ARI Network Services, Inc.

Unaudited Pro Forma Balance Sheet

As of October 31, 2012

(Dollars in Thousands, Except per Share Data)

Pro Forma

ARI

Adjustments

Note

Pro Forma

ASSETS

Cash and cash equivalents

$

$

(2)(3)

$

 -

Trade receivables, less allowance for doubtful accounts of $251

  at October 31, 2012

Work in process

Prepaid expenses and other

Deferred income taxes

Total current assets

Equipment and leasehold improvements:

Computer equipment and software for internal use

(1)

Leasehold improvements

Furniture and equipment

Less accumulated depreciation and amortization

Net equipment and leasehold improvements

Capitalized software product costs:

Amounts capitalized for software product costs

(1)

Less accumulated amortization

Net capitalized software product costs

Deferred income taxes

Other long term assets

Other intangible assets

(1)

Goodwill

(1)

Total assets

$

$

$

Pro Forma

ARI

Adjustments

Note

Pro Forma

LIABILITIES

Current borrowings on line of credit

$

$

$

Current portion of long-term debt

Current portion of contingent liabilities

Accounts payable

Deferred revenue

(1)

Accrued payroll and related liabilities

Accrued sales, use and income taxes

Other accrued liabilities

(3)

Current portion of capital lease obligations

Total current liabilities

Long-term debt

(2)(8)

Long-term portion of contingent liabilities

Capital lease obligations

Other long term liabilities

Total non-current liabilities

Total liabilities

SHAREHOLDERS' EQUITY

Cumulative preferred stock, par value $.001 per share, 1,000,000 shares authorized; 0 shares issued and outstanding at October 31, 2012

 -

 -

 -

Junior preferred stock, par value $.001 per share, 100,000 shares authorized; 0 shares issued and outstanding at October 31, 2012

 -

 -

 -

Common stock, par value $.001 per share, 25,000,000 shares authorized; 8,169,550 shares issued and outstanding at October 31, 2012

Common stock warrants and options

Additional paid-in capital

(8)

Accumulated deficit

Other accumulated comprehensive loss

Total shareholders' equity

Total liabilities and shareholders' equity

$

$

$

See accompanying notes

ARI Network Services, Inc.

Unaudited Pro Forma Statements of Income

For the Twelve months ended July 31, 2012

(Dollars in Thousands, Except per Share Data)

Pro Forma

ARI

50 Below RSD

Adjustments

Note

Pro Forma

Net revenue

$

$

$

$

Cost of revenue

(4)

Gross profit

Operating expenses:

Sales and marketing

Customer operations and support

Software development and technical support (net of

capitalized software product costs

General and administrative

Depreciation and amortization (exclusive of amortization of

software product costs included in cost of revenue)

(5)

Net operating expenses

Operating income (loss)

Other income (expense):

Interest income (expense)

 -

(6)(8)

Other, net

 -

Total other income (expense)

 -

Income (loss) before provision for income tax

Income tax benefit (expense)

 -

(7)

Net income (loss)

$

$

$

$

Weighted average common shares outstanding:

Basic

(8)

Diluted

(8)

Net income (loss) per common share:

Basic

$

$

Diluted

$

$

See accompanying notes

ARI Network Services, Inc.

Unaudited Pro Forma Statements of Income

For the Three months ended October 31, 2012

(Dollars in Thousands, Except per Share Data)

Pro Forma

ARI

50 Below RSD

Adjustments

Note

Pro Forma

Net revenue

$

$

$

$

Cost of revenue

(4)

Gross profit

Operating expenses:

Sales and marketing

Customer operations and support

Software development and technical support (net of

capitalized software product costs

General and administrative

Depreciation and amortization (exclusive of amortization of

software product costs included in cost of revenue)

(5)

Net operating expenses

Operating income (loss)

Other income (expense):

Interest income (expense)

 -

(6)(8)

Other, net

 -

Total other income (expense)

 -

Income (loss) before provision for income tax

Income tax benefit (expense)

 -

(7)

Net income (loss)

$

$

$

$

Weighted average common shares outstanding:

Basic

(8)

Diluted

(8)

Net income (loss) per common share:

Basic

$

$

Diluted

$

$

See accompanying notes

1.

Represents adjustments for the preliminary purchase price allocation to the historical balances at October 31, 2012.  Such adjustments were primarily based on the audited financial statements of 50 Below RSD and an independent valuation of the intangible assets as follows:

Allocation of Purchase Price:

Fixed Assets

$

Internally Developed Technology

Tradenames

Customer relationships

Goodwill

  Total

$

2.

Pro Forma adjustment represents the purchase price funding of $1,500,000 in cash, $4,837,881 of assumed liabilities and $3,500,000 through third party debt.

3.

Pro Forma adjustment represents a reclassification of the pro forma negative cash balance to accrued liabilities.

1.

Pro Forma adjustment represents the increase in amortization costs related to internally developed technology costs amortized over 9 years of approximately $106,000 for the twelve months ended July 31, 2012 and $26,000 for the three months ended October 31, 2012.

2.

Pro Forma adjustment represents amortization of intangibles related to capitalized tradenames amortized over 2 years and customer relationships amortized over 15 years of approximately $200,000 for the twelve months ended July 31, 2012 and $50,000 for the three months ended October 31, 2012.

3.

Pro Forma adjustment represents interest expense on the debt incurred to acquire the assets of 50 Below RSD at an annual interest rate of 10% plus the amortization of debt discount of $585,000 over 42 months.

4.

Pro Forma adjustment represents the tax effect of the historical 50 Below RSD results of operations and the pro forma adjustments at an estimated tax rate of 40%, resulting in a tax benefit of $1,990,000 for the twelve months ended July 31, 2012 and $297,000 for the three months ended October 31, 2012.

5.

Pro Forma adjustment represents the 440,000 shares of the Company’s common stock issued as consideration for the third party promissory note at a market price of $1.33 per share, recorded as a debt discount and amortized over the life of the note.