As filed with the Securities and Exchange Commission on November 2 , 2005 Registration No. 333-_______

UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549

FORM SB-2

REGISTRATION STATEMENT UNDER
THE SECURITIES ACT OF 1933

CARBIZ INC.
(Name of small business issuer in its charter)

Ontario, Canada	7372	Not Applicable
(State or jurisdiction of	(Primary Standard Industrial	(I.R.S. Employer
incorporation or organization)	Classification Code Number)	Identification Number)

7405 North Tamiami Trail
Sarasota, Florida 34243
(941) 952-9255
(Address and telephone number of principal executive offices)

7405 North Tamiami Trail
Sarasota, Florida 34243
(941) 952-9255
(Address of principal place of business or intended principal place of business)

William Guerrant, Esq.
Hill, Ward & Henderson P.A.
101 East Kennedy Blvd.
Suite 3700
Tampa, Florida 33602
(813) 221-3900
(Name, address and telephone number of agent for service)

Copies to:

Thomas M. Rose	Bryce Tingle
Troutman Sanders LLP	Scott Reeves
222 Central Park Avenue	TingleMerrett LLP
Suite 2000	1250 Standard Life Building
Virginia Beach, Virginia 23462	639 – 5th Avenue S.W.
(757) 687-7715	Calgary, Alberta T2P 0M9
	Canada
	(403) 571-8002

     Approximate date of commencement of proposed sale to the public: As soon as practicable after the effective date of this registration statement.

     If any of the securities being registered on this Form are to be offered on a delayed or continuous basis pursuant to Rule 415 under the Securities Act, check the following box. x

     If this Form is filed to register additional securities for an offering pursuant to Rule 462(b) under the Securities Act, please check the following box and list the Securities Act registration number of the earlier effective registration statement for the same offering. ¨

     If this Form is a post-effective amendment filed pursuant to Rule 462(c) under the Securities Act, check the following box and list the Securities Act registration number of the earlier effective registration statement for the same offering. ¨

     If this Form is a post-effective amendment filed pursuant to Rule 462(d) under the Securities Act, check the following box and list the Securities Act registration statement number of the earlier effective registration statement for the same offering. ¨

If delivery of the prospectus is expected to be made pursuant to Rule 434, please check the following box .¨

CALCULATION OF REGISTRATION FEE

Title of Each Class of	Amount	Proposed	Proposed	Amount of
Securities to be Registered	to be	Maximum	Maximum	Registration
	Registered (1)	Offering Price	Aggregate	Fee
		Per Unit	Offering Price (6) (7)(8)
		(2) (3) (4) (5)
Common Shares	27,497,764	$0.09	$2,474,798.76	$291.28
Common Shares Underlying Class A Common Share Purchase	11,254,541	$0.13	$1,463,090.33	$172.21
Warrants
Common Shares Underlying Class B Common Share Purchase	5,627,259	$0.13	$731,543.67	$86.10
Warrants
Common Shares Underlying Other Warrants	428,296	$0.19	$81,376.24	$9.58
Total	44,807,860		$4,750,809.00	$559.17

(1) Pursuant to Rule 416 under the Securities Act of 1933, this Registration Statement also covers such indeterminate number of common shares as may be required to prevent dilution resulting from share splits, share dividends or similar events.
(2) Calculated pursuant to Rule 457(c) and (g) under the Securities Act of 1933.
(3) Based on the actual warrant exercise price per Rule 457(g).
(4) U.S. dollar amounts are calculated based on the noon buying rate in New York City for cable transfers payable in Canadian dollars as certified for customs purposes by the Federal Reserve Bank of New York on October 27, 2005. On such date, the noon buying rate was Cdn$1.00 = U.S. $0.8551.
(5) Estimated pursuant to Rule 457(c) solely for purposes of calculating the amount of the registration fee using the Cdn$0.10 average of the high and low sales price for the registrant’s common shares on the TSX Venture Exchange on October 27, 2005.
(6) Represents 11,254,541 common shares that may be issued upon exercise of class A common share purchase warrants at an exercise price of Cdn$0.15 per share.
(7) Represents 5,627,259 common shares that may be issued upon exercise of class B common share purchase warrants at an exercise price of Cdn$0.15 per share.
(8) Represents 214,148 common shares that may be issued upon exercise of agent’s first warrants and 214,148 common shares that may be issued upon exercise of agent’s second warrants at an exercise price of Cdn$0.23 and Cdn$0.22, respectively.

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     The registrant hereby amends this registration statement on such date or dates as may be necessary to delay its effective date until the registrant shall file a further amendment which specifically states that this registration statement shall thereafter become effective in accordance with Section 8(a) of the Securities Act of 1933 or until the registration statement shall become effective on such date as the Securities and Exchange Commission, acting pursuant to said Section 8(a), may determine.

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     The information contained in this prospectus is not complete and may be changed. The securities may not be sold until the registration statement filed with the Securities and Exchange Commission has been declared effective. This prospectus is not an offer to sell these securities, and it is not soliciting any offer to buy these securities, in any state where the offer or sale is not permitted or would be unlawful prior to registration under the securities laws of any such state.

(Subject to completion, dated November 2, 2005)

PROSPECTUS

CARBIZ INC.

Up to 44,807,860 Common Shares
Offered by Selling Shareholders

_____________________

     This prospectus relates to up to 44,807,860 common shares which may be sold from time to time by the selling shareholders named herein or their pledgees, donees or successors. These shares consist of:

• 10,623,815 common shares that will be issuable upon conversion of our 5% convertible debentures as described herein;

• 11,254,541 common shares that would be issuable upon exercise of class A common share purchase warrants issuable upon conversion of our 5% convertible debentures as described herein;

• 5,627,259 common shares that would be issuable upon exercise of class B common share purchase warrants issuable upon conversion of our 5% convertible debentures as described herein;

• 428,296 common shares that would be issuable upon exercise of certain warrants issuable upon conversion of our 5% convertible debentures described herein; and

• 16,873,949 common shares that are currently issued and outstanding and held by the selling shareholders.

     The shares are being registered to permit the selling shareholders to sell the shares from time to time in the public market. Selling shareholders may sell shares under this prospectus at fixed prices or prices that may be changed, at market prices prevailing at the time of sale, at prices related to such prevailing market prices, or at negotiated prices.

     We will not receive any of the proceeds from the sale of these shares. We will, however, receive the respective exercise price upon the exercise of our class A common share purchase warrants and our class B common share purchase warrants which will occur prior to the sale of the underlying common shares by a selling shareholder.

     Our common shares are traded on the TSX Venture Exchange under the symbol “CZ.” On November 1, 2005, the last trading day prior to the filing of this registration statement, the closing sale price of our common shares on the TSX Venture Exchange was Cdn$0.09. There is currently no public market for our common shares in the United States. We will seek to list our common shares on the Over-The-Counter Bulletin Board after this registration statement is declared effective.

     We are an Ontario, Canada corporation incorporated in March 1998. Our principal executive offices are located at 7405 North Tamiami Trail, Sarasota, Florida 34243, and our telephone number is 941-952-9255.

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_____________________

     Before purchasing any of the common shares covered by this prospectus, carefully read and consider the risk factors included in the section entitled “Risk Factors” beginning on page 5. Investing in our common shares is speculative, and you could lose all of your investment.

_____________________

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

_____________________

The date of this prospectus is November 2, 2005

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TABLE OF CONTENTS

	Page
About This Prospectus	1
Special Note Regarding Forward-Looking Statements	1
Prospectus Summary	3
The Offering	4
Currency and Exchange Rates	4
Summary Financial Information	5
Risk Factors	5
Use of Proceeds	14
Price Range of Common Shares	14
Tax Consequence to United States Holders	15
Dividend Policy	16
Equity Compensation Plans as of January 31, 2005	16
Management’s Discussion and Analysis of Financial Condition and Results of Operations	17
Business	26
Management	33
Certain Relationships and Related Transactions	38
Security Ownership of Certain Beneficial Owners and Management	39
Description of Securities	40
Selling Shareholders	41
Plan of Distribution	45
Legal Matters	47
Change in Certifying Accountants	47
Experts	47
Where to Find Additional Information	48
Index to Financial Statements	49

ABOUT THIS PROSPECTUS

     This prospectus is part of a registration statement we filed with the Securities and Exchange Commission. If the Securities and Exchange Commission declares the registration statement effective, the selling shareholders named beginning on page 41 may sell up to 44,807,860 common shares. We will update this prospectus from time to time to include new information about Carbiz, and we will file supplements to the prospectus with the Securities and Exchange Commission. You should carefully read this prospectus, any prospectus supplement, and the information we from time to time file with Securities and Exchange Commission as described under the caption “Where You Can Find Additional Information.” In this prospectus, unless the context otherwise requires, “Carbiz,” “we,” “us,” and “our” refer to Carbiz Inc.; our wholly-owned subsidiary Carbiz USA Inc., incorporated in the State of Delaware; Carbiz USA Inc.’s wholly-owned subsidiary Carbiz Auto Credit, Inc., incorporated in the State of Florida; and our joint venture arrangement Carbiz Auto Credit JV1, LLC, formed in the State of Florida.

     You should rely only on the information provided in this prospectus or included in any prospectus supplement. We have authorized no one to provide you with different information. We are not making an offer of these securities in any state where the offer is not permitted. You should not assume that the information in this prospectus or the prospectus supplement is accurate as of any date other than the date on the front of the document.

_____________________

SPECIAL NOTE REGARDING FORWARD-LOOKING STATEMENTS

     Some of the statements in this prospectus and in any prospectus supplement we may file constitute “forward-looking statements” within the meaning of Section 27A of the Securities Act of 1933 and Section 21E of the Securities Exchange Act of 1934. These statements relate to future events concerning our business and our future revenues, operating results, and financial condition. In some cases, you can identify forward-looking statements by terminology such as “may,” “could,” “would,” “should,” “expect,” “plan,” “anticipate,” “intend,” “believe,” “estimate,” “forecast,” “predict,” “propose,” “potential,” or “continue” or the negative of those terms or other comparable terminology.

     Any forward-looking statements contained in this prospectus or any prospectus supplement are only estimates or predictions of future events based on information currently available to our management and management’s current beliefs about the potential outcome of future events. Whether these future events will occur as management anticipates, whether we will achieve our business objectives, and whether our revenues, operating results, or financial condition will improve in future periods are subject to numerous risks. These risks include, but are not limited to, our new business strategy; our limited operating history and history of losses; the potential maturity of our 5% convertible debentures; our need for additional financing; our dependence on key personnel; our attraction and retention of officers and directors; control of us by existing shareholders; the volatility of our common share price; the lack of liquidity related to our common shares; penny stock risks related to our common shares; our integration of acquisitions; risks related to our insurance coverage; our history of not declaring dividends; risks related to our internal controls; your potential inability to enforce civil liabilities against us and our officers and directors; risks related to sub-prime borrowers; risks related to general economic conditions; competition; government regulation; risks related to joint venture arrangements; protection of our proprietary rights; potential infringement by us of third parties’ proprietary rights; risks related to third-party licenses; risks related to new product development; risks related to product defects; risks related to system security breaches; risks related to our business model consulting services; the seasonality of our TaxMax business; regulation of and litigation exposure to refund anticipation loans; our compliance with privacy laws and other risks discussed elsewhere in this prospectus. The section of this prospectus captioned “Risk Factors,” beginning on page 5, provides a more detailed discussion of the various risks that could cause our actual results or future financial condition to differ materially from forward-looking statements made in this prospectus. The factors discussed in this section are not intended to represent a complete list of all the factors that could adversely affect our business, revenues, operating results, or financial condition. Other factors that we have not considered may also have an adverse effect on our business, revenues, operating results, or financial condition, and the factors we have identified could affect us to a greater extent than we currently anticipate. Before making any investment in our securities, we encourage you to carefully read the information contained under the caption “Risk Factors,” as well the other information contained in this prospectus and any prospectus supplement we may file.

_____________________

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     Carbiz.com is a registered trademark of Carbiz. Trade names and trademarks of other companies appearing in this prospectus are the property of their respective holders.

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PROSPECTUS SUMMARY

     The following summary is qualified in its entirety by the more detailed information and the financial statements and notes thereto appearing elsewhere in this prospectus. Prospective investors should consider carefully the information discussed under “Risk Factors,” beginning on page 5. An investment in our securities presents substantial risks, and you could lose all or substantially all of your investment.

Carbiz Inc.

     Historically, we have been primarily in the business of developing, marketing and supporting products for the North American automotive industry. Our client base is made up of used and new automobile dealers, with over 80% of our clients specifically in the used vehicle business. Our products fall into three primary categories:

•   software products for operation of auto dealers and business model consulting for “Buy Here-Pay Here” operations,

• tax return processing for auto purchase down payment assistance, and

• direct auto sales and financing through wholly-owned operations or joint venture arrangements.

     Our dealer software solutions focus on finance, sub-prime finance and Buy Here-Pay Here finance operations and dealer accounting solutions while our business model consulting products focus on assisting our dealers in the successful operation of a Buy Here-Pay Here business. Our principal software and consulting products include:

•   Management System Plus (“MSP”) – Provides dealers with ability to offer Buy Here-Pay Here financing at the point of sale including inventory management, contracting and collection functionality.

•     VisualCat – Provides dealers with the ability to offer prime and sub-prime financing through third-party lenders at the point of sale including inventory management, storage of lender criteria, credit bureau access and contracting functionality.

•   Independent Dealer Accounting (“IDA”) – Provides a suite of accounting and financial reporting tools designed specifically for independent dealers, including real time integration with MSP and VisualCat.

