actual results may differ from these estimates under different assumptions or
conditions.

The Company believes the following critical accounting policies affect its more
significant judgments and estimates used in the preparation of its financial
statements.

Revenue Recognition

Revenue for use of the network and for information services is recognized in the
period such services are utilized. Revenue from annual or periodic maintenance
fees, license and license renewal fees and catalog subscription fees is
recognized ratably over the period the service is provided. Arrangements that
include acceptance terms beyond the Company's standard terms are not recognized
until acceptance has occurred. If collectibility is not considered probable,
revenue is recognized when the fee is collected. Arrangements that include
professional services are evaluated to determine whether those services are
essential to the functionality of other elements of the arrangement. When
professional services are not considered essential, the revenue allocable to the
professional services is recognized as the services are performed. When
professional services are considered essential, revenue under the arrangement is
recognized pursuant to contract accounting using the percentage-of-completion
method with progress-to-completion measured based upon labor hours incurred.
When the current estimates of total contract revenue and contract cost indicate
a loss, a provision for the entire loss on the contract is made. Revenue on
arrangements with customers who are not the ultimate users (resellers) is
deferred if there is any contingency on the ability and intent of the reseller
to sell such software to a third party.

Bad Debt

The Company maintains allowances for doubtful accounts for estimated losses
resulting from the inability of its customers to make required payments. The
Company currently reserves for most amounts due over 90 days, unless there is
reasonable assurance of collectability. If the financial condition of the
Company's customers were to deteriorate, resulting in an impairment of their
ability to make payments, additional allowances may be required.

Use of Estimates

The preparation of the Company's financial statements in conformity with
accounting principles generally accepted in the United States requires
management to make estimates and assumptions about accrued expenses, including
royalties and other contingent expenses that affect the amounts reported in the
financial statements and accompanying notes. Actual results could differ from
those estimates.

Debt Instruments

The Company valued a debt discount for Common Stock Warrants and Options granted
in consideration for the RGC Debenture and the WITECH Facility using the Black
Scholes valuation method. Non-cash interest expense is recorded for the
amortization of the debt discount over the term of the debt.

Impairment of Long-Lived Assets

Equipment and leasehold improvements, capitalized software development costs and
goodwill are reviewed for impairment whenever events or changes in circumstances
indicate that the carrying amount may not be recoverable. If the sum of the
expected undiscounted cash flows is less than the carrying value of the related
asset or group of assets, a loss is recognized for the difference between the
fair value and carrying value of the asset or group of assets.


                                       8
<PAGE>
                                    REVENUES

The Company is a leading provider of technology-enabled business solutions for
sales, service and life cycle product support in the manufactured equipment
market. The Company currently serves over 100 manufacturers and 20,000 dealers
in more than 100 countries in 12 segments of the worldwide manufactured
equipment market including outdoor power, recreation vehicles, auto and truck
parts aftermarket, marine, construction, power sports, floor maintenance and
others. The Company supplies three types of software and services: robust Web
and CD-ROM electronic parts catalogs, transaction services and template-based
website services. The Company's primary business is electronic cataloging; the
others are complementary businesses that leverage our catalog position.

The Company also has a supplemental business that provides e-Commerce services
to certain non-equipment industries including agribusiness and publishing. As
the Company focuses on its core businesses in the Equipment industry, revenues
in the non-equipment industry are expected to decline significantly during
fiscal 2002.

Management reviews the Company's recurring vs. non-recurring revenue in the
aggregate and within the North American Equipment, Non-North American Equipment
and non-Equipment markets.

The following table sets forth, for the periods indicated, certain revenue
information derived from the Company's unaudited financial statements.



                           REVENUE BY INDUSTRY SECTOR
                                 (IN THOUSANDS)
<TABLE>
<CAPTION>
                                    THREE MONTHS ENDED                              SIX MONTHS ENDED
    INDUSTRY SECTOR                     JANUARY 31               PERCENT               JANUARY 31               PERCENT
                                   2002            2001          CHANGE           2002            2001           CHANGE
                                  ------          ------        --------         ------          ------        ---------
<S>                               <C>             <C>            <C>             <C>             <C>            <C>
EQUIPMENT INDUSTRY

    North American
       Recurring                  $1,919          $2,150          (11%)          $3,883          $3,781            3%
       Non-recurring                 423             699          (39%)           1,160           1,574          (26%)
                                  ------          ------                         ------          ------
           Subtotal                2,342           2,849          (18%)           5,043           5,355           (6%)

