Filed Pursuant to Rule 424(b)(3)

Registration No. 333-188093

 

PROSPECTUS SUPPLEMENT NO. 1

ARI NETWORK SERVICES, INC.

900,000 shares of Common Stock

This prospectus supplement relates to the prospectus dated December 4, 2014, which covers the sale of up to 900,000 shares of our common stock, $0.001 par value per share (the “Common Stock”), by the selling security holders identified in the prospectus (collectively with any such holder’s transferee, pledgee, donee or successor, referred to as the “Selling Shareholders”).  The 900,000 shares of Common Stock covered by the prospectus were issued in a private placement pursuant to a Securities Purchase Agreement we entered into on March 12, 2013 with selected accredited investors.

We will not receive any proceeds from the sale by the Selling Shareholders of the shares covered by the prospectus. 

This prospectus supplement is being filed to supplement the prospectus with the information set forth in (i) our amended current report on Form 8-K/A filed on December 12, 2014, (ii) our current report on Form 8-K filed on December 12, 2014, and (iii) our quarterly report on Form 10-Q filed on December 15, 2014, each of which is set forth in its entirety below.  This prospectus supplement should be read in conjunction with the prospectus, which is to be delivered with this prospectus supplement.

Our Common Stock is traded on the NASDAQ Capital Market under the symbol “ARIS”.  The last reported market price of our Common Stock on the NASDAQ Capital Market on December 15, 2014 was $3.75 per share.  Our executive offices are located at 10850 West Park Place, Suite 1200, Milwaukee, Wisconsin 53224, and our telephone number is
(414) 973-4300.

Investing in our securities involves risks.  You should carefully consider the Risk Factors beginning on page 2 of the prospectus before you make an investment in our securities.

Neither the Securities and Exchange Commission nor any state securities commission has approved or disapproved of these securities or determined if the prospectus or this prospectus supplement are truthful or complete.  Any representation to the contrary is a criminal offense.

 

The date of this prospectus supplement is December 19, 2014

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UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

WASHINGTON, D.C.  20549

 

FORM 8-K/A

(Amendment No. 1)

CURRENT REPORT

 

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

 

Date of Report (Date of earliest event reported):  September 30, 2014

ARI NETWORK SERVICES, INC.

(Exact name of registrant as specified in its charter)

 

 

Registrant’s telephone number, including area code: (414) 973-4300

Check the appropriate box below if the Form 8-K filing is intended to simultaneously satisfy the filing obligation of the Registrant under any of the following provisions:

Written communications pursuant to Rule 425 under the Securities Act (17 CFR 230.425)

Soliciting material pursuant to Rule 14a-12 under the Exchange Act (17 CFR 240.14a-12)

Pre-commencement communications pursuant to Rule 14d-2(b) under the Exchange Act (17     CFR 240.14d-2(b))

Pre-commencement communications pursuant to Rule 13e-4(c) under the Exchange Act (17 CFR 240.13e-4(c))

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Item 2.01Completion of Acquisition or Disposition of Assets

This Amendment No. 1 to Current Report on Form 8-K/A is being filed to amend the Current Report on Form 8-K (the "Initial 8-K") filed with the Securities and Exchange Commission on October 2, 3014, by ARI Network Services, Inc. (the "Company" or "ARI") to include the financial information referred to in Item 9.01(a) and (b) with respect to the Company's acquisition of the assets of Tire Company Solutions, LLC ("TCS") on September 30, 2014. The Company hereby amends Item 9.01 of the Initial 8-K to provide in its entirety audited financial statements of TCS as of and for the fiscal years ended July 31, 2014 and 2013 and the unaudited pro forma information required by Item 9.01 of Form 8-K.

Item 9.01Financial Statements and Exhibits

(a) Financial Statements of Businesses Acquired

 

Attached hereto as exhibits 99.2 and 23.1, respectively, are the audited consolidated financial statements of TCS as of and for the years ended July 31, 2014 and 2013, and independent auditors' report and the consent of independent auditors.