•   Traffic Management System – Provides dealers with the ability to track walk-in and phone traffic in the dealership including follow up list generation, sales result reporting and VisualCat interface functionality.

•     Dealer Controlled Finance (“DCF”) Business Model Package – Provides dealers with a complete Buy Here-Pay Here operation model including policies and procedures, sales methods, collections methods and manager and associate training.

•     Guardian Consulting Service – Provides DCF dealers with a weekly review of goals, problem areas and operational results done through extraction of data from the dealer’s software, a written summary of results, and presentation of the report by conference call by a Carbiz consultant.

•   Onsite Consulting – Provides dealers with an onsite review of sales and collections policies and procedures including the presentation of a written summary of recommendations by a Carbiz consultant.

•   Training – Provides dealers with a manager training class and an associate training class held bi-monthly at the Carbiz facility in Sarasota, Florida.

     Our TaxMax product provides dealers with the ability to offer a “refund for down payment” program during the income tax filing season. TaxMax receives return data for a dealer’s customer by fax or internet, prepares the return while the customer is at the dealer, electronically files the completed return, provides quick funding of the refund through a bank affiliation, and routes the funds directly to the dealer by onsite check printing or electronic funds transfer.

     In May 2004, we opened our first Carbiz Auto Credit center in Palmetto, Florida as a result of our decision to enter the direct automobile sales market. Our “credit center” is a used car dealership that offers financing onsite to

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customers with poor credit through the utilization of our software products and our DCF business model. Rather than continuing to focus only on our existing software, consulting and TaxMax business, it is our intent to expand and diversify our business by opening additional credit centers in the future. In November 2004, our second Carbiz Auto Credit location was opened in St. Petersburg, Florida, and our third location was opened in Tampa, Florida in July 2005.

     We have incurred net losses since our inception and may incur losses and negative cash flows for at least the next two years. Our ability to fund our recurring losses from operations depends upon the market acceptance of our software, consulting, and TaxMax products, the success of our Carbiz Auto Credit center business, and/or raising other sources of financing.

Our corporate information

     We were incorporated in the province of Ontario, Canada in March 1998. Our principal executive offices are located at 7405 North Tamiami Trail, Sarasota, Florida 34243. Our telephone number at that location is (941) 953-3812, and our website address is www.carbiz.com. The information contained on, or that can be accessed through, our website is not a part of this prospectus.

THE OFFERING

Common shares offered by the selling shareholders	Up to 44,807,860 common shares
Common shares outstanding on July 31, 2005	41,090,514 common shares
Common shares outstanding after this offering(1)	69,024,425 common shares
Use of proceeds	We will not receive any proceeds from the sale of common shares by the selling shareholders. We will receive proceeds from the exercise of our class A common share purchase warrants and our class B common share purchase warrants for which the underlying shares to be issued to the selling shareholders may be sold by the selling shareholders in accordance with this prospectus. We intend to use any proceeds we receive from the exercise of those warrants for working capital and general corporate purposes. See “Use of Proceeds.”
Risk factors	Investing in our common shares involves a high degree of risk. You should carefully review and consider the risks set forth under “Risk Factors,” as well as the other information contained in this prospectus before purchasing any of our common shares.

(1) This number assumes the issuance of 17,310,096 common shares that may be issued upon exercise of class A common share purchase warrants, class B common share purchase warrants and certain other warrants held by selling shareholders. We cannot assure you that the warrants will be exercised by the selling shareholders.

CURRENCY AND EXCHANGE RATES

     Some of the financial and other information included in this prospectus is presented in Canadian dollars (“Cdn$”). The following table sets out the exchange rates, based on the noon buying rates in New York City for cable transfers in foreign currencies, as certified for customs purposes by the Federal Reserve Bank of New York, for the conversion of Canadian dollars into United States dollars in effect at the end of the following periods, and the average exchange rates (based on the average of the exchange rates on the last day of each month in such periods) and the range of high and low exchange rates for such periods.

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						Six-Month
						Period Ended
	Years Ended January 31,					July 31, 2005
	2001	2002	2003	2004	2005	2005
Average for the period	0.6709	0.6414	0.6392	0.7289	0.7763	0.8112

     The following table sets out the high and low exchange rates for one Cdn$ expressed in terms of one US$ in effect at the end of the following periods.

	April	May	June	July	August	September
	2005	2005	2005	2005	2005	2005
High for the Month	0.8233	0.8082	0.8159	0.8300	0.8411	0.8615
Low for the Month	0.7957	0.7872	0.7950	0.8041	0.8206	0.8417

     As of November 2, 2005 the noon rate of exchange, as reported by the Federal Reserve Bank of New York for the conversion of United States dollars into Canadian dollars was US$1.1806 (US$1.00 = Cdn$0.8470) . Unless otherwise indicated in this prospectus, all references herein are to United States dollars.

SUMMARY FINANCIAL INFORMATION

		Fiscal Year						Six-Month Period
		Ended January 31						Ended July 31
		2005			2004			2005			2004
Statement of Operations Data:
Revenue	$	3,359,551		$	2,960,865		$	2,295,669		$	1,703,434
Cost of sales		1,486,506			1,491,122			1,109,475			757,893
Gross profit		1,873,045			1,469,743			1,186,194			945,541
Operating expenses		3,415,695			2,541,110			1,235,038			1,619,725
Operating income (loss)		(1,542,650	)		(1,071,367	)		(48,844	)		(674,184	)
Interest expense		(144,892	)		(97,119	)		(118,669	)		(40,988	)
Minority interest income (loss)		-0-			-0-			13,005			-0-
Net income (loss)	$	(1,687,542	)	$	(1,168,486	)	$	(154,508	)	$	(715,172	)
Other comprehensive income (loss)		(98,841	)		(26,524	)		-0-			26,022
Comprehensive income (loss)	$	(1,786,383	)	$	(1,195,010	)	$	(154,508	)	$	(689,150	)
Net income (loss) per share	$	(0.05	)	$	(0.04	)	$	(0.00	)	$	(0.02	)

		January 31, 2005			July 31, 2005
Balance Sheet Data:
Cash and cash equivalents	$	130,520		$	56,309
Working capital deficiency	$	495,344		$	318,031
Total assets	$	1,533,774		$	1,614,869
Total current liabilities	$	1,348,973		$	1,337,552
Total capital deficiency	$	(1,083,585	)	$	(976,696	)

RISK FACTORS

     Investing in our common shares involves substantial risk, including the potential loss of your entire investment. You should carefully consider the following factors as well as other information contained in this prospectus and any prospectus supplement before deciding to invest in our common shares.

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Risks Related to Our Company

     New Business Strategy

     Until recently, our business operations have been focused primarily on the development of our software, consulting and TaxMax products for the North American automotive industry related to the purchase and financing of automobile transactions and the operations of Buy Here-Pay Here businesses. In May 2004, we decided to enter the direct automobile sales market by opening our first Carbiz Auto Credit center in Palmetto, Florida, which is a used car dealership that offers onsite financing to customers with poor credit through the utilization of our software products and our DCF business model. Rather than continuing to focus only on our existing software, consulting and TaxMax business, it is our intent to expand and diversify our business by opening additional credit centers in the future. In November 2004, our second Carbiz Auto Credit location was opened in St. Petersburg, Florida. In order to further accelerate the growth of our credit center business, we recently announced an agreement for the formation of a joint venture company for purpose of opening several additional credit centers over a period of time, the first of which was opened in Tampa, Florida during July 2005. The structure of this joint venture involves the joint venture partner investing the necessary funding and Carbiz providing management and the licensing of certain of our software and other intellectual property to the joint venture company. The credit centers opened as joint ventures will run under the Carbiz Auto Credit name. We seek to grow the first joint venture company to five locations, and we seek to enter into additional joint venture companies in the future to facilitate growth of the credit center business at a faster rate than is possible with internal funding of additional centers only. Our joint venture company may not be successful or grow beyond a single location or our joint venture model may not attract additional joint venture partners in the future.

     Although we will be relying heavily on our proprietary methods and technologies and our experience with advising third parties as to how to utilize those methods and technologies in their businesses, our management team does not have extensive experience with directly operating used car dealerships or selling automobiles directly to consumers with poor credit. Management may not be able to successfully implement this new business strategy and successfully compete in the used car finance business. If we are not successful in implementing this new business strategy, it would likely have a materially adverse effect on our financial position, liquidity and results of operations.

Limited Operating History; History of Losses

     We commenced operations in March 1998. We have a limited operating history and, as a result, we face many of the risks and uncertainties encountered by early-stage companies. Further, our limited operating history and the changing nature of our business make it difficult to predict our future operating results and how our business will develop.

     We have incurred net losses in each fiscal year since inception. During the six-month period ended July 31, 2005, we incurred a loss of approximately $154,000, and at July 31, 2005, we had an accumulated deficit of approximately $21.4 million. As a result of our intent to expand our business by opening additional credit centers, we have increased our operating expenses in recent periods and plan further increases in the future. Our planned increases in operating expenses may result in larger losses in future periods. As a result, we will need to generate significantly greater revenues than we have to date to achieve profitability. We cannot assure you that our revenues will increase. Our business strategies may not be successful, and we may not be profitable in any future period.

Maturity of 5% Convertible Debentures

     On October 12, 2004, we conducted a private placement of Cdn$1,614,030 principal amount of 5% convertible debentures. These debentures were to automatically convert into units, with each unit comprised of one common share, one class A common share purchase warrant and one-half of one class B common share purchase warrant, at a price of Cdn$0.22 per unit upon the listing of our common shares for trading on the Over-The-Counter Bulletin Board and the delisting of our common shares for trading on the TSX Venture Exchange. Each class A common share purchase warrant was to be exercisable through October 12, 2009 for one common share at an exercise price of Cdn$0.23, each whole class B common share purchase warrant was to be exercisable through October 12, 2009 for one common share at an exercise price of Cdn$0.30 per common share. If we did not meet the conditions for the conversion within 180 days of October 12, 2004, we were obligated to issue additional class A common share purchase warrants and class B common share purchase warrants to debenture holders upon the conversion of the debentures up to a maximum of 6% of the number of these securities the debenture holder would be entitled to receive upon the conversion of his, her or its debenture. Interest did not accrue on the debentures until May 1, 2005. If the conditions necessary for the conversion

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of these debentures were not met by October 6, 2005, the debentures matured and the principal and accrued interest would be due and payable in full on that date.

     As of October 6, 2005, we had not achieved a listing on the Over-The-Counter Bulletin Board, and we did not have sufficient cash on hand to repay the debentures. As a result, we negotiated with our debenture holders for an extension of the maturity date until April 6, 2006 in order to allow us additional time to list our common shares for trading on the Over-The-Counter Bulletin Board and delist our common shares from trading on the TSX Venture Exchange. In exchange for the extension of the maturity date, we offered to lower the conversion rate of the debentures to Cdn$0.15 per unit and the exercise price for each of the class A common share purchase warrants and the class B common share purchase warrants to Cdn$0.15. The holders of Cdn$846,297.50 principal amount of our debentures sought to be paid the principal and interest on their debentures on the maturity date, while the remaining debenture holders agreed to the extension of the maturity date. Because we did not have sufficient cash on hand to repay these debenture holders, certain of our directors and executive officers agreed to purchase 5% convertible debentures from us on the same terms as the debenture holders who agreed to the extension of the maturity date to provide us with sufficient cash to repay the debenture holders who sought to be paid the principal and interest on their debentures. Those debenture holders who agreed to the extension of the maturity date are entitled to 5% interest on their debentures beginning on May 1, 2005, and are entitled to the full 6% of the number of additional warrants to be issued upon conversion of their debentures. The new debenture holders are entitled to 5% interest on their debentures beginning immediately, and are entitled to the full 6% of the number of additional warrants that were to be issued by us to the debenture holder that the new debenture holder’s investment in us was used to pay in full.

     If we are not able to list our common shares for trading on the Over-The-Counter Bulletin Board and delist our common shares for trading on the TSX Venture Exchange on or before April 6, 2006, Cdn$1,576,852.40 principal amount of 5% convertible debentures will mature with interest and will be immediately due and payable. We do not expect that at such time we will have sufficient cash on hand to repay this amount. If we do not have sufficient cash on hand to repay this amount, we may be required to seek additional financing. We may not be successful in our efforts to arrange additional financing, if needed, on terms satisfactory to us or at all. The failure to obtain additional financing could result in a substantial curtailment of our operations. If additional financing were raised by the issuance of securities, control of Carbiz may change and/or our shareholders may suffer significant dilution.

Need for Additional Financing

     Should our operating revenues fail to increase to provide sufficient cash flow to fund operations we may require additional financing. Based on second quarter results and an assumption of meeting business projections for the remainder of the fiscal year and the year following, our current cash flow from operations and our cash on hand are sufficient to fund our operations until January 2007. Actual results that vary from projections may require the need for additional cash during that period. Our ability to arrange such financing in the future will depend in part upon the prevailing capital market conditions as well as our business performance. We may not be successful in our efforts to arrange additional financing, if needed, on terms satisfactory to us or at all. The failure to obtain adequate financing could result in a substantial curtailment of our operations. If additional financing is raised by the issuance of securities, control of Carbiz may change and/or our shareholders may suffer significant dilution.

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Dependence on Key Personnel

     Our performance and future operating results are substantially dependent on the continued service and performance of our senior management and key technical and sales personnel. Further, we may need to hire a number of technical and sales personnel. Competition for such personnel is intense, and we may not retain our key technical, sales and managerial employees or we may not be able to attract or retain highly qualified technical and managerial personnel in the future.