    Non-North American
       Recurring                     260             269           (3%)             478             547          (13%)
       Non-recurring                  25              80          (69%)             123             207          (41%)
                                  ------          ------                         ------          ------
           Subtotal                  285             349          (18%)             601             754          (20%)

Total Equipment Industry
    Recurring                      2,179           2,419          (10%)           4,361           4,328            1%
    Non-recurring                    448             779          (42%)           1,283           1,781          (28%)
                                  ------          ------                         ------          ------
           Subtotal                2,627           3,198          (18%)           5,644           6,109           (8%)

NON-EQUIPMENT INDUSTRY
    Recurring                        691             888          (22%)           1,486           2,072          (28%)
    Non-recurring                     --              --           --                 8              47          (83%)
                                  ------          ------                         ------          ------
           Subtotal                  691             888          (22%)           1,494           2,119          (29%)

TOTAL REVENUE
    Recurring                      2,870           3,307          (13%)           5,847           6,400           (9%)
    Non-recurring                    448             779          (42%)           1,291           1,828          (29%)
                                  ------          ------                         ------          ------
           Grand Total            $3,318          $4,086          (19%)          $7,138          $8,228          (13%)
                                  ======          ======                         ======          ======
</TABLE>


                                       9
<PAGE>
Recurring revenues are derived from catalog subscription fees, software
maintenance and support fees, software license renewals, network traffic and
support fees and other miscellaneous subscription fees. Non-recurring revenues
are derived from initial software licenses and professional services fees.
Recurring revenue, as a percentage of total revenue, was 82% for the six months
ended January 31, 2002 compared to 78% for the same period last year. Management
believes that the relationship of approximately three quarters recurring revenue
to one quarter non-recurring revenue establishes an appropriate level of base
revenue while the Company continues to add new sales to drive future increases
in recurring revenue. If the manufacturing sector of the economy improves in the
future, the percentage of recurring revenue may be slightly lower, indicating a
higher amount of new business. This ratio is expected to fluctuate from quarter
to quarter and year to year, depending on the size and timing of new business.
Management expects the Equipment Industry revenues to increase and non-Equipment
Industry revenues to decrease resulting in decreased total revenues for the
remainder of fiscal 2002.

Equipment Industry

The Equipment Industry comprises several vertical markets including outdoor
power, recreation vehicles, motorcycles, auto and truck parts after-market,
manufactured housing, farm equipment, marine, construction, power sports, floor
maintenance and others primarily in the U.S., Canada, Europe and Australia.
Management's strategy is to expand the Company's electronic parts catalog
software and services business with manufacturers and distributors and their
dealers in the existing vertical markets, add supplemental products for existing
customers, and then expand to other similar markets in the future. Revenues in
the Equipment Industry increased, as a percentage of total revenues, from 74%
for the six months ended January 31, 2001 to 79% for the six months ended
January 31, 2002. Management expects revenues in the Equipment Industry to
increase for the remainder of fiscal 2002, as management continues to focus
attention and resources in this industry, but not at a rate sufficient to offset
the decline in non-Equipment Industry revenues.

    North American

    Recurring revenues in the North American Equipment Industry decreased for
    the three month period ended January 31, 2002, compared to the same period
    last year, primarily due to the decline in the base of customers of the
    Company's communications product. Non-recurring revenues in the North
    American Equipment Industry decreased for the three and six month periods
    ended January 31, 2002, compared to the same periods last year, due to fewer
    new customer contracts because of the decline in the manufacturing sector of
    the economy.

    Non-North American

    Recurring revenues in the Non-North American Equipment Industry decreased
    for the three and six month periods ended January 31, 2002, compared to the
    same periods last year, primarily due to the loss of a major customer in the
    agricultural equipment market. Non-recurring revenues in the Non-North
    American Equipment Industry decreased for the three and six month periods
    ended January 31, 2002, compared to the same periods last year, primarily
    due to the decrease in sales to new customers.