 

Pro Forma Financial Information

 

Attached hereto as exhibit 99.2 are the unaudited Pro Forma Condensed Combined Balance Sheet as of July 31, 2014, Unaudited Pro Forma Condensed Combined Statement of Operations for the Year Ended July 31, 2014 and Notes to the Unaudited Pro Forma Condensed Combined Financial Statements of the Company and TCS.

(d)Exhibits

 

Exhibit No.Description

2.1Asset Purchase Agreement, dated September 30, 2014, by and among ARI Network Services, Inc., Tire Company Solutions, LLC, Barry Reese and Kenny Pratt.*

 

4.1Form of Subordinated Promissory Notes, dated September 30, 2014 issued to Barry Reese and Kenny Pratt.*

10.1First Loan Modification Agreement, dated September 30, 2014, by and among Silicon Valley Bank, ARI Network Services, Inc. and Project Viking II Acquisition, Inc.*

23.1Consent of Independent Registered Public Accounting Firm.

99.1The audited consolidated financial statements of TCS as of and for the fiscal years ended July 31, 2014 and 2013.

 

99.2Unaudited pro forma combined financial statements and footnotes of ARI Network Services, Inc. and  TCS as of and for the twelve months ended July 31, 2014 and 2013.

 

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* Previously filed.

 

 

 

SIGNATURES

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

 

ARI Network Services, Inc.

(Registrant)

 

 

Date:  December 12, 2014

By:  /s/ William A. Nurthen___________ 

               William A. Nurthen

               Chief Financial Officer

 

 

 

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EXHIBIT INDEX

 

Exhibit No.Description

2.1Asset Purchase Agreement, dated September 30, 2014, by and among ARI Network Services, Inc., Tire Company Solutions, LLC, Barry Reese and Kenny Pratt.*

 

4.1Form of Subordinated Promissory Notes, dated September 30, 2014 issued to Barry Reese and Kenny Pratt.*

10.1First Loan Modification Agreement, dated September 30, 2014, by and among Silicon Valley Bank, ARI Network Services, Inc. and Project Viking II Acquisition, Inc.*

23.1Consent of Independent Registered Public Accounting Firm.

 

99.1The audited consolidated financial statements of TCS as of and for the fiscal years ended July 31, 2014 and 2013.

 

99.2Unaudited pro forma combined financial statements and footnotes of ARI Network Services, Inc. and TCS as of and for the twelve months ended July 31, 2014 and 2013.

* Previously filed.

 

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EXHIBIT 23.1

 

CONSENT OF INDEPENDENT AUDITORS

 

We consent to the incorporation by reference in ARI Network Services, Inc.'s Registration Statement Nos. 333-52176, 333-110104, 333-156380, and 333-171491 and 333-193232 on Form S-8, Registration Statement No. 333-195379 on Form S-3 and Registration Statement No. 333-188093 on Form S-1, of our report dated December 8, 2014 (which report expresses an unmodified opinion, related to the financial statements of Tire Company Solution, LLC as of July 31, 2014 and 2013 and for the years ended July 31, 2014 and 2013.)

 

 

/s/ LATTIMORE BLACK MORGAN & CAIN, PC

 

Brentwood, Tennessee

 

December 12, 2014

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EXHIBIT 99.1

 

TIRE COMPANY SOLUTIONS, LLC

Financial Statements

July 31, 2014 and 2013

 

(With Independent Auditors' Report Thereon)

 

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TIRE COMPANY SOLUTIONS, LLC

 

 

 

 

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INDEPENDENT AUDITORS' REPORT

The Members

Tire Company Solutions, LLC:

 

We have audited the accompanying financial statements of Tire Company Solutions, LLC (a Tennessee limited liability company), which are comprised of the balance sheets as of July 31, 2014 and 2013, the related statements of operations and members equity and cash flows for the years then ended, and the related notes to the financial statements. 