     The loss of the services of any of our senior management or other key employees or the inability to attract and retain the necessary technical, sales and managerial personnel could have a material adverse effect upon our business, financial condition, operating results and cash flows. We do not currently maintain “key man” insurance for any senior management or other key employees.

Attraction and Retention of Officers and Directors

     We may be unable to attract and retain qualified officers, directors and members of board committees required to provide for our effective management as a result of the recent and currently proposed changes in the rules and regulations which govern publicly-held companies. The enactment of the Sarbanes-Oxley Act of 2002 has resulted in a series of rules and regulations by the Securities and Exchange Commission that increase responsibilities and liabilities of directors and executive officers. The perceived increased personal risk associated with these recent changes may deter qualified individuals from accepting these roles.

Control by Existing Shareholders

     Our present officers, directors and greater than 5% shareholders together beneficially own approximately 44.8% of our outstanding common shares. Further, after the conversion of the 5% convertible debentures, our present officers, directors and greater than 5% shareholders together will beneficially own approximately 55.2% of our common shares. As a result, these shareholders, if they act together, are able to control all matters requiring shareholder approval including the election of directors and approval of significant corporate transactions. This concentration of ownership may delay, deter or prevent actions that would result in a change of control and might affect the market price of our common shares.

Volatility of Share Price

     The market price of our common shares has fluctuated significantly in the past and is likely to fluctuate significantly in the future. During the past two years, our common shares have traded on the TSX Venture Exchange between a low of Cdn$0.06 per share and a high of Cdn$0.40 per share. Furthermore, securities markets have experienced significant price and volume fluctuations and the market prices of the securities of finance-related companies, including automobile finance companies, have been especially volatile. Fluctuations in our common shares could result from, among other things:

• quarterly variations in operating results;

• short-selling of our common shares;

•   significant sales or issuances of our common shares or the perception that such sales or issuances could occur;

• events affecting other companies that investors deem to be comparable to us; and

• general economic trends and conditions.

These market fluctuations might have a material adverse effect the market price of our common shares.

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Lack of Liquidity

     We will seek to list our common shares on the Over-The-Counter Bulletin Board after this registration statement is declared effective. Trading in stocks quoted on the Over-The-Counter Bulletin Board is often thin and characterized by wide fluctuations in trading prices due to many factors that may have little to do with a company’s operations or business prospects. Moreover, the Over-The-Counter Bulletin Board is not a stock exchange, and trading of securities on the Over-The-Counter Bulletin Board is often more sporadic than the trading of securities listed on a quotation system such as Nasdaq or a stock exchange such as Amex. Accordingly, you may have difficulty reselling any of the common shares you purchase from a selling shareholder.

Penny Stock Risks

     If the trading price of our common shares is less than $5.00 per share, trading in our common shares would be subject to the requirements of certain rules promulgated under the Securities Exchange Act of 1934, which require additional disclosure by broker-dealers in connection with any trades involving a stock defined as a “penny stock.” A broker-dealer is required to deliver to a customer information regarding the risks of investing in penny stocks, its offer and bid prices for the penny stock and the amount of compensation received by the broker-dealer with respect to such transactions. The additional burdens imposed upon broker-dealers may discourage broker-dealers from effecting transactions in our common shares, which could reduce the liquidity of our common shares and thereby have a material adverse effect on the trading market for our securities.

Integration of Acquisitions

     We may, when and if the opportunity arises, acquire other products, technologies or businesses involved in activities, or having product lines, that are complementary to our business. Acquisitions involve numerous risks, including difficulties in the assimilation of the operations, technologies and products of the acquired companies, the diversion of management’s attention from other business concerns, risks associated with entering markets or conducting operations with which we have no or limited direct prior experience and the potential loss of key employees of the acquired company. Moreover, any anticipated benefits of an acquisition may not be realized. Future acquisitions by us could result in potentially dilutive issuances of equity securities, the incurrence of debt and contingent liabilities, and the write-off of acquired research and development costs, all of which could have a material adverse effect on our financial condition, results of operations and cash flows.

Insurance

     Our operations are subject to a number of hazards and risks. We maintain insurance at levels that are customary in our industry to protect against these liabilities; however, our insurance may not be adequate to cover all losses or liabilities that might be incurred in our operations. Moreover, we will be subject to the risk that we may not be able to maintain or obtain insurance of the type and amount desired at reasonable rates. If we were to incur a significant liability for which we were not fully insured, it could seriously harm our business.

Dividends

     We have never declared or paid any cash dividends on our common shares. The payment of any future dividends will be of the sole discretion of our board of directors. We currently intend to retain earnings to finance the expansion of our business and, therefore, we do not anticipate paying dividends in the foreseeable future. Therefore, you likely must rely upon the appreciation of our common share price to gain from your investment in our common shares.

Internal Controls

     Upon becoming a reporting issuer in the United States, we will be required to comply with the requirements of Section 404 of the Sarbanes-Oxley Act of 2002. Specifically, we and our independent registered public accounting firm will be required to certify the adequacy of our internal controls over financial reporting as of January 2008. Identification of material weaknesses in internal controls over financial reporting by us or our independent registered public accounting firm could adversely affect our competitive position in our business and the market price for our common shares.

Enforcement of Civil Liabilities in Canada

     We are incorporated under the laws of the province of Ontario, Canada. Some of our directors and officers are citizens or residents of countries other than the United States and certain of our assets and the assets of such persons are located outside of the United States. Consequently, it may be difficult for you to effect service of process within the United States upon our directors and officers or to realize in the United States upon judgments against such persons granted by courts of the United States based upon the civil liability provisions of the U.S. federal securities laws or other laws of the United States. There is doubt as to the enforceability against us and against our non-U.S. resident directors and officers, in original actions in Canadian courts, of liabilities based upon the U.S. federal securities laws and as to the enforceability against us and against our non-U.S. resident directors and officers in Canadian courts of judgments of U.S. courts obtained in actions based upon the civil liability provisions of the U.S. federal securities laws. As a result, it may not be possible to enforce those actions against us or against certain of our directors and officers.

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Risks Related to Our Credit Center Business

Sub-Prime Borrowers

     With our credit center business, we intend to focus on serving customers with poor credit. These customers are often referred to as “sub-prime borrowers.” Sub-prime borrowers typically have higher-than-average delinquency and default rates. While we believe that we effectively manage the risks associated with lending to these borrowers, our risk management policies and procedures may not be effective in the future. In the event that we underestimate the default risk of these borrowers, our financial position, liquidity and results of operations would be adversely affected, possibly to a material degree.

General Economic Conditions

     We are subject to general economic conditions which are beyond our control. During periods of economic slowdown or recession, such as the United States economy has at times experienced, delinquencies, defaults, repossessions and losses generally increase. These periods also may be accompanied by decreased consumer demand for automobiles and declining values of automobiles securing outstanding loans, which weakens collateral coverage and increases the amount of a loss in the event of default. Significant increases in the inventory of used automobiles during periods of economic recession may also depress the prices at which repossessed automobiles may be sold or delay the timing of these sales. Because the focus of our credit center business will be on sub-prime borrowers, the actual rates of delinquencies, defaults, repossessions and losses on these loans are higher than those experienced in the general automobile finance industry and could be more dramatically affected by a general economic downturn. In addition, during an economic slowdown or recession, our servicing costs may increase without a corresponding increase in our servicing income. While we seek to manage the higher risk inherent in loans made to sub-prime borrowers through the risk management policies and procedures we employ, these policies and procedures may not afford adequate protection against these risks. Any sustained period of increased delinquencies, defaults, repossessions or losses or increased servicing costs could also have a material adverse effect on our financial position, liquidity and results of operations.

Competition

     Competition in the used automobile retail industry is intense and highly fragmented. We compete with (i) other similar used car dealerships that offer Buy Here-Pay Here financing, (ii) the used vehicle retail operations of franchised automobile dealerships, (iii) independent used vehicle dealers, and (iv) individuals who sell used vehicles in private transactions. Also, we compete for both the purchase and resale of used vehicles. Some of our competitors have substantially greater financial resources than we do.

     Management believes the principal competitive factors in the sale of used vehicles include: (i) the availability of financing to consumers with limited credit histories or past credit problems, (ii) the breadth and quality of vehicle selection, (iii) pricing, (iv) the convenience of a dealership’s location, and (v) customer service. We may not be able to compete successfully in this market or against our competitors with respect to all of these competitive factors.

Government Regulation

     Our operations, in particular the financing services we provide with our credit centers, are subject to regulation, supervision and licensing under various federal, state and local statutes, ordinances and regulations.

     In the states in which we operate, a consumer credit regulatory agency regulates and enforces laws relating to consumer lenders and sales finance agencies such as us. These rules and regulations generally provide for licensing of sales finance agencies; limitations on the amount, duration and charges, including interest rates, for various categories of loans; requirements as to the form and content of finance contracts and other documentation; and restrictions on collection practices and creditors’ rights. We are also subject to periodic examination by state regulatory authorities.

     We are also subject to extensive federal regulation, including the Truth in Lending Act, the Equal Credit Opportunity Act and the Fair Credit Reporting Act. These laws require us to provide certain disclosures to prospective borrowers and protect against discriminatory lending practices and unfair credit practices. The principal disclosures required under the Truth in Lending Act include the terms of repayment, the total finance charge and the annual percentage rate charged on each loan. The Equal Credit Opportunity Act prohibits creditors from discriminating against loan applicants on the basis of race, color, sex, age or marital status. According to Regulation B promulgated under the Equal Credit Opportunity Act, creditors are required to make certain disclosures regarding consumer rights and advise

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consumers whose credit applications are not approved of the reasons for the rejection. In addition, the credit scoring system we use must comply with the requirements for such a system as set forth in the Equal Credit Opportunity Act and Regulation B. The Fair Credit Reporting Act requires us to provide certain information to consumers whose credit applications are not approved on the basis of a report obtained from a consumer reporting agency. Additionally, we are subject to the Gramm-Leach-Bliley Act, which requires us to maintain privacy with respect to certain consumer data in our possession and to periodically communicate with consumers on privacy matters. We are also subject to the Soldiers’ and Sailors’ Civil Relief Act, which requires us to reduce the interest rate charged on each loan to customers who have subsequently joined, enlisted, been inducted or called to active military duty. Failure by us to comply with these statutes and regulations could result in consumers having rights of rescission and other remedies that could have an adverse effect on us.

     We believe that we maintain all material licenses and permits required for our current operations and are in substantial compliance with all applicable local, state and federal regulations. However, we may not be able to maintain all requisite licenses and permits, and the failure to satisfy those and other regulatory requirements could have a material adverse effect on our operations. Further, the adoption of additional, or the revision of existing, rules and regulations could have a material adverse effect on our business.

Joint Venture Arrangements

     One of our Carbiz Auto Credit centers is currently structured as a joint venture arrangement in which we possess a 50% ownership interest in exchange for our providing management services and licensing certain of our intellectual property to the joint venture company with our joint venture partner investing the funds necessary to operate the center. We anticipate that a significant portion of any future growth of our Carbiz Auto Credit center business will be made through similar joint ventures. However, we may not be able to identify suitable joint venture partners or opportunities or enter into joint venture arrangements on terms favorable to us, if at all. We generally will not be in a position to exercise sole decision-making authority regarding these joint ventures. Investments in joint ventures may under certain circumstances, involve risks not present when a third-party is not involved, including the possibility that joint venture partners might become bankrupt or fail to fund their share of the required capital contributions. Joint venture partners may have business interests, strategies or goals that are inconsistent with our business interests, strategies or goals and may be, in cases where we have a minority interest will be in a position to take actions contrary to our policies, strategies or objectives. Joint venture investments also entail a risk of impasse on decisions, because neither we nor our joint venture partner would have full control over the joint venture. Any disputes that may arise between us and our joint venture partners may result in litigation or arbitration that could increase our expenses and could prevent our officers and/or directors from focusing their time and effort exclusively on our business strategies. Consequently, actions by or disputes with our joint venture partners might result in subjecting our Carbiz Auto Credit centers owned by the joint venture to additional risks. In addition, we may in certain circumstances be liable for the actions of our third-party joint venture partners.

Risks Related to Our Software and Business Model Consulting Business

Competition

     The market for our software products is intensely competitive, fragmented and rapidly changing. As we develop new products, we may begin competing with companies with whom we have not previously competed. It is also possible that new competitors will enter the market or that our competitors will form alliances that may enable them to rapidly increase their market share.

     Some of our actual and potential competitors are larger, better established companies and have greater technical, financial and marketing resources. Increased competition may result in price reductions, lower gross margins or loss of our market share, any of which could have a material adverse effect our business, financial condition and operating results.

Protection of Proprietary Rights

     Our success depends in part on our ability to protect our proprietary software and our other proprietary rights from copying, infringement or use by unauthorized parties. To protect our proprietary rights we rely primarily on a combination of trade secret and trademark laws, confidentiality agreements with employees and third parties, and

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protective contractual provisions such as those contained in license agreements with consultants, vendors and customers, although we have not signed these types of agreements in every case. Despite our efforts to protect our proprietary rights, unauthorized parties may copy aspects of our products and obtain and use information that we regard as proprietary. Other parties may breach confidentiality agreements and other protective contracts we have entered into. We may not become aware of, or have adequate remedies in the event of, these types of breaches or unauthorized activities.

Infringement of Third Parties’ Proprietary Rights

     If any of our products violate third-party proprietary rights, including copyrights and patents, we may be required to re-engineer our products or obtain licenses from third parties to continue offering our products without substantial re-engineering. Although some of our current and potential competitors have sought copyright or patent protection, we have not sought copyright or patent protection for our software products. If a copyright or patent has been issued or is issued in the future to a third-party that prevents us from using technology included in our products, we would need to obtain a license or re-engineer our product to function without infringing the patent or copyright. Any efforts to re-engineer our products or obtain licenses from third parties may not be successful and, in any case, could substantially increase our costs, or force us to interrupt product sales or delay product releases.

