Mail Stop 4561
September 26, 2005
Brian E. Dearing
Chairman of the Board,
Chief Executive Officer and President
ARI Network Systems, Inc.
11425 W. Lake Park Drive
Milwaukee, Wisconsin 53224
Re: ARI Network Services, Inc.
Form 10-K for the Fiscal Year Ended
July 31, 2004
Filed October 29, 2004
Forms 10-QSB for the fiscal quarters ended October 31, 2004,
January 31, 2005 and April 30, 2005
Forms 8-K filed October 14, 2004, December 2, 2004, February 24,
2005
and May 19, 2005
File No. 000-19608
Dear Mr. Dearing:
We have reviewed your response to our letter dated August 25,
2005 in connection with our review of the above referenced filings
and have the following comments. Please note that we have limited
our review to the matters addressed in the comments below. We may
ask you to provide us with supplemental information so we may
better
understand your disclosure. Please be as detailed as necessary in
your explanation. After reviewing this information, we may raise
additional comments.
Please understand that the purpose of our review process is
to
assist you in your compliance with the applicable disclosure
requirements and to enhance the overall disclosure in your filing.
We look forward to working with you in these respects. We welcome
any questions you may have about our comments or any other aspect
of
our review. Feel free to call us at the telephone numbers listed
at
the end of this letter.
General
1. Please refer to comment 1 of our letter dated August 25, 2005.
We
have reviewed your response and your proposed disclosure relating
to
Non-GAAP financial measures that are presented in your filing
(EBITDA
and Earn/Burn Rate). Based on your proposed disclosure it appears
you are presenting EBITDA as a performance measure. Tell us why
it
is appropriate to present EBITDA as a performance measure,
considering it excludes recurring charges (interest, taxes,
depreciation and amortization). In your response, address why
each
of the charges excluded from EBITDA are not considered necessary
to
assess your performance. In addition, provide us with your
revised
disclosure that clearly addresses why each recurring item is
excluded
and how you compensate for the limitations of EBITDA as a
performance
measure. Alternatively, if you determine that the recurring
charges
excluded from EBITDA are necessary to assess your performance,
revise
future filings to remove EBITDA as a performance measure. We
refer
you to Item 10(1)(h)(i)(C) and (D) and 10(1)(h)(ii)(B) of
Regulation
S-B and Question 8 of the FAQ.
2. We note from your response the reconciliation of earn/burn rate
to
Net cash provided by operating activities excludes charges or
liabilities that require(d) cash settlement (e.g. net increase or
decrease in receivables, prepaid expenses, accounts payable,
etc.).
Item 10(h)(1)(ii)(A) of Regulation S-B prohibits excluding charges
that required, or will require, cash settlement, or would have
required cash settlement absent an ability to settle in another
manner, from non-GAAP liquidity measures. Tell us how you intend
to
comply with Item 10 of Regulation S-B.
* * * * *
As appropriate, please amend your filing and respond to
these
comments within 10 business days or tell us when you will provide
us
with a response. Please submit all correspondence and
supplemental
materials on EDGAR as required by Rule 101 of Regulation S-T. You
may wish to provide us with marked copies of any amendment to
expedite our review. Please furnish a cover letter with any
amendment that keys your responses to our comments and provides
any
requested information. Detailed cover letters greatly facilitate
our
review. Please understand that we may have additional comments
after
reviewing any amendment and your responses to our comments.
You may contact Patrick Gilmore at (202) 551-3406, Thomas
Ferraro at (202) 551-3225 or me at (202) 551-3499 if you have
questions regarding comments on the financial statements and
related
matters.
Sincerely,
Kathleen Collins
Accounting Branch Chief
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Brian E. Dearing
ARI Networks, Inc.
September 26, 2005
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