Non-Equipment Industry

The Company's business outside of the Equipment Industry includes sales of
database management services and electronic communications services to the
agricultural inputs industry, the on-line provision of information for
republication to the non-daily newspaper publishing industry and until December
31, 2000, database management services to the railroad industry. Revenues in the
non-Equipment Industry decreased for the three and six month periods ended
January 31, 2002, compared to the same periods last year, due to the Company's
focus in the Equipment Industry and the non-renewal of the railroad industry
business. Management expects revenues in the non-Equipment Industry will decline
significantly for the remainder of fiscal 2002. The Company's five-year contract
with the Associated Press, on which its business in the non-daily newspaper
publishing industry depends and which represented approximately $1.5 million in
revenue on an annual basis, expired on February 28, 2002.


                                       10
<PAGE>
                       COST OF PRODUCTS AND SERVICES SOLD

The following table sets forth, for the periods indicated, certain revenue and
variable cost of products and services sold information derived from the
Company's unaudited financial statements.

   COST OF PRODUCTS AND SERVICES SOLD AS A PERCENT OF REVENUE BY REVENUE TYPE
                                 (IN THOUSANDS)
<TABLE>
<CAPTION>
                                              THREE MONTHS ENDED                               SIX MONTHS ENDED
                                                  JANUARY 31                                      JANUARY 31
                                                                           PERCENT                                         PERCENT
                                             2002           2001            CHANGE           2002             2001           CHANGE
                                            ------         ------          --------         ------           ------        ---------
<S>                                         <C>            <C>             <C>              <C>              <C>           <C>
Subscriptions, support and other
   services fees
   Revenue                                  $ 2,228        $2,550            (13%)          $4,683           $5,102            (8%)
   Cost of revenue                              (58)          317           (118%)             151              690           (78%)
   Cost of revenue as a percent of
       revenue                                   (3%)          12%                               3%              14%

Software licenses and renewals
   Revenue                                      671           842            (20%)           1,491            1,601            (7%)
   Cost of revenue                              423           907            (53%)             819            1,874           (56%)
   Cost of revenue as a percent of
       revenue                                   63%          108%                              55%             117%


Professional services
   Revenue                                      419           694            (40%)             964            1,525           (37%)
   Cost of revenue                              152           402            (62%)             360              904           (60%)
   Cost of revenue as a percent of
       revenue                                   36%           58%                              37%              59%


Total
   Revenue                                  $ 3,318        $4,086            (19%)          $7,138           $8,228           (13%)
   Cost of revenue                              517         1,626            (68%)           1,330            3,468           (62%)
   Cost of revenue as a percent of
       revenue                                   16%           40%                              19%              42%
</TABLE>


Cost of subscriptions, support and other services fees consists primarily of
telecommunications and catalog replication and distribution costs and royalties
on revenues in the publishing industry. Cost of subscriptions, support and other
services fees as a percentage of revenue decreased significantly for the three
and six month periods ended January 31, 2002, compared to the same periods last
year, primarily due to the reduction of an accrual for royalties related to the
settlement of a contract in the publishing industry. Management expects gross
margins, as a percent of revenue from subscriptions, support and other services
fees, to be relatively consistent from quarter to quarter, once the royalties
from revenues in the publishing industry are no longer being incurred.

Cost of software licenses and renewals consists primarily of amortization of
software products, royalties and software distribution costs. Cost of software
licenses and renewals as a percentage of revenue decreased for the three and six
month period ended January 31, 2002, compared to the same periods last year,
primarily due to lower software amortization costs as a result of the
restructuring in the fourth quarter of fiscal 2001 and the sale of software
licenses with no associated royalties. Management expects gross margins from
software licenses and renewals to fluctuate from quarter to quarter based on the
mix of products and services sold.

Cost of professional services consists of customization and catalog production
labor. Cost of professional services as a percentage of revenue decreased for
the three and six month periods ended January 31, 2002, compared to the same
periods last year, primarily due to a decrease in communication software
customization, which has a lower margin. Management expects cost of professional
services to fluctuate from quarter to quarter depending on the mix of services
sold and on the Company's performance towards the contracted amount for
customization projects.


                                       11
<PAGE>
                               OPERATING EXPENSES

The following table sets forth, for the periods indicated, certain operating
expense information derived from the Company's unaudited financial statements.