Third-Party Licenses

     Some of our products are designed to include intellectual property owned by third parties. We believe we have all of the necessary licenses from third parties to use and distribute third-party technology and content that we do not own that is used in our current products and services. From time to time we may be required to renegotiate with these third parties – or negotiate with new third parties – to include their technology or content in our existing products, in new versions of our existing products or in wholly new products. We may not be able to negotiate or renegotiate licenses on reasonable terms, or at all. If we are unable to obtain the rights necessary to use or continue to use third-party technology or content in our products and services, we may not be able to sell the affected products, which would in turn have a negative impact on our revenue and operating results.

New Product Development

     We expect that a significant portion of our future revenue will be derived from the sale of newly introduced products and from enhancement of existing products. Our success will depend in part upon our ability to enhance our current products on a timely and cost-effective basis and to develop new products that meet changing market conditions, including changing customer needs, new competitive product offerings and enhanced technology. We may not be successful in developing and marketing on a timely and cost-effective basis new products and enhancements that respond to such changing market conditions. If we are unable to anticipate or adequately respond on a timely or cost-effective basis to changing market conditions, to develop new software products and enhancements to existing products, to correct errors on a timely basis or to complete products currently under development, or if such new products or enhancements do not achieve market acceptance, our business, financial condition, operating results and cash flows could be materially adversely effected. In light of the difficulties inherent in software development, we expect that we will experience delays in the completion and introduction of new software products.

Product Defects

     Software products as complex as ours may contain errors or defects, especially when first introduced or when new versions are released. We have had to delay commercial release of some versions of our products until software problems were corrected, and in some cases have provided product enhancements to correct errors in released products. Our new products and product enhancements or new applications or features may not be free from errors after commercial shipments have begun. Any errors that are discovered after commercial release could result in loss of revenues or delay in market acceptance, diversion of development resources, damage to our reputation, increased service and warranty costs and liability claims.

     Our end-user licenses contain provisions that limit our exposure to product liability claims, but these provisions may not be enforceable in all jurisdictions. A successful product liability claim could result in material liability and damage to our reputation.

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System Security Breaches

     A fundamental requirement for online communications is the secure transmission of confidential information over the Internet. Users of our products transmit their and their customers’ confidential information over the Internet. In our license agreements with our customers, we disclaim responsibility for the security of confidential data and have contractual indemnities for any damages claimed against us. However, if unauthorized third parties are successful in obtaining confidential information from users of our products, our reputation and business may be damaged and, if our contractual disclaimers and indemnities are not enforceable, we may be subjected to liability.

Business Model Consulting Services

     Our business model consulting services may result in professional liability. Our engagements involve matters that could have a severe impact on the client’s business and cause the client to lose significant amounts of money.

Accordingly, if a client is dissatisfied with our performance, the client could threaten or bring litigation in order to recover damages or to contest its obligation to pay our fees. Litigation alleging that we performed negligently or otherwise breached our obligations to the client could expose us to significant liabilities and tarnish our reputation.

Risks Related to Our TaxMax Business

Seasonality of Business

     Our tax return preparation and refund anticipation loan business is highly seasonal. We derive most of our revenue from this business during the fourth quarter and first quarter of each year as a result of dealers paying registration fees to enroll in our programs primarily from October through December and customers paying tax preparation fees primarily from January through April of each year. The concentration of this revenue-generating activity during this relatively short period presents a number of operational challenges for us, which primarily involve hiring a sufficient number of seasonal employees to assist with the processing of tax filings and ensuring optimal uninterrupted operations during this peak season.

     If we were unable to meet these challenges or we were to experience significant business interruptions during the tax season, which may be caused by labor shortages, systems failures, work stoppages, adverse weather or other events, many of which are beyond our control, we could experience a loss of business, which would have a material adverse effect on our business and results of operations.

Competition

     The tax return preparation business is highly competitive. With our TaxMax product, we specifically compete with one national provider along with several small regional providers in the automobile dealer market. Also, there are a substantial number of tax return preparation firms and accounting firms offering tax return preparation services, and many such firms offer refund anticipation loan services to the public. Some of our actual and potential competitors are larger, better established companies and have greater technical, financial and marketing resources. We may not be able to compete successfully in this market or against our competitors in the future.

Government Initiatives

     The performance of our tax business depends on our ability to offer access to products that increase the speed and efficiency by which customers of our customers can receive funds associated with their tax returns. The federal government and various state and local municipalities have, from time to time, announced initiatives designed to modernize their operations and improve the timing and efficiency of processing tax returns. If tax authorities are able to increase the speed and efficiency with which they process tax returns, the value and attractiveness of our products and demand for our services could be reduced.

Regulation of Refund Anticipation Loans

     Because these loans are short-term, their effective annual percentage rate is relatively high compared to other consumer loans. While these loans are not prohibited by federal regulations, some states have considered legislation,

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and a few states have interpreted existing laws in a manner that would effectively limit the annual percentage rate on refund anticipation loans or restrict our ability to receive fees in connection with these loans.

     Consumer advocacy groups have called for a legislative and regulatory response to the perceived inequity of these types of loans. One such consumer group advocates for the adoption by various states of regulations that would place significant limitations on annual percentage rates and impose costly bonding requirements, among other things. Legislation of this type, if adopted, would likely increase costs to us or could render refund anticipation loans too costly to market. In addition, various jurisdictions have also imposed regulatory restraints on the marketing of refund anticipation loans under existing laws. These restraints include requirements regarding specific disclosures that must be made to customers.

Litigation Exposure Relating to Refund Anticipation Loans

     Tax return preparers who facilitate the sale of refund anticipation loans have been subject, from time to time, to individual and class action lawsuits concerning their role in facilitating these loans. These lawsuits have alleged, among other claims, collusion between the tax return preparers and lenders in violation of federal law and fraud on the part of the tax return preparers for failing to disclose the nature of the loan or that the tax return preparer receives a fee from the lender in connection with the loan. Although we do not believe that if these claims were made against us that they would have merit, and we would vigorously contest them, given the number of refund anticipation loans we facilitate every year and the inherent uncertainties of the U.S. legal system, we could experience significant losses as a result of litigation defense and resolution costs, which would have a significant adverse impact on our business.

Compliance with Privacy Laws

     Privacy concerns relating to the disclosure of consumer financial information have drawn increased attention from federal and state governments. The Internal Revenue Service generally prohibits the use or disclosure by tax return preparers of taxpayers’ information without the prior written consent of the taxpayer. In addition, the Gramm-Leach-Bliley Act and other Federal Trade Commission regulations require financial service providers, including tax return preparers, to adopt and disclose consumer privacy policies and provide consumers with a reasonable opportunity to opt out of having personal information disclosed to unaffiliated third parties for advertising purposes. Although we have established security procedures to protect against identity theft, breaches of our customers’ privacy may occur. To the extent the measures we have taken prove to be insufficient or inadequate, we may become subject to litigation or administrative sanctions, which could result in significant fines, penalties or damages and harm to our reputation.

USE OF PROCEEDS

     Assuming that all of our class A common share purchase warrants and our class B common share purchase warrants held by the selling shareholders are exercised for cash, we will receive proceeds of approximately Cdn$2,532,270 which we intend to use for working capital and general corporate purposes. We will not receive any proceeds from the sale by the selling shareholders of their common shares or common shares issued to them upon exercise of our class A common share purchase warrants or our class B common share purchase warrants.

     We have agreed to bear the expenses in connection with the registration of the common shares being offered by the selling shareholders under this prospectus.

PRICE RANGE OF COMMON SHARES

     Our common shares are quoted on the TSX Venture Exchange under the symbol “CZ”. Our common shares are not currently listed for trading in the United States. We will seek to list our common shares for trading on the Over-The-Counter Bulletin Board after this registration statement is declared effective.

     The quarterly high and low sales price information in Canadian dollars on the TSX Venture Exchange of our common shares during the periods indicated are as follows:

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	High	Low
Fiscal Year Ending January 31, 2006
Third Quarter (through November 1, 2005)	Cdn$0.15	Cdn$0.06
Second Quarter	Cdn$0.20	Cdn$0.06
First Quarter	Cdn$0.20	Cdn$0.11
Fiscal Year Ending January 31, 2005
Fourth Quarter	Cdn$0.20	Cdn$0.12
Third Quarter	Cdn$0.27	Cdn$0.16
Second Quarter	Cdn$0.29	Cdn$0.15
First Quarter	Cdn$0.40	Cdn$0.20
Fiscal Year Ended January 31, 2004
Fourth Quarter	Cdn$0.40	Cdn$0.15
Third Quarter	Cdn$0.18	Cdn$0.06
Second Quarter	Cdn$0.12	Cdn$0.07
First Quarter	Cdn$0.10	Cdn$0.06

     As of November 1, 2005, the closing sales price for our common shares was Cdn$0.09 per share on the TSX Venture Exchange.

     As of October 5, 2005, there were approximately 117 holders of record of our common shares.

TAX CONSEQUENCES TO UNITED STATES HOLDERS

     The discussion under this heading summarizes the principal Canadian federal income tax consequences of acquiring, holding and disposing of our common shares for our shareholders who are not residents of Canada but are residents of the United States and who will acquire and hold our common shares as capital property for the purposes of the Income Tax Act (Canada) (which we refer to as the “Canadian Tax Act”). This summary does not apply to shareholders who carry on business in Canada through a “permanent establishment” situated in Canada or who perform independent personal services in Canada through a fixed base in Canada if the shareholders’ holdings in us are effectively connected with such permanent establishment or fixed base. This summary is based on the provisions of the Canadian Tax Act and the applicable regulations and on an understanding of the administrative practices of Canada Revenue Agency, and takes into account all specific proposals to amend the Canadian Tax Act or regulations made by the Minister of Finance of Canada as of today’s date. It has been assumed that there will be no other relevant amendment of any governing law although no assurance can be given in this respect. This discussion is general only and is not a substitute for independent advice from a shareholder’s own Canadian and U.S. tax advisors. The provisions of the Canadian Tax Act are subject to income tax treaties to which Canada is a party, including the Canada-United States Income Tax Convention (1980), as amended (the “Convention”).

Dividends on Common Shares and Other Income

     Under the Canadian Tax Act, a non-resident of Canada is generally subject to Canadian withholding tax at the rate of 25% on dividends paid or deemed to have been paid to him or her by a corporation resident in Canada. The Convention limits the rate to 15% if the shareholder is a resident of the United States and the dividends are beneficially owned by and paid to the shareholder and to 5% if the shareholder is also a corporation that beneficially owns at least 10% of the voting stock of the payer corporation.

     The amount of a stock dividend (for tax purposes) would generally be equal to the amount by which our paid up or stated capital had increased by reason of the payment of such dividend. We will furnish additional tax information to shareholders in the event of such a dividend. The Convention generally exempts from Canadian income tax dividends paid to a religious, scientific, literary, educational or charitable organization or to an organization constituted and operated exclusively to administer a pension, retirement or employee benefit fund or plan, if the organization is a resident of the United States and is exempt from income tax under the laws of the United States.

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     The tax payable on dividends is to be withheld at source by us or personnel acting on our behalf. We are liable for the amount of the tax if we fail to so withhold. The taxpayer is liable in any event if we fail to withhold.

Dispositions of Common Shares and Other Income

     Under the Canadian Tax Act, a taxpayer’s capital gain or capital loss from a disposition of our common shares is the amount, if any, by which his or her proceeds of disposition exceed (or are exceeded by, respectively) the aggregate of his or her adjusted cost base of the shares and reasonable expenses of disposition. The capital gain or loss must be computed in Canadian currency using a weighted average adjusted cost base for identical properties. Capital gains net of losses are currently taxable as to 50%. The amount by which a shareholder’s capital loss exceeds the capital gain in a year may be deducted from a capital gain realized by the shareholder in the three previous years or any subsequent year, subject to certain restrictions in the case of a corporate shareholder.

     If our common shares are disposed of to us other than in the open market in the manner in which common shares would normally be purchased by the public, the proceeds of disposition will, in general terms, be considered as limited to the paid-up capital of the common share and the balance of the price paid will be deemed to be a dividend. In the case of a shareholder that is a company, the amount of any capital loss otherwise determined may be reduced, in certain circumstances, by the amount of dividends previously received in respect of the common shares disposed of, unless the company owned the common shares for at least 365 days prior to sustaining the loss and the company (together with companies, persons and other entities, with whom the company was not dealing at arm’s length) did not own more than 5% of our common shares from which the dividend was received, at the time the dividend was received. These loss limitation rules may also apply where a company is a member of a partnership or a beneficiary of a trust that owned the common shares disposed of.

     Under the Canadian Tax Act, a non-resident of Canada is subject to Canadian tax on taxable capital gains, and may deduct allowable capital losses, realized on a disposition of “taxable Canadian property.” Our common shares will only be taxable Canadian property if at any time in the 60 months immediately preceding the disposition, 25% or more of our issued common shares belonged to one or more persons in a group comprising the shareholder and persons with whom the shareholder did not deal at arm’s length. We believe the Convention will generally relieve United States residents from liability for Canadian tax on capital gains derived from a disposition of our common shares.

DIVIDEND POLICY

     We have never declared or paid any cash dividends on our common shares. The payment of any future dividends will be of the sole discretion of our board of directors. We currently intend to retain earnings to finance the expansion of our business and, therefore, we do not anticipate paying dividends in the foreseeable future.