 

Management's Responsibility for the Financial Statements

 

Management is responsible for the preparation and fair presentation of these financial statements in accordance with accounting principles generally accepted in the United States of America; this includes the design, implementation, and maintenance of internal control relevant to the preparation and fair presentation of financial statements that are free from material misstatement, whether due to fraud or error.

 

Auditors' Responsibility

 

Our responsibility is to express an opinion on these financial statements based on our audits. We conducted our audits in accordance with auditing standards generally accepted in the United States of America. Those standards require that we plan and perform the audits to obtain reasonable assurance about whether the financial statements are free of material misstatement.

 

An audit involves performing procedures to obtain audit evidence about the amounts and disclosures in the financial statements. The procedures selected depend on the auditors' judgment, including the assessment of the risks of material misstatement of the financial statements, whether due to fraud or error. In making those risk assessments, the auditor considers internal control relevant to the entity's preparation and fair presentation of the financial statements in order to design audit procedures that are appropriate in the circumstances, but not for the purpose of expressing an opinion on the effectiveness of the entity's internal control. Accordingly, we express no such opinion. An audit also includes evaluating the appropriateness of accounting polices used and the reasonableness of significant accounting estimates made by management, as well as evaluating the overall presentation of the financial statements.

 

We believe that the audit evidence we have obtained is sufficient and appropriate to provide a basis for our audit opinion.

 

Opinion

 

In our opinion, the financial statements referred to above present fairly, in all material respects, the financial position of Tire Company Solutions, LLC as of July 31, 2014 and 2013, and the results of its operations and its cash flows for the years then ended in accordance with accounting principles generally accepted in the United States of America.

 

/s/ LATTIMORE BLACK MORGAN & CAIN, PC

 

Brentwood, Tennessee

December 4, 2014

 

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(1)Nature of operations

 

Tire Company Solutions, LLC (the "Company") supports the tire and automotive industries through providing fully‑integrated tire business, e‑commerce and retreading software solutions. The Company is headquartered in Cookeville, Tennessee and sells software to tire and automotive companies throughout the United States.

 

(2)Summary of significant accounting policies

 

(a)Receivables and credit policies

 

Accounts receivable are uncollateralized customer obligations due under normal trade terms typically requiring payment within 30 days from invoice date. Certain customers have been granted extended payment terms based on business volume. Late or interest charges on delinquent accounts are not recorded until collected. The carrying amount of accounts receivable is reduced by a valuation allowance, if necessary, which reflects management's best estimate of the amounts that will not be collected. The allowance is estimated based on management's knowledge of its customers, historical loss experience and existing economic conditions. Accounts receivable and the allowance are written off when, in management's opinion, all collection efforts have been exhausted.

 

(b)Deferred revenue and unbilled revenue

 

Deferred revenue represents the portion of collected or billed revenue for which the revenue recognition process is incomplete.  Unbilled revenue represents revenue earned for which invoices have not been generated.

 

(c)Property and equipment

 

Property and equipment are stated at cost. Depreciation and amortization are provided over the assets' estimated useful lives using the straight‑line method. Computer software and equipment are depreciated over three to seven years while furniture and equipment are depreciated over five to seven years. Automobiles are depreciated over five years.

 

Expenditures for maintenance and repairs are expensed when incurred.  Expenditures for renewals or betterments are capitalized.  When property is retired or sold, the cost and the related accumulated depreciation or amortization is removed from the accounts, and the resulting gain or loss is included in operations.

 

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(d)Capitalized software costs

 

The Company capitalizes its software development costs related to the Company's TreadTracks and ePower or other web‑based applications once a project is in the application development stage. All external direct costs for materials and services as well as internal payroll and related fringe benefit costs are capitalized. Preliminary stage development costs are expensed as incurred. The Company also capitalizes its software development costs relating to the development of the Company's TirePower software which is purchased by customers and hosted by the Company or used on third‑party hardware. The Company capitalizes such costs subsequent to the establishment of technological feasibility. Costs incurred prior to establishing technological feasibility are expensed as incurred. Capitalized software costs are amortized over the estimated useful life of the project, generally three to five years.