                               OPERATING EXPENSES
                                 (IN THOUSANDS)

<TABLE>
<CAPTION>
                                                THREE MONTHS ENDED                           SIX MONTHS ENDED
                                                    JANUARY 31              PERCENT             JANUARY 31                PERCENT
                                              2002           2001            CHANGE      2002               2001           CHANGE
                                             -------       -------                      -------           --------
<S>                                          <C>           <C>              <C>         <C>               <C>              <C>
Cost of products and services sold           $   517       $ 1,626           (68%)      $ 1,330           $  3,468           (62%)
Customer operations and support                  291           409           (29%)          594                813           (27%)
Selling, general and administrative            1,660         2,200           (25%)        3,517              4,433           (21%)
Software development and technical
    support                                      541           830           (35%)        1,187              1,675           (29%)
Less capitalized portion                        (172)         (508)          (66%)         (430)              (940)          (54%)
Depreciation and amortization                     53           370           (86%)          107                770           (86%)
                                             -------       -------                      -------           --------
    Net operating expenses                   $ 2,890       $ 4,927           (41%)      $ 6,305           $ 10,219           (38%)
                                             =======       =======                      =======           ========
</TABLE>

Customer operations and support consists primarily of data center operations,
software maintenance agreements for the Company's core network and customer
support costs. Customer operations and support costs decreased for the three and
six month periods ended January 31, 2002, compared to the same periods last
year, primarily due to the cost reductions associated with the Company's
restructuring. Management expects customer operations and support costs to
continue to be lower than last year for the remainder of fiscal 2002 due to the
cost containment efforts instituted by the restructuring.

Selling, general and administrative expenses ("SG&A") decreased for the three
and six month periods ended January 31, 2002, compared to the same periods last
year, primarily due to the cost reductions associated with the Company's
restructuring. SG&A, as a percentage of revenue, decreased from 54% for the six
month period ended January 31, 2001 to 49% for the six month period ended
January 31, 2002. Management expects costs in SG&A to continue to be lower than
last year for the remainder of fiscal 2002 due to the cost containment efforts
instituted by the restructuring.

The Company's technical staff (in-house and contracted) performs both software
development and technical support and software customization and data conversion
services for customer applications. Therefore, management expects fluctuations
between software customization and data conversion services and development and
technical support expenses quarter to quarter, as the mix of development and
customization activities will change based on customer requirements. Software
development and technical support costs decreased for the three and six month
periods ended January 31, 2002, compared to the same periods last year,
primarily due to the reduction of resources related to the Company's
communications products as a result of the restructuring. Management expects
software development and technical support costs to continue to be lower than
the previous year for the remainder of fiscal 2002 due to the cost containment
efforts instituted by the restructuring.

Capitalized software product costs represented 36% of software development and
technical support for the six month period ended January 31, 2002, compared to
56% for the same period last year. Management expects capitalized software
product costs to fluctuate from quarter to quarter depending on the deployment
of the Company's resources between early stage research, software development
available for capitalization, data conversion, customer customizations and
maintenance and technical support.

Depreciation and amortization expense decreased significantly for the three and
six month periods ended January 31, 2002, compared to the same periods last
year. Management expects depreciation and amortization to continue to be
significantly lower than the previous year for the remainder of fiscal 2002 due
to the write-off of long-lived assets related to the Company's network platform
at the end of fiscal 2001.


                                       12
<PAGE>
                                   OTHER ITEMS

Earnings improved 104% from a loss of $2,738,000 for the six month period ended
January 31, 2001, to net income of $97,000 for the six month period ended
January 31, 2002. The substantial improvement in earnings is attributable to the
restructuring, which focused the Company on its core catalog business and
reduced both cash and non-cash expenses to bring them in line with our revenues.

Interest paid or accrued for payment decreased for the six month period ended
January 31, 2002, compared to the same period last year, because the Company
paid off $1,132,000 of debt and capital lease obligations since January 31,
2001. Non-cash interest expense of approximately $410,000 was incurred for each
of the six month periods ended January 31, 2001 and 2002 due to debt discount
amortization for the Debenture sold to RGC in April 2000.

Since December 1995, the Company has had a formal and aggressive business
development program aimed at identifying, evaluating and closing acquisitions
that augment and strengthen the Company's market position, product offerings,
and personnel resources. Since the program's inception, four acquisitions have
been completed, all of which were fully integrated into the Company's operations
prior to fiscal year 2000. The business development program is still a strong
component of the Company's growth strategy.


                         LIQUIDITY AND CAPITAL RESOURCES

The following table sets forth, for the periods indicated, certain cash flow
information derived from the Company's unaudited financial statements.