EQUITY COMPENSATION PLANS AS OF JANUARY 31, 2005

Plan Category	Number of Securities to be Issued Upon Exercise of Outstanding Options, Warrants and Rights     (a)	Weighted-average Exercise Price of Outstanding Options, Warrants and Rights       (b)	Number of Securities Remaining Available for Future Issuance Under Equity Compensation Plans (Excluding Securities Reflected in Column (a)) (c)
Equity compensation plans approved by security holders	4,089,988	$0.18	10,213
Equity compensation plans not approved by security holders
Total	4,089,988	$0.18	10,213

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

     The following Management’s Discussion and Analysis of Financial Condition and Results of Operations contains forward-looking statements concerning our revenues, operating results, and financial condition. These forward-looking statements are subject to a number of risks and uncertainties, including but not limited to, our new business strategy; our limited operating history and history of losses; the potential maturity of our 5% convertible debentures; our need for additional financing; our dependence on key personnel; our attraction and retention of officers and directors; control of us by existing shareholders; the volatility of our common share price; the lack of liquidity related to our common shares; penny stock risks related to our common shares; our integration of acquisitions; risks related to our insurance coverage; our history of not declaring dividends; your potential inability to enforce civil liabilities against us and our officers and directors; risks related to our internal controls; risks related to sub-prime borrowers; risks related to general economic conditions; competition; government regulation; risks related to joint venture arrangements; protection of our proprietary rights; potential infringement by us of third parties’ proprietary rights; risks related to third-party licenses; risks related to new product development; risks related to product defects; risks related to system security breaches; risks related to our business model consulting services; the seasonality of our TaxMax business; regulation of and litigation exposure to refund anticipation loans; our compliance with privacy laws, and the other additional risks and uncertainties identified under the caption “Risk Factors,” beginning on page 6 and elsewhere in this prospectus or in any prospectus supplement we may file. You are encouraged to review these risk factors and this additional information carefully. An investment in our common shares involves substantial risk and could result in the loss of your entire investment. The following discussion should also be read in conjunction with our financial statements and notes thereto appearing elsewhere in this prospectus.

Overview

Our revenue is currently derived from three sources, which include:

•     Software product and support sales and business model consulting services - through initial software license fees and subsequent support agreements, which provide monthly maintenance fees as well as through a combination of one-time consulting fees and monthly business analysis services;

•     Tax return processing used for down payments on automobile purchases (Taxmax) – through seasonal registration fees, the bulk of which are received from October through December of each year, and subsequent tax processing fees, the bulk of which are received in February and March of each year; and

•     Direct auto sales and related financing (Carbiz Auto Credit centers) – through our Buy Here-Pay Here specialty finance business, which includes company owned locations as well as locations owned by our joint venture

     Historically, we have been a software company that has also offered tax return processing services for, and business model consulting services to, the North American automobile industry. In May 2004, we decided to enter the direct automobile sales market utilizing our own software and business model consulting products by opening our first “credit center” in Palmetto, Florida, which is a used car dealership that offers financing onsite to customers with poor credit. Rather than continuing to focus our resources only on our software, tax processing and consulting businesses, it is our intent to expand and further diversify our business operations by opening additional credit centers in the future. We opened our second credit center in St. Petersburg, Florida in November 2004, and we recently opened our third credit center, a joint venture location, in Tampa, Florida. We anticipate opening additional credit centers in the future, with some of these credit centers being wholly-owned by us and others utilizing the joint venture structure discussed elsewhere in this prospectus. See “Business – Carbiz Auto Credit” on page 27 of this prospectus.

     In terms of our existing software and consulting businesses, we believe that our IDA software and the related consulting will drive our software revenue and consulting services growth in the near term. To date, it has been installed in ten dealerships, and we have a backlog of six installations which are expected to be fully operational by the end of the third quarter of this fiscal year. There is an industry-wide movement towards standardization of independent dealer accounting that is spearheaded by NIADA (National Independent Automobile Dealer Association) and NABD (National Alliance of Buy Here-Pay Here Dealers). We have worked closely with both of these associations during the development of our IDA software, and have received the “Approved Vendor for Standardized Accounting” designation

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from NIADA. As a result, we believe that this product is positioned to become one of the accepted industry standards and a primary accounting solution for independent dealers throughout North America.

     Although our revenues related to our tax processing services decreased during the fiscal year ended January 31, 2005 and six months ended July 31, 2005 compared to prior periods, we believe that the introduction of our TaxMax on-site data entry and check printing systems will improve our revenues for our TaxMax business in the future. Further, we have tested our TaxMax programs in other preparation venues, and we believe that the results of these tests demonstrate the potential for further expansion of our TaxMax product into other preparation venues in the future.

Critical Accounting Policies

Revenue Recognition

     Our revenue is derived from the sale of licenses, services and commissions, the sale of products to dealers in the automobile industry and sale of used vehicles. We recognize revenue in accordance with Statement of Position 97-2, “Software Revenue Recognition,” issued by the American Institute of Certified Public Accountants in October 1997 as amended by Statement of Position 98-9 issued in December 1998 for all software or software related revenue. For all non-software or non-software related revenue, we recognize revenue in accordance with Securities and Exchange Commission Staff Accounting Bulletin 104, “Revenue Recognition,” which was preceded by Staff Accounting Bulletin 101, “Revenue Recognition in Financial Statements.” For contracts involving multiple deliverables, where the deliverables are governed by more than one authoritative accounting standard, we generally apply the Financial Accounting Standards Board Emerging Issues Task Force Issue No. 00-21, “Revenue Arrangements with Multiple Deliverables” to determine whether deliverables should be accounted for separately.

     We derive our revenue through the licensing of software products and providing related services, including installation, training and support, our TaxMax products, and our Buy Here-Pay Here Carbiz Auto Credit business. Our revenue from licenses is recognized upon the execution of a license agreement, when the licensed product has been delivered, fees are fixed or determinable, collection is probable and when all significant obligations have been fulfilled. Related services revenue is recognized when a signed contract has been executed, the services have been delivered, and obligations have been fulfilled. Our TaxMax revenue is made up of two parts. The first part is the dealer sign-up fee. These fees are paid between October and December. The second part is the tax preparation fees earned between January and April. As a majority of the tax preparation fees are earned subsequent to the year end, a portion of the sign up fees and related expenses are deferred and recognized as the tax preparation services are rendered. We also sell and finance used automobiles. The sale of vehicles is recognized once the customer takes delivery and title has passed to the customer. In the case of financing of sold vehicles, the interest is recognized over the term of the loan, which is generally 80 weeks, based on the principal outstanding at the time.

Use of Estimates

     We prepare our financial statements in accordance with generally accepted accounting principals in the United States. The preparation of consolidated financial statements in conformity with generally accepted accounting principles requires us to make estimates and assumptions that affect the reported amounts of assets and liabilities and 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. Estimates are based upon historical experience and various other assumptions that are believed to be reasonable under the circumstances. These estimates are evaluated on an on-going basis and are used when accounting for items and matters such as the allowance for doubtful accounts, deferred revenue and related costs and contingencies. Actual results may differ from these estimates under different assumptions.

Stock-Based Compensation

     We account for stock-based compensation in accordance with Accounting Principles Board Opinion No. 25, “Accounting for Stock Issued to Employees.” Pursuant to this accounting standard, we record deferred compensation for share options granted to employees at the date of grant based on the difference between the exercise price of the options and the market value of the underlying shares at that date. Deferred compensation is amortized to compensation expense over the vesting period of the underlying options. No compensation expense is recorded for stock options that are granted to employees and directors when the exercise price is equal to the fair market value of the shares at the time of the grant.

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Change in Functional Currency

     Historically, the Canadian dollar has been our functional currency, and financial statements were reported in Canadian dollars. During the year ended January 31, 2005, we determined that as a result of the continued move of our operations and personnel, combined with significant debt issuances in the United States, our functional currency had changed to U.S. dollars. In addition, we determined that we would report our financial statements in U.S. dollars. All amounts presented in these financial statements are expressed in U.S. dollars unless otherwise indicated.

     In accordance with Statement of Financial Accounting Standards No. 52 “Foreign Currency Translation,” we have translated into U.S. dollars the financial statements as at and for the years ended January 31, 2005 and 2004. The method of translation used has resulted in the financial statements of prior years presented for comparison being translated as if the U.S. dollar had always been used as the reporting currency.

     Prior to November 1, 2004, the date on which we determined that our functional currency had changed to U.S. dollars, this translation was done using the current rate method. Under the current rate method, our assets and liabilities were translated into U.S. dollars at the exchange rate at the balance sheet date. Revenue, costs and expenses were translated at average rates prevailing during the periods. Translation adjustments arising prior to November 1, 2004 were reported as a component of other comprehensive income.

     Subsequent to November 1, 2004, this translation was done using the temporal method. Under the temporal method, our monetary assets and liabilities were translated to U.S. dollars at the exchange at the balance sheet date, while equity and non-monetary assets and liabilities were translated at their historical rates. Revenue, costs and expenses were translated at average rates prevailing during the periods. Translation adjustments arising prior to November 1, 2004 were reported as a component of net loss for the year.

Six Month Financial Information

     The following table sets forth selected six month financial information for our period ended July 31, 2005 and 2004. Period-to-period comparisons of Carbiz’s financial results are not necessarily meaningful and should not be relied upon as an indication of future performance.

Six months ended July 31, 2005 compared to the six months ended July 31, 2004

		2005		% of Revenue			2004		% of Revenue
Revenue	$	2,295,669		100.0		$	1,703,434		100.0
Cost of sales	$	1,109,475		48.3		$	757,893		44.5
Gross profit	$	1,186,194		51.7		$	945,541		55.5
Operating expenses	$	1,235,038		53.8		$	1,619,725		95.1
Operating income (loss)	$	(48,844	)	(2.1	)	$	(674,184	)	(39.6	)
Interest expense	$	(118,669	)	5.2		$	(40,988	)	2.4
Minority interest income (loss)	$	13,005		0.1		$	-0-
Net income (loss)	$	(154,508	)	(6.7	)	$	(715,172	)	(42.0	)
Other comprehensive income (loss)	$	-0-				$	26,022		1.5
Comprehensive income (loss)	$	(154,508	)	(6.7	)	$	(689,150	)	(40.5	)
Loss per common share (1)	$	(.00	)			$	(.02	)
Total assets	$	1,614,869				$	1,004,265
Long-term liabilities	$	1,017,018				$	804,577

(1) Fully diluted loss per share does not differ from basic loss per share for any of the above-noted periods as the conversion or exercise of any potentially dilutive securities would be anti-dilutive.

Revenue

     In the six months ended July 31, 2005, our revenues increased by $592,235 compared to our six month revenue during the previous period ended July 31, 2004. This increase was primarily due to the positive sales generated by our new operating unit, Carbiz Auto Credit, which generated sales of $718,820, including $700,020 from our company

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owned locations and $18,800 from our joint venture location, during the first six months of 2005. This increase was offset by a reduction in our TaxMax revenue of approximately $97,000 during the first six months of 2005 when compared to the first six months of 2004. We continue to eliminate non-performing products impacting revenue negatively in the short-term, replacing them with higher priced, higher margin products, which we expect to positively impact future revenues.

Cost of Sales

     Our cost of sales expense increased by $351,582 for the six months ended July 31, 2005, compared to same period ended July 31, 2004. Carbiz Auto Credit operations added cost of sales of $522,075, including $509,393 from our company owned locations and $12,682 from our joint venture location, during the six months ended July 31, 2005, and all other parts of the operation decreased cost of sales by $98,261 during the six months ended July 31, 2005. We anticipate that our cost of sales expense will continue to increase as we open additional Carbiz Auto Credit centers in the future.

Expenses

     For the six months ended July 31, 2005, our operating expenses decreased by $85,508 compared to the same period ended July 31, 2004. The Carbiz Auto Credit operating expenses were $309,774, including $277,784 from our company owned locations and $31,990 from our joint venture location, during the six months ended July 31, 2005, while operating expenses for other segments decreased by $336,684 during the six months ended July 31, 2005. This primarily resulted from a decrease in expenses to accrue for tax work for the six months ended July 31, 2004 that did not reoccur in the current year six months ended July 31, 2005 as well as allocation of management expenses to Carbiz Auto Credit.

     We have not been investing significant amounts in fixed assets over the past two years. This fact is reflected in the decrease in depreciation and amortization expenses by $299,179 for the six months ended July 31, 2005 as compared to the same period ended July 31, 2004. During the six months ended July 31, 2004, we had increased the amortization of leaseholds as a result of moving to a new location. Leaseholds were reduced to zero prior to July 31, 2004.

Interest Expense

     Our interest expense increased by $77,681 for the six months ended July 31, 2005, compared to the same period ended July 31, 2004. We continue to pay down our longer term debt, with principal payments being made monthly.

Software Sales, Support and Consulting

     This segment of our business consists of new sales and recurring monthly revenue for software products and new sales, new sales and recurring monthly revenue of consulting products, and other related products including revenue from credit bureau fees, supply sales, and forms programming. Our total software, consulting and other sales during the six months ended July 31, 2005 increased over the prior period ended July 31, 2004 by $113,771.

     Total software sales during the six months ended July 31, 2005 increased over the prior period by $97,652, with recurring monthly support revenue showing improvement over the prior period by an increase of $50,575 or 17.2% . Sales of new software installations also showed improvement over the prior period by an increase of $38,430 or 26.7% .