 

(e)Deferred rent

 

Deferred rent reflects the cumulative excess of rent expense recognized on the straight‑line basis over payments made.

 

(f)Revenue recognition

 

The Company recognizes revenue on the accrual basis of accounting in which revenue is recognized when earned. Revenues of the Company are derived primarily from the licensing of software applications, providing professional services and equipment sales. Billings occur in accordance with the terms of the respective contracts, and revenue which relates to billings rendered in advance is deferred until earned.

 

Revenue from licensing of software for use on third party hardware or in Company‑hosted arrangements where the third‑party has the ability to take possession of the software without significant penalty is recognized when the software is delivered. Equipment sales are recognized when the equipment is delivered. Professional services are recognized as the services are provided. Revenue from subscriptions for the use of software only provided through a hosting arrangement with the Company is recognized as the hosting services are provided over the term of the arrangement. Set‑up or other up‑front fees with no stand‑alone value, maintenance and support fees are deferred and recognized ratably over the contractual term of the arrangement.

 

The Company accounts for all governmental taxes associated with revenue transactions on a net basis.

 

(g)Income taxes

 

The Company is a limited liability company and has elected to be taxed as a partnership for income tax purposes. As such, all federal taxable income and losses pass through to the individual members for inclusion in their personal income tax returns. Some states have enacted statutes that treat partnerships as taxable entities for state income tax purposes. Thus, the Company is subject to taxation on income generated within the states' boundaries.

 

The amount provided for state income taxes is based upon the amounts of current and deferred taxes payable or refundable at the date of the financial statements as a result of all events recognized in the financial statements as measured by the provisions of enacted tax laws. There were no significant tax assets, liabilities, expense or benefit at July 31, 2014 or 2013 or for the years then ended.

 

A tax position is recognized as a benefit only if it is "more likely than not" that the tax position would be sustained in a tax examination, with a tax examination being presumed to occur. The amount recognized is the largest amount of tax benefit that is greater than 50% likely of being realized on examination. For tax positions not meeting the "more likely than not" test, no tax benefit is recorded. The Company has no uncertain tax positions that qualify for either recognition or disclosure in the financial statements.

 

As of July 31, 2014, the Company has accrued no interest and no penalties related to uncertain tax positions. It is the Company's policy to recognize interest and/or penalties related to income tax matters in income tax expense.

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The Company files U.S. Federal and various state income tax returns. The Company is currently open to audit under the statute of limitations for the years ending on or after December 31, 2010.

 

(h)Advertising and promotion costs

 

Advertising and promotion costs are expensed as incurred. Advertising costs of $96,019 and $80,967 were expensed during 2014 and 2013, respectively.

 

(i)Realization of long‑lived assets

 

Management evaluates the recoverability of the investment in long‑lived assets on an ongoing basis and recognizes any impairment in the year of determination. It is reasonably possible that relevant conditions could change in the near term and necessitate a change in management's estimate of the recoverability of these assets.

 

(j)Use of estimates

 

The preparation of financial statements in conformity with generally accepted accounting principles requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and the disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of revenues and expenses during the reporting period. Actual results could differ from those estimates.

 

(k)Events occurring after reporting date

 

The Company has evaluated events and transactions that occurred between July 31, 2014 and December 4, 2014, which is the date that the financial statements were available to be issued, for possible recognition or disclosure in the financial statements.

 

(3)Credit risk and other concentrations

 

The Company generally maintains cash on deposit at banks in excess of federally insured amounts. The Company has not experienced any losses in such accounts and management believes the Company is not exposed to any significant credit risk related to cash.

 

The majority of the Company's revenues are to customers in the tire and automotive industries.  Accordingly, substantially all trade accounts receivable are due from such customers. 

 

Revenue from two customers and one customer amounted to approximately 27% and 14% of the Company's revenues in 2014 and 2013, respectively, and approximately 72% and 41% of the Company's total accounts receivable and unbilled revenue at July 31, 2014 and 2013, respectively.