                              CASH FLOW INFORMATION
                                 (IN THOUSANDS)
<TABLE>
<CAPTION>
                                                 THREE MONTHS ENDED                        SIX MONTHS ENDED
                                                    JANUARY 31                                JANUARY 31                 PERCENT
                                              2002              2001                   2002              2001             CHANGE
                                              -----           -------                 -------           -------          -------
<S>                                           <C>             <C>        <C>          <C>               <C>              <C>
Net cash provided by operating activities
   before changes in working capital          $ 728           $   183     298%        $ 1,472           $   180            718%
Net cash used in investing activities          (172)             (500)     66%           (430)             (950)            55%
                                              -----           -------                 -------           -------
   Subtotal                                     556              (317)    275%          1,042              (770)           235%
Effect of net changes in working capital        (54)            1,130    (105%)          (188)            1,543           (112%)
                                              -----           -------                 -------           -------
   Net cash provided by operating and
      investing activities                    $ 502           $   813     (38%)       $   854           $   773             10%
                                              =====           =======                 =======           =======
</TABLE>

Net cash provided by operating activities before changes in working capital
increased for the three and six month periods ended January 31, 2002, compared
to the same periods last year, due to the reduction in cash expenses related to
the Company's restructuring. Net cash used in investing activities decreased for
the three and six month periods ended January 31, 2002, compared to the same
periods last year, primarily due to decreased costs attributable to the
development of the Company's communications software. The effect of net changes
in working capital is dependent on the timing of payroll and other cash
disbursements, accruals and the timing of invoices and may vary significantly
from quarter to quarter. Management expects the summation of cash provided by
operating activities and used in investing activities to be positive for the
fiscal year ended July 31, 2002, however, there can be no assurance that this
result will be ultimately achieved.

At January 31, 2002, the Company had cash of approximately $490,000 compared to
approximately $313,000 at July 31, 2001.


                                       13
<PAGE>
The following table sets forth, for the periods indicated, certain information
related to the Company's debt derived from the Company's unaudited financial
statements.


                                  DEBT SCHEDULE
                                 (IN THOUSANDS)
<TABLE>
<CAPTION>
                                                              JANUARY 31         JULY 31
                                                                2002              2001              NET
                                                             (UNAUDITED)        (AUDITED)         CHANGE
                                                             -----------        ---------         ------
<S>                                                          <C>                <C>               <C>
Debt to Shareholder:
   Current portion of line of credit                           $    --           $   200           $(200)
   Current portion of notes payable                                222               333            (111)
   Long-term portion of notes payable                               --                56             (56)
   Debt discount (common stock warrants)                           (23)              (41)             18
                                                               -------           -------           -----
      Total Debt to Shareholder                                    199               548            (349)

Subordinated Debenture:
   Notes payable*                                                4,000             4,000              --
   Debt discount (common stock warrants and options)              (981)           (1,373)            392
                                                               -------           -------           -----
       Total Subordinated Debenture                              3,019             2,627             392

Other Debt:
    Current portion of notes payable other                         102               275            (173)
    Long-term notes payable other                                   30                78             (48)
                                                               -------           -------           -----
       Total Other Debt                                            132               353            (221)
                                                               -------           -------           -----
Total Debt                                                     $ 3,350           $ 3,528           $(178)
                                                               =======           =======           =====
</TABLE>


*      The debenture includes a condition which was in default due to the
       Company's delisting from Nasdaq, which gives RGC the right to call the
       debenture, although they have not actually done so.