     The adoption of our current Carbiz Windows-based programs by existing DOS users continued to show an upward trend during the six months ended July 31, 2005, with approximately 8% of users on previous generation DOS programs upgrading to current programs. We believe this demonstrated that our existing user base is remaining stable while new, incremental software sales should continue to add customers for consulting services. We believe the overall trend also indicates continuing growth of recurring revenue.

     The results of our IDA installations had some positive impact on the six months ended July 31, 2005, with several completed installations included in the sales totals. The monthly recurring support revenue for IDA in the six months ended July 31, 2005, grew to $8,500, with additional installations to be completed during the third quarter of

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fiscal 2006. Dealer interest in IDA continues to increase, which along with a shift in emphasis to higher value monthly support functions, we believe should result in continued growth in installations and recurring revenue.

     Our new sales of consulting services for the six-month period ended July 31, 2005 showed a decrease from the prior period of $34,456 or 64.2%, while recurring monthly consulting revenue remained constant with the prior period. New consulting customers were an even mix of additional locations opened by existing customers and new consulting customers.

     Software sales provide opportunities for us to introduce our consulting services to business clients. While our software products facilitate data accumulation and reporting, our consulting services help to interpret the data and provide advice, as well as industry benchmarks, to help dealers improve results. Our consulting focuses on implementing a data tracking product that automates some data analysis, creates a recurring revenue stream and facilitates additional consulting services.

     We offer two levels of consulting services targeted mainly to the Buy Here-Pay Here dealer. The standard package includes unlimited manager training, unlimited “800” number technical support, a monthly benchmarking report of composite data from dealerships using our system, and one training conference per year. The premier package also includes a weekly faxed performance report based on download and analysis of the client’s data. Our consultants provide telephone consultation to discuss the report and provide guidance on areas where improvements could be made. We also may provide customized trend analysis on specialized issues. Also included in the premier package are three on-site visits each year by our consultant. Each visit includes a top-to-bottom audit of sales, operations, procedures, marketing activities, inventories, computer systems and financial results.

TaxMax

     TaxMax is our tax preparation and refund division. The seasonal nature of our TaxMax business means that the impact of our return preparation operations is recognized during the first quarter of each year. Our TaxMax revenue for the six months ended July 31, 2005 declined by $97,299 or 20.6% over the prior period, reflecting a continuing trend of lower dealer participation in tax refund promotions and lower tax return volume per location.

     While overall revenue was down for our TaxMax business, there are several developments that we believe will help trend more positive results for our TaxMax business next tax season. First, more than 80% of our TaxMax dealers have adopted the TaxMax on-site check printing system introduced in September 2004. This technology improves dealer efficiency and eliminates the cost of delivering checks or conducting electronic fund transfers. Second, a test group of approximately 20 dealers adopted a new online entry system for return data at the dealer site for this tax season. This new technology improves the efficiency and response time by up to 75% by eliminating much of the internal labor to prepare each return while improving the service provided to the dealer.

     Additionally, a test program was set up with TaxMax personnel in a check cashing store for this tax season using the online entry technology. While this test site did not contribute significantly to our total revenue, it did produce tax return volume of approximately four times the average auto dealer location and demonstrated the potential for further expansion of the TaxMax program into other preparation venues.

Carbiz Auto Credit

     The fastest growing segment of our business continues to be our Carbiz Auto Credit Buy Here-Pay Here specialty consumer finance business. In May and November 2004, Carbiz opened two facilities in Florida called “Carbiz Auto Credit,” that originate, underwrite, fund and collect auto loans to customers with credit difficulties. The scalable business model leverages our industry expertise and proprietary underwriting and collection processes.

     Results from the Palmetto, Florida location have indicated a strong consumer demand for the finance product in that market, as well as reinforcing the effectiveness of our system for operations, marketing, underwriting and collections.

     In order to further accelerate the growth of our credit center business, we recently announced the formation of a joint venture company with the intent of opening additional credit centers over a period of time. The first of these credit centers recently opened in Tampa, Florida.

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Year End Financial Information

     The following summary of selected financial information for the years ended January 31, 2005 and 2004 is derived from, and should be read in conjunction with, and is qualified in its entirety by reference to, our audited annual financial statements, including the notes thereto, and with audited financial statements for fiscal years ended January 31, 2005 and 2004.

Year ended January 31, 2005 compared to the year ended January 31, 2004

		January		% of		January		% of
		2005		Revenue		2004		Revenue
Revenue	$	3,359,551		100.0	$	2,960,865		100.0
Cost of sales	$	1,486,506		44.2	$	1,491,122		50.4
Gross Profit	$	1,873,045		55.7	$	1,469,743		49.6
Operating expenses	$	3,415,695		101.7	$	2,541,110		85.8
Operating income (loss)	$	(1,542,650	)	(45.9)	$	(1,071,367	)	(36.2)
Interest expense	$	(144,892	)	4.3	$	(97,119	)	3.3
Net income (loss)	$	(1,687,542	)	(50.2)	$	(1,168,486	)	(39.5)
Other comprehensive income (loss)	$	(98,841	)	2.9	$	(26,524	)	0.9
Comprehensive income (loss)	$	(1,786,383	)	(53.1)	$	(1,195,010	)	(40.4)
Loss per common share(1)	$	(0.05	)		$	(0.04	)
Total assets	$	1,533,774			$	1,319,674
Long-term liabilities	$	1,268,386			$	1,101,299

(1) Fully diluted loss per share does not differ from basic loss per share for any of the above-noted periods as the conversion or exercise of any potentially dilutive securities would be anti-dilutive.

Revenue

     In the year ended January 31, 2005, our revenues increased by $398,686 compared to the previous year. This increase was primarily due to the positive sales generated by our new operating unit, Carbiz Auto Credit, which generated sales of $594,722 in its nine months of operations. This increase was partially offset by a reduction in our TaxMax revenue of approximately $157,000 during the year ended January 31, 2005 compared to the previous year. We continue to eliminate non-performing products impacting revenue negatively in the short-term, replacing them with higher priced, higher margin products, which we expect to positively impact the future.

     Our total software, consulting and other sales during the year ended January 31, 2005 decreased over the prior year by $38,524. While our total revenue from our core software and consulting products increased by $68,919, revenue from all other products decreased by $107,601 during the year ended January 31, 2005 compared to the previous year. This significant difference consists of a decrease in credit bureau revenue of $32,607 due to changes in reporting regulations that resulted in a decision to discontinue certain credit bureau agent relationships and a decrease in custom programming fees of $41,255 due to a single large project in the prior year that was a one-time occurrence.

Cost of Sales

     Our cost of sales expense decreased by $4,616 for the year ended January 31, 2005, compared to the previous year. Our Carbiz Auto Credit operations added cost of sales of $300,977. Cost of sales for all other parts of the operation decreased by $305,593 during the year ended January 31, 2005 compared to the previous year, with the decrease primarily due to a reallocation of payroll costs related to product development and enhancement as a result of changes in operations. During the year ended January 31, 2005, those payroll costs were allocated to operating expenses rather than to cost sales as was done in the previous year.

Expenses

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     For the year ended January 31, 2005, our operating expenses increased by $926,132 compared to the previous year. The major causes of the increase were increased professional fees related to our preparation of our U.S. registration statement, and the addition of the Carbiz Auto Credit operations. The professional fees increase totaled approximately $280,000 and Carbiz Auto Credit operations amounted to $315,269 of the increase year over year. The remaining difference is due to currency fluctuations in various operating expense categories as well as a reallocation of payroll costs related to product development and enhancement as a result of changes in operations. During the year ended January 31, 2005, those payroll costs were allocated to operating expenses rather than to cost sales as was done in the previous year. We also continue to accrue professional fees in connection with our U.S. registration statement and intended listing of our common shares on the Over-The-Counter Bulletin Board.

     We have not been investing significant amounts in fixed assets over the past two years. This fact is reflected in the decrease in depreciation and amortization expenses by $51,547 for the year ended January 31, 2005 as compared to the previous year.

Interest Expense

     Our interest expense increased by $47,773 for the year ended January 31, 2005, compared to the previous year. We continue to pay down our long-term debt, with principal payments being made monthly.

Software Sales, Support and Consulting

     This segment of our business consists of new sales and recurring monthly revenue for software products, and new sales and recurring monthly revenue of consulting products, and other related products including revenue from credit bureau fees, supply sales, and forms programming.

     Our software recurring revenue for the year ended January 31, 2005 continued to show improvement over the prior year with an increase of 3% in our monthly support revenue. Our sales of new software installations also showed improvement over the prior year with an increase of 9.5% . This reflected the beginning of positive growth as a result of changes in our product mix to eliminate less profitable products and shift the focus of sales of our core software and support products that can provide long-term growth opportunities.

     The adoption of our current Carbiz Windows-based programs by our existing DOS users continued to show an upward trend. During the year ended January 31, 2005, approximately 6% of users on previous generation DOS programs upgraded to current programs. This was a consistent trend quarter-by-quarter throughout the year, demonstrating that our existing user base is remaining stable while new, incremental software sales should continue to add customers for consulting services. We believe that this overall trend indicates continuing growth of recurring revenue.

     The results of our IDA installations had some positive impact on the year ended January 31, 2005, with several completed installations included in the sales totals. The monthly recurring support revenue for IDA in the year ended January 31, 2005 was negligible, with the completed installations producing support revenue in the fourth quarter. Dealer interest in IDA continues to increase, which along with a shift in emphasis to higher value monthly support functions, we believe should result in continued growth in installations and recurring revenue.

     Our new sales of consulting services for the year ended January 31, 2005 showed an increase from the prior year of 10.9%, which also resulted in an increase of recurring monthly consulting revenue of 4.5% over the prior year. New consulting customers were an even mix of additional locations opened by existing customers and new consulting customers.

     Software sales provide opportunities for us to introduce our consulting services to business clients. While our software products facilitate data accumulation and reporting, our consulting services help to interpret the data and provide advice, as well as industry benchmarks, to help dealers improve results. Our consulting focuses on implementing a data tracking product that automates some data analysis, creates a recurring revenue stream and facilitates additional consulting services.

     We offer two levels of consulting services targeted mainly to the Buy Here-Pay Here dealer. The standard package includes unlimited manager training, unlimited “800” number technical support, a monthly benchmarking

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report of composite data from dealerships using our system, and two training conferences per year. The premier package also includes a weekly faxed performance report based on download and analysis of the client’s data. Our consultants provide telephone consultation to discuss the report and provide guidance on areas where improvements could be made. We also may provide customized trend analysis on specialized issues. Also included in the premier package are three on-site visits each year by our consultant. Each visit includes a top-to-bottom audit of sales, operations, procedures, marketing activities, inventories, computer systems and financial results.

TaxMax

     TaxMax is our tax preparation and refund division. The seasonal nature of our TaxMax business means that the impact of our return preparation operations is recognized in the first quarter of each year. Our TaxMax revenue for the year ended January 31, 2005 declined by 19.7% over the prior year, reflecting a continuing trend of lower dealer participation in tax refund promotions and lower tax return volume per location.

     While overall revenue was down for our TaxMax business, there are several developments that we believe will help trend more positive results for our TaxMax business next tax season. First, more than 80% of our TaxMax dealers have adopted the TaxMax on-site check printing system introduced in September 2004. This technology improves dealer efficiency and eliminates the cost of delivering checks or conducting electronic fund transfers. Second, a test group of approximately 20 dealers adopted a new online entry system for return data at the dealer site for this tax season. This new technology improves the efficiency and response time by up to 75% by eliminating much of the internal labor to prepare each return while improving the service provided to the dealer.

     Additionally, a test program was set up with TaxMax personnel in a check cashing store for this tax season using the online entry technology. While this test site did not contribute significantly to our total revenue, it did produce tax return volume of approximately four times the average auto dealer location and demonstrated the potential for further expansion of the TaxMax program into other preparation venues.

Carbiz Auto Credit

     The fastest growing segment of our business continues to be our Carbiz Auto Credit Buy Here-Pay Here specialty consumer finance business. In May and November 2004, Carbiz opened two facilities in Florida called “Carbiz Auto Credit,” that originate, underwrite, fund and collect auto loans to customers with credit difficulties. The scalable business model leverages our industry expertise and proprietary underwriting and collection processes.

     Results from the Palmetto, Florida location have indicated a strong consumer demand for the finance product in that market, as well as reinforcing the effectiveness of our system for operations, marketing, underwriting and collections.

     In order to further accelerate the growth of our credit center business, we recently announced the formation of a joint venture company with the intent of opening additional credit centers over a period of time. The first of these credit centers recently opened in Tampa, Florida.

Liquidity and Capital Resources

     As of January 31, 2005 and July 31, 2005, we had $130,520 and $56,309, respectively, in cash and cash equivalents. During the six months ended July 31, 2005, we decreased our accounts payable and accrued liabilities by $113,036, which now total $931,121. During the year ended January 31, 2005, we made debt repayments totaling $140,427. We have continued to rely on private placements to meet our cash flow requirements. Operationally, we have not generated the necessary revenue to cover our operating expenses.

     On October 6, 2005, we completed a non-brokered private placement of 5% convertible debentures for gross proceeds of Cdn$809,119.94 issued to certain of our executive officers and directors. Prior to the maturity date, the debentures convert automatically upon the listing of our common shares for trading on the Over-The-Counter Bulletin Board and the delisting of our common shares for trading on the TSX Venture Exchange. The debentures convert into units, with each unit comprised of one common share, one class A common share purchase warrant and one-half of one class B common share purchase warrant, at a price of Cdn$0.15 per unit. Each class A common share purchase warrant may be exercised through October 6, 2010 for one common share at an exercise price of Cdn$0.15 per common share.