 

(4)Assets and liabilities measured at fair value

 

Fair value is a market‑based measurement, not an entity‑specific measurement.  Therefore, a fair value measurement should be determined based on the assumptions that market participants would use in pricing the asset or liability.  As a basis for considering market participant assumptions in fair value measurements, fair value accounting standards establish a fair value hierarchy that distinguishes between market participant assumptions based on market data obtained from sources independent of the reporting entity including quoted market prices in active markets for identical assets (Level 1), or significant other observable inputs (Level 2) and the reporting entity’s own assumptions about market participant assumptions (Level 3).  The Company does not have any fair value measurements using significant other observable inputs (Level 2) or significant unobservable inputs (Level 3) as of July 31, 2014 or 2013. 

 

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(5)Capitalized software

 

A summary of capitalized software as of July 31, 2014 and 2013 is as follows:

 

 

 

 

(6)Line of credit

 

The Company has a $175,000 line of credit available with a bank which bears interest, payable monthly, at the Wall Street Journal Prime Rate plus 1.75% (5.0% at December 31, 2013) with a floor of 3.25%. The line is secured by accounts receivable and the personal guarantees of the members. Borrowings of $140,000 and $70,278 were outstanding under this line at July 31, 2014 and 2013, respectively. The line matured on July 8, 2014 and is currently due on demand.

 

The provisions of the credit agreement place certain restrictions and limitations upon the Company. These include the maintenance of certain financial ratios of the Company during the loan term.

 

(7)Note payable

 

The Company has a note payable to a lender which was used to finance the acquisition of a vehicle. The note requires monthly installments in the amount of $912, including interest at a fixed rate of 3.5%, and matures in December 2017. The note is secured by the vehicle. At July 31, 2014 and 2013, the Company owed  $37,194 and $48,138, respectively, under the note payable.

 

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A summary of future maturities of the note payable as of July 31, 2014 is as follows:

 

 

 

(8)Capital lease obligations

 

The Company has entered into capital lease agreements to finance the acquisition of certain computer equipment. The Company's obligation under these capital leases is as follows:

 

 

 

 

 

Future minimum annual lease payments payable under the capital leases as of July 31, 2014 are as follows:

 

 

 

 

Computer equipment utilized under capital leases at July 31, 2014 and 2013 is as follows:

 

 

 

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(9)Lease commitments

 

The Company utilizes office space under operating leases.  Rent expense is recognized on a straight line basis and amounted to $213,292 and $199,005 in 2014 and 2013, respectively, including $150,000 and $87,500, respectively, paid to a related party. A summary of approximate future minimum payments under these leases as of July 31, 2014 is as follows:

 

 

 

(10)Related party transactions

 

Revenue recognized from a related party amounted to approximately $812,000 and $500,000 in 2014 and 2013, respectively. The Company was owed accounts receivable and unbilled receivables from this related party totaling $192,820 and $243,378 at July 31, 2014 and 2013, respectively.

 

Amounts owed to a member amounted to $39,983 and $20,167 as of July 31, 2014 and 2013. The advances from the member are non‑interest bearing and are due on demand.

 

(11)Supplemental disclosures of cash flow statement information

 

 

 

During 2014 and 2013, the Company incurred capital lease obligations of $22,810 and $130,510, respectively, for various acquisitions of computer equipment (Note 8).

 

(12)Subsequent event

 

During October 2014, the Company entered into an asset purchase agreement with ARI Network Services, Inc. ("ARI") whereby the Company sold substantially all of its assets to ARI.

 

 

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EXHIBIT 99.2

UNAUDITED PRO FORMA CONDENSED COMBINED FINANCIAL INFORMATION

On September 30, 2014, ARI Network Services, Inc. (“ARI” or the “Company”), completed its acquisition of substantially all of the assets of Tire Company Solutions, LLC (“TCS”), pursuant to the terms of the Asset Purchase Agreement dated as of September 30, 2014 (the "Asset Purchase Agreement"). Consideration for the acquisition included, (1) a cash payment equal to $4,200,000; (2) 618,744 shares of the Company's common stock, $0.001 par value (the "Common Stock"); (3) the issuance of two promissory notes (the “TCS Notes”) in aggregate principal amount of $3,000,000 to the former owners of TCS; and (4) a contingent earn-out purchase price payable in three potential payments and contingent upon the attainment of specific revenue goals.