On April 27, 2000, the Company issued and sold pursuant to a Securities Purchase
Agreement, dated as of April 25, 2000, by and among the Company and RGC
International Investors, LDC (the "Investor"), (i) a convertible subordinated
debenture in the amount of $4,000,000 due on April 27, 2003 (the "Debenture"),
and convertible into shares of the Company's common stock, (ii) warrants to
purchase 600,000 shares of Common Stock (the "Warrants"), and (iii) an
investment option to purchase 800,000 shares of Common Stock (the "Investment
Option"). The Investment Option expired on October 27, 2001 and the Warrants
expire on April 27, 2005. The Debenture is convertible into Common Stock at $4
per share and the Warrants are exercisable at $6 per share. The Company is
required to maintain listing of its common stock on the Nasdaq National Market,
the Nasdaq Small Cap Market, the New York Stock Exchange or the American Stock
Exchange; failure to meet this requirement results in the Debenture becoming
fully due at 130% of principal and accrued interest, as well as an increase in
the interest rate from 7% to 17%. At any time after October 27, 2000, the
Company can require the Investor to convert the amount owed under the Debenture
into Common Stock at $4.00 per share provided that: (i) the closing bid price of
the Common Stock has been greater than $6.60 for twenty (20) consecutive trading
days and (ii) the Company's resale registration statement has been effective for
at least three (3) months. As long as $500,000 or more principal amount of the
Debenture is outstanding, the Company agreed not to: (i) pay any dividends or
make any other distribution on our common stock, other than stock dividends and
stock splits; (ii) repurchase or redeem any shares of our capital stock, except
in exchange for common stock or preferred stock; (iii) incur or assume any
liability for borrowed money, except our existing debt, debt from a bona fide
financial lending institution, indebtedness to trade creditors, borrowings used
to repay the debenture, indebtedness assumed or incurred in connection with the
acquisition of a business, product, license or other asset, refinancing of any
of the above, and indebtedness that is subordinate to the debenture; (iv) sell
or otherwise dispose of assets outside the normal course of business, except the
sale of a business, product, license or other asset that our board of directors
determines is in the best interests of us and our shareholders, and sales of
assets with a value not exceeding $500,000 in any 12-month period following the
issuance of the debenture; (v) lend money or make advances to any person not in
the ordinary course of business, except loans to subsidiaries or joint ventures
approved by a majority of our independent directors, guarantee another person's
liabilities, except, among other things, guarantees made in connection with the
acquisition of a business, product, license or other asset.

The Company was delisted on July 7, 2001 from the NASDAQ National Market System
but is currently listed on the NASDAQ Bulletin Board Market. The delisting
resulted in a default condition on the RGC debenture, which gives RGC the right
to accelerate the Debenture, although they have not actually done so. If the
Company is unable to negotiate a new debenture or obtain waivers from the
Investor, shareholders could be materially and adversely affected.

ARI has a term loan with WITECH for an original principal amount of $1.0 million
payable in equal monthly principal installments over three years, commencing
November 1, 1999 and which bears interest at prime plus 4.0%. As of March 13,
2002 there was $194,000 outstanding under the WITECH term loan. The only
financial covenant was that ARI maintained a net worth (calculated in accordance
with accounting principles generally accepted in the United States) of at least
$1 million. This net worth covenant was waived as of July 31, 2001 and for the
fiscal year ended July 31, 2002.


                                       14
<PAGE>
On September 28, 1999, ARI and RFC Capital Corporation ("RFC") executed a
Receivables Sales Agreement (the "Sale Agreement") establishing a $3.0 million
working capital facility (the "RFC Facility"). The three-year Sale Agreement
allows RFC to purchase up to $3.0 million (the "Purchase Commitment") of ARI's
accounts receivable. The Purchase Commitment may be increased in increments of
$1.0 million upon mutual agreement and a payment by ARI of $10,000 for each $1.0
million increase. Under the Sale Agreement, RFC purchases 90% of eligible
receivables. In connection with the Sale Agreement ARI was required to pay a
Commitment Fee of $45,000 on September 28, 1999, $30,000 on September 28, 2000,
and $15,000 on September 28, 2001. In addition, ARI is obligated to pay a
monthly program fee equal to the greater of (a) $3,000 or (b) the amount of the
purchased but uncollected receivables times the prime rate plus 2%. ARI may
terminate the Sale Agreement prior to three-year term by paying 2.0% of the
Purchase Commitment during the second year, and 1.0% of the Purchase Commitment
during the third year. The RFC Facility expires on September 28, 2002. RFC has
indicated to the Company that the Facility will be extended, although there can
be no assurance that this will occur. As of March 13, 2002, the balance of the
RFC Facility was $650,000.

Management believes that funds generated from operations and the RFC Facility
will be adequate to fund the Company's operations, investments and debt payments
through fiscal 2002 if the RFC Facility is extended and the Debenture is
successfully renegotiated or the necessary waiver is obtained from RGC. If
management is unable to renegotiate the Debenture or obtain the necessary
waiver, the Company will remain in default and owe in excess of $5 million,
which would have a material adverse effect on the Company. The Company does not
expect to be in a position to pay back the Debenture if it is accelerated or at
the scheduled maturity date. Management has restructured the Company to reduce
cash overhead by over $2 million in fiscal 2002. Management is also continually
analyzing its anticipated cash flows under a variety of growth scenarios ranging
from modest contraction to modest growth. Management believes that, provided the
defaults can be cured, either (i) sufficient cash can be generated from the
business to fund operations and a modest level of investment or (ii) that the
cash profile of the business can be further restructured to be self-funding,
although there can be no assurance that these efforts will be successful.