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Each whole class B common share purchase warrant may be exercised through October 6, 2010 for one common share at an exercise price of Cdn$0.15 per common share. The maturity date for the debentures is April 6, 2006, and interest immediately accrues on the debentures. All of the proceeds from this private placement were used to repay the principal and accrued interest on certain other debentures that matured on October 6, 2005, because the debenture holders would not extend the maturity date of those debentures until April 6, 2006.

     On July 29, 2005, we completed a non-brokered private placement of a $150,000 principal amount promissory note that bears interest at a rate of 17.7% with Medipac (US) International Inc., which is a wholly-owned subsidiary of Medipac International Inc. which is an entity controlled by Mr. Quigley, who is one of our directors, and Mr. Popel, who is also one of our directors. This note calls for payments of $15,000 including principal and interest to begin on October 1, 2005 and will mature on August 1, 2006.

     On October 12, 2004, we completed a brokered private placement of 5% convertible debentures for net proceeds of Cdn$1,614,030 issued to a group consisting of non-U.S. and U.S. purchasers. The debentures were to convert automatically upon the listing of our common shares for trading on the Over-The-Counter Bulletin Board and the delisting of our common shares from trading on the TSX Venture Exchange. The debentures were to convert into units, with each unit comprised of one common share, one class A common share purchase warrant and one-half of one class B common share purchase warrant, at a price of Cdn$0.22 per unit. Each class A common share purchase warrant was to be exercisable through October 12, 2009 for one common share at an exercise price of Cdn$0.23 per common share. Each whole class B common share purchase warrant was to be exercisable through October 12, 2009 for one common share at an exercise price of Cdn$0.30 per common share. Interest did not accrue on the debentures until May 1, 2005. If the conditions necessary for the conversion of these debentures were not met by October 6, 2005, the debentures matured and the principal and accrued interest would be due and payable in full on that date.

     As a result of not achieving a listing on the Over-The-Counter Bulletin Board by October 6, 2005 and not having sufficient cash on hand to repay the debentures, we negotiated with our debenture holders for an extension of the maturity date until April 6, 2006 in order to allow us additional time to list our common shares for trading on the Over-The-Counter Bulletin Board and delist our common shares from trading on the TSX Venture Exchange. In exchange for the extension of the maturity date, we offered to lower the conversion rate of the debentures to Cdn$0.15 per unit and the exercise price for each of the class A common share purchase warrants and the class B common share purchase warrants to Cdn$0.15. The holders of Cdn$846,297.50 principal amount of our debentures sought to be paid the principal and interest on their debentures, while the remaining debenture holders agreed to the extension of the maturity date.

     In consideration for the services provided by an agent related to the private placement on October 12, 2004, the agent received a cash commission equal to 10% of the gross proceeds raised by the agent, which totaled $61,974. The agent is also entitled to receive a cash fee equal to 2% of the gross proceeds from the subsequent exercise within twelve months from the date the debentures are converted of any class A common share purchase warrants or class B common share purchase warrants that were issued upon conversion of debentures placed by the agent. In addition, the agent will receive that number of units that is equal to 10% of the number of units to be issued on the date the debentures are converted with respect to debentures placed by the agent. Each unit shall consist of one first common share purchase warrant and one second common share purchase warrant. Each first common share purchase warrant may be exercised to acquire one common share at a price of Cdn$0.22 per share on or before the date that is five years from the date the debentures are converted into units. Each second common share purchase warrant may be exercised to acquire one common share at a price of Cdn$0.23 per share on or before the date that is five years from the date the debentures are converted into units.

     On September 16, 2004, we completed a non-brokered private placement of 91,000 units at a purchase price of Cdn$0.30 per unit to a group consisting of non-U.S. and U.S. purchasers for gross proceeds of Cdn$27,300. Each unit consisted of one common share and one common share purchase warrant, with each common share purchase warrant exercisable for one common share until September 16, 2005 upon payment by the holder of Cdn$0.30 per common share.

     On July 9, 2004, we completed a brokered private placement of 602,431 units at a purchase price of Cdn$0.30 per unit to a group consisting of non-U.S. and U.S. purchasers for gross proceeds of Cdn$180,729. Each unit consists of one common share and one common share purchase warrant, with each common share purchase warrant exercisable for one common share until July 9, 2005 upon payment by the holder of Cdn$0.30 per common share. The agents involved

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in the private placement were issued 302,387 common share purchase warrants, with each common share purchase warrant exercisable for one common share until July 9, 2006 upon payment by the holder of Cdn$0.30 per common share.

     On May 5, 2004, we completed a non-brokered private placement of 232,628 units at a purchase price of Cdn$0.30 per unit to a group consisting of non-U.S. purchasers and U.S. purchasers for gross proceeds of Cdn$69,788. Each unit consists of one common share and one common share purchase warrant, with each common share purchase warrant exercisable into one common share until May 5, 2005 upon payment by the holder of Cdn$0.30 per common share.

     On March 31, 2004, we completed a non-brokered private placement of 1,054,158 units at a purchase price of Cdn$0.30 per unit to a group consisting of non-U.S. and U.S. purchasers for gross proceeds of Cdn$316,247. Each unit consists of one common share and one common share purchase warrant, with each common share purchase warrant exercisable into one common share until March 31, 2005 upon payment by the holder of Cdn$0.30 per common share.

     With the exception of the most recent private placement, we used all of these funds primarily to finance our operating loss and expand our Carbiz Auto credit operations.

     Payments due from us over the next five fiscal years for operating and capital leases, and short and long-term debt are as follows:

		Less Than		One to		Three to		Greater Than		Total
		One Year		Three Years		Five Years		Five Years
Operating Leases	$	207,000	$	311,000	$	-	$	-	$	518,000
Capital Leases		12,833		28,674		3,041		-		44,548
Long-Term Debt		187,046		386,266		-		-		573,312
Interest		30,494		27,967		-		-		58,461
	$	437,373	$	753,907	$	3,041	$	-	$	1,194,321

     Should our operating revenues fail to increase to provide sufficient cash flow to fund operations we may require additional financing. Based on first quarter results and an assumption of meeting business projections for the remainder of the fiscal year and achieving a listing on the Over-The-Counter Bulletin Board and a delisting on the TSX Venture Exchange on or before April 6, 2006, our current cash flow from operations and our cash on hand are sufficient to fund our operations until January 2007. Actual results that vary from projections may require the need for additional cash during that period. Our ability to arrange such financing in the future will depend in part upon the prevailing capital market conditions as well as our business performance. There can be no assurance that we will be successful in our efforts to arrange additional financing, if needed, on terms satisfactory to us or at all. The failure to obtain adequate financing could result in a substantial curtailment of our operations. If additional financing is raised by the issuance of securities, control of Carbiz may change and/or our shareholders may suffer significant dilution.

Off-Balance Sheet Arrangements

     As of July 31, 2005, Carbiz has a $20,000 standby letter of credit for its leased premises, which will be reduced to nil in December 2005.

BUSINESS

Carbiz Inc.

     We were incorporated pursuant to the provisions of the Business Corporations Act (Ontario) under the name “Data Gathering Capital Corp.” on March 31, 1998. We changed our name from “Data Gathering Capital Corp.” to “Carbiz.com Inc.” on September 1, 1999. Thereafter, we changed our name again to “Carbiz Inc.” on July 15, 2003.

     On July 14, 1998, we completed our initial public offering in Canada by issuing 1,500,000 common shares, and we listed our common shares for trading on the junior capital pool board of The Alberta Stock Exchange (now the TSX Venture Exchange Inc.) on July 23, 1998.

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     On December 18, 1998, we acquired our wholly-owned subsidiary, Data Gathering Service Inc., by way of a reverse takeover. Data Gathering Service Inc. was incorporated under the Business Corporations Act (Ontario) on November 30, 1995. Data Gathering Service Inc. was in the business of consulting to auto dealers. On August 1, 1999, we acquired all of the shares of Autosure Financial Corporation Atlantic Limited and MPI Marketing Professionals Incorporated, both companies incorporated under the Companies Act (Nova Scotia) that were in the business of providing auto dealer software for sales enhancement. On January 20, 2000, Autosure Financial Corporation changed its name to 2288764 Nova Scotia Ltd. On March 29, 2000, we acquired all of the shares of Advanced Dealer Services, Inc., a company incorporated under the laws of the State of Florida that was in the business of providing software and business model consulting to Buy Here-Pay Here automobile dealers. On April 4, 2000, we acquired all of the shares of Abbey Canada Inc., a company incorporated under the Business Corporations Act (Ontario) that was in the business of credit insurance. On May 19, 2000, we acquired all of the shares of TaxMax Service Group, Inc., a company incorporated under the laws of the State of Florida that was in the business of providing tax return processing for auto dealer customers for use of refunds as down payments.

     We currently operate one wholly-owned subsidiary in the United States, Carbiz USA Inc., which is incorporated in the State of Delaware. Carbiz USA Inc. also has an operating subsidiary in the United States, Carbiz Auto Credit, Inc., which is incorporated in the State of Florida.

     On February 25, 2005, we also entered into a joint venture agreement with an entity controlled by one of our directors and, as a result, we own a 50% interest in Carbiz Auto Credit JV1, LLC, a limited liability company formed in Florida.

     Our Canadian registered office is located at Suite 930, 3044 Bloor Street West, Toronto, Ontario, M3Y 2Y8. Our United States registered agent is William Guerrant, Esq. of Hill, Ward & Henderson P.A. at 101 East Kennedy Blvd., Suite 3700, Tampa, Florida 33602. Our principal office is located at 7405 North Tamiami Trail, Sarasota, Florida 34243. Our telephone number is (941) 952-9255.

Our Business

     We are a provider of specialty consumer financing products, software, training and consulting services, mainly to the automotive Buy Here-Pay Here industry in the United States. Since our founding in 1995, we have served numerous new and used car dealerships of all sizes and in many geographic areas. We have been and continue to be focused on Buy Here-Pay Here dealerships, which are automotive dealers who use their own money to finance vehicles for customers with sub-standard or poor credit. According to articles published by the National Alliance of Buy Here-Pay Here Dealers in July 2003, the Buy Here-Pay Here industry in the United States generates over $50 billion per year in revenue from over 30,000 lots throughout the country.

     In addition to continuing to grow our core business, the main thrust of our expansion strategy includes establishing our own group of Buy Here-Pay Here credit centers in order to capitalize on our knowledge and experience in this area. We opened our first “Carbiz Auto Credit” finance center in Palmetto, Florida on May 10, 2004. We believe the favorable economics and market opportunity in the Buy Here-Pay Here industry and our prior knowledge and expertise advising automobile dealerships in this industry positions us to be successful in the Buy Here-Pay Here market.

     We have developed a solid and growing base of customers and revenue, and we currently serve over 3,500 clients across all 50 states who utilize one or more of our products and/or services. Our products fall into three primary categories: software products for operation of auto dealers and business model consulting, tax return processing for auto purchase down payment assistance, and direct auto sales and financing through our wholly-owned operations or our joint venture arrangements.

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Dealer Software and Business Model Consulting

     Our dealer software solutions focus on finance, sub-prime finance and Buy Here-Pay Here finance operations and dealer accounting solutions. After a series of acquisitions, we spent most of 2001 and 2002 consolidating over sixty separate software programs into three main programs (MSP, VisualCAT and IDA). We plan to continue developing, selling and maintaining each of these and the other products and services listed below, as well as identifying new products and services for the specialty consumer finance and automotive businesses.

Our principal products include:

•	Management System Plus (“MSP”) – Provides dealers with the ability to offer Buy Here-Pay Here financing at the point of sale, including inventory management, contracting and collection functionality. The Buy Here- Pay Here business emerged as a distinct business category when car dealers began financing “unbankable” customers in order to sell used cars. In short, the customer needs a car, the dealer wants to make a profit, and no one will lend the customer the money, so the dealer finances the deal. The Buy Here-Pay Here business is the combination of a consumer finance company and a used car dealership. Customers typically make a down payment and then make weekly payments to the dealer. In order to obtain dealer financing, customers typically pay high interest rates, usually in the range of 18-22% per annum.
	MSP is a Windows program written in Visual Basic and is available for delivery on a single person computer, a local area network, or via the Internet. Recent enhancements include an interface with starter interrupt devices, automated Internet credit report access, and automated access to the Office of Foreign Assets Control “bad guy” list.
•	VisualCat – Provides dealers with the ability to offer prime and sub-prime financing through third-party lenders at the point of sale, including inventory management, storage of lender criteria, credit bureau access and contracting functionality. The program compares the credit parameters of each finance program offered by various lenders against customer data and determines which, if any, are available based on the buyer’s credit status and maximum monthly payment. The program then matches the buyer’s maximum monthly payment with every vehicle in the dealer’s inventory to allow the dealer to select appropriate vehicles for the buyer. The software enables dealers to expand their customer base by arranging financing for the full range of automotive customers.
	VisualCAT is a Windows program written in Delphi and is available for delivery on a single personal computer, a local area network, or via the Internet. Recent enhancements include automated Internet credit report access, and automated access to the Office of Foreign Assets Control “bad guy” list.
•	Independent Dealer Accounting (“IDA”) – Provides a suite of accounting and financial reporting tools designed specifically for independent dealers, including real-time integration with MSP and VisualCat. All appropriate entry points create entries and updates in real-time in both the dealer management system and accounting files. One benefit of this tight integration is the production of a daily operation control report, previously available only in systems beyond the financial reach of the smaller dealer. Another key area of integration is the generation of real-time transactions to a related finance company. For the Buy Here-Pay Here dealer that has a related finance company, when the contract is sold to the company from the dealership, IDA will automatically generate all transactions in both companies.
	The major modules of IDA include powerful tools for the management of:
	•      General ledger;
	•      Vehicle inventory;
	•      Accounts payable;
	•      Accounts receivable;
	•      Journal transactions; and
	•      Payroll.