The unaudited pro forma condensed combined statements of operations for the year ended July 31, 2014 and the unaudited pro forma condensed combined balance sheet as of July 31, 2014 illustrate the estimated effect of the acquisition of TCS on the Company's financial statements. The unaudited pro forma condensed combined financial statements are based on certain estimates and assumptions made with respect to the combined operations of ARI and TCS, which the Company believes are reasonable. The unaudited pro forma condensed combined financial statements are presented for illustrative purposes only and do not purport to be indicative of the results of operations or financial position of ARI or TCS that actually would have been achieved had the acquisition of TCS been completed on the assumed dates, or to project the Company's results of operations or financial position for any future date or period. The unaudited pro forma condensed combined statement of operations gives pro forma effect to the acquisition as if it had occurred on August 1, 2013. The unaudited pro forma condensed combined balance sheet gives pro forma effect to the acquisition as if it had occurred on July 31, 2014.

The unaudited pro forma condensed combined financial information should be read in conjunction with the accompanying notes to the unaudited pro forma condensed combined financial statements. In addition, the unaudited pro forma condensed combined financial information was based on and should be read in conjunction with the following:

The acquisition is being accounted for using the acquisition method of accounting for business combinations in accordance with accounting principles generally accepted in the United States of America (“GAAP”). Under this method, the total consideration transferred to consummate the acquisition is being allocated to the tangible and intangible assets acquired and liabilities assumed based on extensive judgments and estimates of their respective fair values as of the closing date of the acquisition. Accordingly, the allocation of the consideration transferred in the unaudited pro forma condensed combined financial statements is preliminary and will be adjusted upon completion of the final valuation of the assets acquired and liabilities assumed. Such adjustments could be significant. The final valuation is expected during 2015.

 

For income tax purposes, the acquisition is a taxable business combination. The ARI tax basis in the assets acquired and liabilities assumed will be equal to fair market value as of the acquisition date, and thus the basis for financial reporting and tax purposes will generally be the same and no temporary differences are expected.

The historical consolidated financial statements of the Company have been adjusted in the unaudited pro forma condensed combined financial statements to give effect to pro forma events that are (1) directly attributable to the acquisition, (2) factually supportable, and (3) with respect to the unaudited condensed combined statement of operations, expected to have a continuing impact on the combined results. The unaudited pro forma condensed combined financial information does not reflect any operating cost synergy savings that the combined company may achieve as a result of the acquisition, or the costs necessary to achieve these operating synergies.

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1

 

 

ARI Network Services, Inc.

UNAUDITED PRO FORMA CONDENSED COMBINED BALANCE SHEET

As of July 31, 2014

(in thousands)

 

 

 

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See accompanying Notes to the Unaudited Pro Forma Condensed Combined Financial Statements, which are an integral part of these statements.

______________________________

2

ARI Network Services, Inc.

UNAUDITED PRO FORMA CONDENSED COMBINED STATEMENT OF OPERATIONS

For the year ended July, 2014

(in thousands, except for per share data)

 

 

 

See accompanying Notes to the Unaudited Pro Forma Condensed Combined Financial Statements, which are an integral part of these statements.

______________________________

 

 

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ARI NETWORK SERVICES, INC.

NOTES TO THE UNAUDITED PRO FORMA CONDENSED

COMBINED FINANCIAL STATEMENTS

 

Note 1.   Basis of Presentation

The unaudited pro forma condensed combined financial information was prepared using the acquisition method of accounting and was based on the historical consolidated financial statements of ARI and TCS as of July 31, 2014 and for the year ended July 31, 2014. The unaudited pro forma condensed combined statements of operations and balance sheet give effect to the

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acquisition of certain TCS assets and liabilities as if it occurred on August 1, 2013 for statement of operations purposes, and on July 31, 2014 for balance sheet purposes.