The Company believes that earnings before interest, taxes, depreciation and
amortization ("EBITDA") is generally accepted as providing useful information
regarding a company's ability to service and/or incur debt. EBITDA increased
from $471,000 for the six month period ended January 31, 2001 to $1,739,000 for
the six month period ended January 31,2002 primarily due to reductions in cash
expenses as a result of the restructuring. Management believes that EBITDA will
continue to be positive for the remainder of fiscal 2002, although there can be
no assurance that this will occur.

The Company has included data with respect to EBITDA because it is commonly used
as a measurement of financial performance and by investors to analyze and
compare companies on the basis of operating performance. EBITDA is not a
measurement of financial performance under accounting principles generally
accepted in the United States and should not be considered an alternative to
operating income, as determined in accordance with accounting principles
generally accepted in the United States, as an indicator of our operating
performance, or to cash flows from operating activities, as determined in
accordance with generally accepted generally accepted in the United States, as a
measure of our liquidity. EBITDA is not necessarily comparable with similarly
titled measures for other companies.


                           FORWARD LOOKING STATEMENTS


Certain statements contained in this Form 10-Q are forward looking statements
including revenue growth, future cash flows and cash generation and sources of
liquidity. Expressions such as "believes," "anticipates," "expects," and similar
expressions are intended to identify such forward looking statements. Several
important factors can cause actual results to materially differ from those
stated or implied in the forward looking statements. Such factors include, but
are not limited to the factors listed on exhibit 99.1 of the Company's annual
report on Form 10-K for the year ended July 31, 2001.


                                       15
<PAGE>
                           PART II - OTHER INFORMATION


ITEM 3 - DEFAULTS UPON SENIOR SECURITIES

(a) See Part I, Item 2 Management's discussion and analysis of financial
    condition and results of operation under liquidity with respect to
    information of the Company's violation of requirements of its debenture with
    RGC International Investors, LDC.


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

(a)  The Company held its 2001 Annual Meeting of Shareholders on December 13,
     2001. The meeting was adjourned because there was not a quorum of votes and
     reconvened on January 31, 2002 to report the results of the shareholder
     votes.

(b)  Votes cast for the ratification of the appointment of Brian E. Dearing to
     serve as director until the 2004 Annual Shareholder's Meeting were as
     follows:

<TABLE>
<S>               <C>                   <C>
                  For                   3,359,054
                  Against                       0
                  Abstained                82,212
                  Broker Non-Vote               0
</TABLE>


     Votes cast for the ratification of the appointment of Richard W. Weening to
     serve as a director until the 2004 Annual Shareholder's meeting were as
     follows:

<TABLE>
<S>               <C>                   <C>
                  For                   3,368,391
                  Against                       0
                  Abstained                72,875
                  Broker Non-Vote               0
</TABLE>


     Directors whose terms of office continue past the 2001 Annual Meeting of
     Shareholders are:  Gordon J. Bridge,  Ted C. Feierstein, Steven M. Katz
     and D. Bruce Merrifeld, Jr.

(c)  Votes cast to ratify the appointment of Ernst & Young LLP as the Company's
     auditors for the year ending July 31, 2002 were as follows:

<TABLE>
<S>               <C>                   <C>
                  For                   3,402,256
                  Against                  15,355
                  Abstained                23,655
                  Broker Non-Vote               0
</TABLE>


                                       16
<PAGE>
                                   SIGNATURES


Pursuant to the requirements of the Securities and Exchange Act of 1934, the
Registrant has duly caused this report to be signed on its behalf by the
undersigned thereunto duly authorized.



          ARI Network Services, Inc.
          (Registrant)


Date:     March 17, 2002                           /s/ Brian E. Dearing
                                                 -------------------------------
                                                 Brian E. Dearing, Chairman
                                                 of the Board


                                                   /s/ Timothy Sherlock
                                                 -------------------------------
                                                 Timothy Sherlock, Chief
                                                 Financial Officer


                                       17