The unaudited pro forma condensed combined financial information is not necessarily indicative of the combined results of operations or financial condition had the acquisition been completed as of the dates indicated. The unaudited pro forma condensed combined financial information does not purport to project future results of operations or financial position of the combined company. The unaudited pro forma condensed combined financial statements, and the related pro forma adjustments in Note 4, do not reflect any operating cost synergy savings that the combined company may achieve as a result of the acquisition, or the costs necessary to achieve these operating synergies.

Note 2.   Preliminary Estimated Purchase Price

The total preliminary estimated purchase price, based on the July 31, 2014 unaudited pro forma condensed combined balance sheet, was $9,941,000 which included, (1) a cash payment equal to $4,200,000; (2) 618,744 shares of Common Stock, $0.001 par value (the "Common Stock"); (3) the issuance of TCS Notes; and (4) a contingent earn-out purchase price payable in three potential payments and contingent upon the attainment of specific revenue goals.  The preliminary estimated purchase price to be allocated is as follows (in thousands):

 

 

The final purchase price is subject to post-closing adjustments pursuant to the terms of the Asset Purchase Agreement and to completion of the final valuation of the net assets acquired and contingent earn-out. The final valuation is expected to be completed as soon as is practicable but no later than 12 months after the closing date of the acquisition and could have a material impact on the preliminary purchase price noted above.

 

 

4

 

 

 

ARI NETWORK SERVICES, INC.

NOTES TO THE UNAUDITED PRO FORMA CONDENSED

COMBINED FINANCIAL STATEMENTS

 

Note 3. Estimate of Assets to be Acquired

Under the acquisition method of accounting, the total preliminary estimated purchase price as shown in Note 2 is allocated to the acquired TCS tangible and intangible assets (both definite and indefinite-lived) and assumed TCS liabilities based on their estimated fair values as of the September 30, 2014 acquisition closing date.

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The allocation of the consideration transferred to effect the acquisition is preliminary. The final purchase price is subject to post-closing adjustments pursuant to the terms of the purchase agreement and to completion of the final valuation of the net assets acquired and contingent earn-out. The final valuation is expected to be completed as soon as is practicable but no later than 12 months after the closing date of the acquisition and could have a material impact on the preliminary estimate of assets to be acquired.

The preliminary estimate of assets to be acquired and liabilities to be assumed by ARI based on the July 31, 2014 unaudited pro forma condensed combined balance sheet is as follows (in thousands, includes impact of pro forma balance sheet adjustments from Note 4):

 

 

 

 

 

 

 

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Note 4. Pro Forma Adjustments

Adjustments included in the column under the heading "Pro Forma Adjustments" are presented in accordance with GAAP and represent the following:

 

  

(b)To record a $31,000 reduction in hardware and equipment to a value of 120,000 based on the preliminary assessment of fair value.

(c)To record a $937,000 reduction in capitalized software to a value of 780,000, based on the preliminary results of an appraisal of the TCS software acquired.

(d)To record intangible assets of $3,660,000 based on the preliminary results of an appraisal.  The intangible assets consist of $610,000 of trade names, $2,270,000 of customer relationships and $780,000 of non-competition agreements.

(e)To record preliminary goodwill balance of $4,368,000.

(f)To eliminate the following liabilities not assumed as part of the asset purchase agreement (in thousands):

 

  

  

(g)To record an $815,000 reduction in deferred revenue to a value of $346,000, based on the preliminary fair value analysis of its fair value.

(h)To eliminate TCS’s historical members’ equity.

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(i)To eliminate the transaction costs recorded in the ARI and TCS financial statements of $159,000 and $100,000 respectively.

(j)To eliminate TCS software amortization recorded of $577,000 and record $200,000 and $700,000 of amortization expense in cost of revenue and net operating expenses, respectively.  The amortization expense recorded is based on the preliminary results of an appraisal and relates to acquired software product costs and the customer relationship, trade name and non-compete intangible assets.

(k)To eliminate TCS interest expense recorded of $17,000 related to debt ARI is not assuming, and to record interest expense related to the new debt incurred to fund the acquisition, as follows (in thousands):

 

(l)  Prior to the acquisition by ARI, TCS was treated as a partnership for tax purposes.  This adjustment is to record income tax expense on the historical TCS net income and pro forma adjustments at an estimated rate of 40%.

(m) To adjust average shares of Common Stock outstanding for the shares issued to fund the acquisition of TCS.

 

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UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

FORM 8-K

CURRENT REPORT

Pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934

Date of Report (Date of earliest event reported): December 9, 2014

ARI NETWORK SERVICES, INC.

(Exact name of registrant as specified in its charter)

Wisconsin (State or other jurisdiction of incorporation)

0-19608 (Commission File Number)

39-1388360 (IRS Employer Identification No.)

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

53224 (Zip Code)

Registrant’s telephone number, including area code: (414) 973-4300

Check the appropriate box below if the Form 8-K filing is intended to simultaneously satisfy the filing obligation of the Registrant under any of the following provisions:



Written communications pursuant to Rule 425 under the Securities Act (17 CFR 230.425)



Soliciting material pursuant to Rule 14a-12 under the Exchange Act (17 CFR 240.14a-12)



Pre-commencement communications pursuant to Rule 14d-2(b) under the Exchange Act (17 CFR 240.14d-2(b))



Pre-commencement communications pursuant to Rule 13e-4(c) under the Exchange Act (17 CFR 240.13e-4(c))

2

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Item 5.02. Departure of Directors or Certain Officers; Election of Directors; Appointment of Certain Officers; Compensatory Arrangements of Certain Officers.

On December 9, 2014, James R. Johnson resigned from the Board of Directors of ARI Network Services, Inc. (the “Company”), effective immediately. Mr. Johnson was also a member of the Company’s Audit Committee. In recognition of his service, the Company determined to accelerate the vesting of all of Mr. Johnson’s unvested restricted stock awards, to vest immediately upon his resignation. Mr. Johnson’s resignation was not due to any disagreement with the Company on any matter relating to its operations, policies or practices.

3

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SIGNATURE

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

Date: December 12, 2014

ARI NETWORK SERVICES, INC.

By:

/s/ William A. Nurthen

William A. Nurthen

Chief Financial Officer

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UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C.  20549

 

FORM 10-Q

 

(Mark One)

 

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

 

For the quarterly period ended October 31, 2014

 

( )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 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)

 

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 12 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 90 days.

YESüNO

 

Indicate by check mark whether the registrant has submitted electronically and posted on its corporate Website, if any, every Interactive Data File required to be submitted and posted pursuant to Rule 405 of Regulation S-T (S232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit and post such files).

YESüNO

 

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, or a smaller reporting company.  See the definitions of “large accelerated filer”, “accelerated filer” and “smaller reporting company” in Rule 12b-2 of the Exchange Act.  (Check one):

 

Large accelerated filerAccelerated filer

Non-accelerated filerSmaller reporting companyü

(Do not check if a smaller reporting

reporting company)

 

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act).

YESNOü

 

As of December 9, 2014 there were 14,230,632 shares of the registrant’s common stock outstanding.

 

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ARI Network Services, Inc.

 

FORM 10-Q

FOR THE THREE MONTHS ENDED OCTOBER 31, 2014

INDEX

 

 

 

 

 

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ARI Network Services, Inc.

Consolidated Balance Sheets

(Dollars in Thousands, Except per Share Data)

 

 

 

See accompanying notes

 

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ARI Network Services, Inc.

Consolidated Balance Sheets

(Dollars in Thousands, Except per Share Data)

 

 

See accompanying notes

 

 

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ARI Network Services, Inc.

Consolidated Statements of Operations

(Dollars in Thousands, Except per Share Data)

(Unaudited)