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	IDA is the result of years of development of accounting functions in the DOS version of our Buy Here-Pay Here software. Our understanding of the dealership accounting functions results from many installations where we not only provide software to the dealer but also provide consulting services that touch all areas of the dealer operations. IDA brings that depth of accounting design and operational knowledge to a system integrated with our current Windows dealer management systems to provide a complete management solution to the independent dealer. IDA is a Windows program written in Visual Basic and is available for delivery on a single personal computer, a local area network, or via the Internet. With our IDA product, we are an Approved Vendor for Standardized Accounting by the NIADA.
•	Traffic Management System – Provides dealers with the ability to track walk-in and phone traffic in the dealership including follow-up list generation, sales result reporting and VisualCat interface functionality. Traffic Management System enables dealers to do the following:
	•	Track prospects and sold and cancelled customers.
	•	Provide a multitude of reports including salesperson’s activities, salesperson efficiency, customer and prospect contacts, customer analysis by model type and source, etc.
	•	Provide daily follow-up scheduling.
	•	Provide unlimited follow-up letters with an automated letter-printing program.
		Effective traffic management can assist dealers improve their closing ratios, sell more cars and increase customer satisfaction.
•	BHPH Business Model Consulting – Our business model consulting products focus on assisting our dealers with the successful operation of a Buy Here-Pay Here business. Our consultants have extensive knowledge and practical experience in finance and insurance, sub-prime finance and the Buy Here-Pay Here business. Dealers can choose from various products, including:
	•	Dealer Controlled Finance (“DCF”) Business Model Package – Provides dealers with a complete Buy Here-Pay Here operation model including policies and procedures,   sales methods, collections methods and manager and associate training.
	•	Guardian Consulting Service – Provides DCF dealers with a weekly review of goals, problem areas and operational results done through extraction of data from the dealer’s software, a written summary of results, and presentation of the report by conference   call by a Carbiz consultant.
	•	Onsite Consulting – Provides dealers with an onsite review of sales and collections policies and procedures including the presentation of a written summary of recommendations by a Carbiz consultant.
	•	Training – Provides dealers with a manager training class and an associate training class held monthly at the Carbiz facility in Sarasota, Florida.

TaxMax

     We purchased our current TaxMax business in 2000. In the last eight years, the TaxMax products have processed over $100 million in tax refunds. It has served as a tremendous lead generator for our customers, especially during the months of January through April. It has also increased sales by an average of fifteen cars per lot during this timeframe and also increased the size of initial down payments by customers, which allows dealers to break even more quickly. We have grown this division significantly since its purchase, and we continue to also secure and explore joint ventures outside of the automobile financing business, including employee placement agencies and payroll processing companies, among others.

     Our TaxMax product provides dealers with the ability to offer a “refund for down payment” program during the income tax filing season. For an initial sign-up fee, a dealer receives a marketing package, signage and training with the TaxMax program. We generate income based on the initial fees from the dealers and subsequent tax preparation

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fees paid by the customer. TaxMax receives return data for a dealer’s customer by fax or internet, prepares the return while the customer is at the dealer, electronically files the completed return, provides quick funding of the refund through a bank affiliation, and routes the funds directly to the dealer by onsite check printing or electronic funds transfer. Due to the seasonal nature of TaxMax, we recognize most of our revenue and expenses during the fourth and first quarters of each fiscal year when we enroll dealerships and process tax returns.

Carbiz Auto Credit

     In May 2004, we opened our first Carbiz Auto Credit center in Palmetto, Florida as a result of our decision to enter the direct automobile sales market. Our “credit center” is a used car dealership that offers financing onsite to customers with poor credit through the utilization of our software products and our DCF business model. Rather than continuing to focus only on our existing software, consulting and TaxMax business, it is our intent to expand and diversify our business by opening additional credit centers in the future. In November 2004, our second Carbiz Auto Credit location was opened in St. Petersburg, Florida, and our third location, the first location of our joint venture, recently opened in Tampa, Florida. Each credit center originates, funds, manages and collects loans for vehicles sold to customers.

The Buy Here-Pay Here Industry

     Buy Here-Pay Here is the common term for automobile dealers who use their own money to finance vehicles for customers. The term developed because the customer makes his/her car payment in person, at the same lot where they bought the vehicle. The customer base for these dealers is people who have poor or badly impaired credit histories, thus making conventional financing and even sub-prime financing unavailable to them. This includes customers with multiple bankruptcies, multiple accounts defaulted upon and charged-off by previous lenders, etc. They have low-paying jobs, no health insurance, and a history of not paying their bills. Nevertheless, all of these people typically need a car to get to work and for other basic transportation needs. According to an article in the Wall Street Journal dated July 8, 2003, statistics show approximately 70% of those who visit a Buy Here-Pay Here lot buy and finance a car from that lot.

     Although the Buy Here-Pay Here business looks like the retail automobile sales business on the surface, it is, in fact, a “finance and collections” business. Successful Buy Here-Pay Here dealers have developed ways to ensure collections of not only of their costs, but most of their profit as well.

     The reason Buy Here-Pay Here dealers can operate profitably with this class of customer is that they have developed business practices which allow them to collect sufficient amounts of money to cover their charge-off losses and generate a profit. In fact, some are so successful that they can maintain average charge-off rates of 5% of outstanding loan balances or lower, and produce return on investment in the triple digits. Some of the procedures Buy Here-Pay Here dealers have developed to ensure this are:

•   Payday Payments – The typical Buy Here-Pay Here customer can pay $55 - $65 dollars per week, but cannot pay $200 a month. They just can’t save and are poor money managers.

•   Required In-Person Payments – This avoids the “check is in the mail” syndrome, and also allows the dealerships to develop personal relationships.

•   Development of Personal Relationships – People will pay “friends” before they will pay faceless entities like the phone or power companies.

•   Start Collection Process Immediately – Buy Here-Pay Here dealers begin this process the day after the customer is delinquent or if payment is not made in full.

     We believe that if managed properly, the Buy Here-Pay Here business can be profitable. Further, we believe that we have gained significant knowledge, data and expertise through our years of training others to successfully start and operate Buy Here-Pay Here businesses to begin starting our own Buy Here-Pay Here group of dealerships.

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Markets

     The primary market for our software and TaxMax products and services is the automotive retail industry in North America, with a direct focus on the Buy Here-Pay Here segment. According to an annual summary of industry data published in May 2005 by NADA, it is estimated that new car dealers generated approximately $714 billion in sales in the United States in 2004. Further, according to this same source, there are approximately 21,640 franchised automotive dealers in the United States, of which a significant number engage in Buy Here-Pay Here automobile sales. Although we consider all dealers as potential customers, we believe that the specific Buy Here-Pay Here dealer segment is best suited for our MSP and IDA software products and the franchised dealer segment is best suited for our VisualCAT software product.

     As a result of changing demographics and a growing segment of the population with declining credit worthiness, we believe that the need for Buy Here-Pay Here dealerships continues to grow. Many new car or franchise dealers are entering the Buy Here-Pay Here market as a way to increase their business by capturing the customer that could not be financed through normal prime of sub-prime channels offered by the dealer. This vertical integration also works in the use of inventory by making older trade in vehicles that would otherwise be disposed of wholesale available for sale to the Buy Here-Pay Here customer, providing a higher margin on that vehicle. The dealer principle in these cases will not be physically located at the Buy Here-Pay Here facility, and is a prime prospect for our business model consulting products.

     To date, we have opened three Carbiz Auto Credit centers in the State of Florida. It is our intent to continue to open additional Carbiz Auto Credit centers in the future, with these additional centers likely located in the State of Florida.

Sales and Marketing

     Sales of our software and consulting products and our TaxMax products are conducted by our sales staff located at our corporate office in Sarasota, Florida. Our sales staff is responsible for responding to sales leads generated from our marketing activity, explaining products and services, demonstrating products, following-up with customers, and closing orders.

     Product marketing for all products includes several industry conferences and trade shows during the year, including the National Alliance of Buy Here-Pay Here Dealers Conference, NIADA Annual Convention, the National Sub-Prime and Buy Here-Pay Here Conference, and several state independent dealer association conventions. Such trade show activity provides an opportunity to present our products directly to attending dealers as well as providing an increased general awareness of Carbiz within the dealer market.

     Product print advertising is done on a consistent basis in multiple industry trade publications, including Used Car News, Auto Remarketing, and Used Car Dealer magazines. In addition, an active Internet advertising program includes key word search placement on multiple search engines, with click through results directed to the Carbiz website. On a seasonal basis, additional advertising is placed specifically for our TaxMax products.

     As a result of the acquisition of several regional software companies during 2000, we currently have a user base of approximately 3000 software installations, many of which are still using older programs originally purchased from the acquired companies. Marketing to this specific target group is done through an ongoing program of outbound phone calls and specific mailings to users of individual products.

Research and Development

     Research and development is carried out by a staff of program developers who maintain and enhance our current products as well design and program new products for future release. As a result, these expenses are included in the total operating expenses of our software division along with product support rather than as a segregated expense or capital cost. While our development efforts over the past two years have been primarily focused on the development of our IDA software product, it is not possible to specifically separate those development expenses from our overall product costs.

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Government Regulations and Industry Standards

     Our operations are subject to regulation, supervision and licensing under various United States federal, state and local statutes, ordinances and regulations.

     Although we are not directly subject to any United States federal or state regulations that affect our ability to operate our software, the functionality of our software related to the calculation of interest APR and the printed disclosure of this amount on auto finance contracts is subject to verification that the calculations and disclosures meet both United States federal and state regulations. In some cases, the verification process is done internally using the published standards and in some cases samples are submitted to a state for approval. All such verifications are redone each time any changes are made to an applicable portion of our software.

     Our TaxMax division has processed an application with the Internal Revenue Service for and has received status as an “electronic return originator” and as such has received from the Internal Revenue Service an electronic filer identification number (EFIN) which is required to process and E-file customer tax returns. The annual requirements to maintain this status, including current document filings and completion of an audit of procedures and paperwork, are completed each year.

     With respect to the financing services we provide with our credit centers in the states in which we operate, a consumer credit regulatory agency regulates and enforces laws relating to consumer lenders and sales finance agencies such as us. These rules and regulations generally provide for licensing of sales finance agencies; limitations on the amount, duration and charges, including interest rates, for various categories of loans; requirements as to the form and content of finance contracts; and other documentation, and restrictions on collection practices and creditors’ rights. We are also subject to periodic examination by applicable state regulatory authorities.

     We are also subject to extensive United States federal regulation, including the Truth in Lending Act, the Equal Credit Opportunity Act and the Fair Credit Reporting Act. These laws require us to provide certain disclosures to prospective borrowers and protect against discriminatory lending practices and unfair credit practices. The principal disclosures required under the Truth in Lending Act include the terms of repayment, the total finance charge and the annual percentage rate charged on each loan. The Equal Credit Opportunity Act prohibits creditors from discriminating against loan applicants on the basis of race, color, sex, age or marital status. According to Regulation B promulgated under the Equal Credit Opportunity Act, creditors are required to make certain disclosures regarding consumer rights and advise consumers whose credit applications are not approved of the reasons for the rejection. In addition, the credit scoring system we use must comply with the requirements for such a system as set forth in the Equal Credit Opportunity Act and Regulation B. The Fair Credit Reporting Act requires us to provide certain information to consumers whose credit applications are not approved on the basis of a report obtained from a consumer reporting agency. Additionally, we are subject to the Gramm-Leach-Bliley Act, which requires us to maintain privacy with respect to certain consumer data in our possession and to periodically communicate with consumers on privacy matters. We are also subject to the Soldiers’ and Sailors’ Civil Relief Act, which requires us to reduce the interest rate charged on each loan to customers who have subsequently joined, enlisted, been inducted or called to active military duty.

     We believe that we maintain all material licenses and permits required for our current operations and are in substantial compliance with all applicable local, state and federal regulations.

Competition

     The market for auto dealer software, in particular software for independent dealers, is not dominated by any large national provider as compared to the market for new cars or franchise dealers. Within our primary markets, we compete directly with other dealer software providers such as Auto-Master, AutoStar, and Micro-21, most of whom market and service customers within a regional geographic area. We offer efficient stand-alone systems to dealers that provide comparatively inexpensive personal computer-based solutions that focus on management systems designed specifically for the automotive market. We provide dealers with a full range of solution products to allow dealers to effectively and efficiently operate their dealerships. We sell all products or services as a full service suite or independently as required. We believe that none of our competitors offer the same breadth of product offerings.

     The tax return preparation business is highly competitive. With our TaxMax product, we specifically compete with one national provider along with several small regional providers in the automobile dealer market. Also, there are

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a substantial and increasing number of tax return preparation firms and accounting firms offering tax return preparation services and refund anticipation loan services to the public. We believe that the most significant competitive advantage of TaxMax is its ability to offer rapid return preparation and refund processing from a remote location without the necessity of that location having or obtaining an electronic return originator license from the Internal Revenue Service. TaxMax will continue to enhance its capabilities through the development and use of unique technologies.

     Competition in the used automobile retail and finance industries is intense and highly fragmented. Although the range of possible points of purchase include (i) other similar used car dealerships that offer Buy Here-Pay Here financing, (ii) the used vehicle retail operations of franchised automobile dealerships, (iii) independent used vehicle dealers, and (iv) individuals who sell used vehicles in private transactions, we believe that the actual competition for our Carbiz Auto Credit lies only with other similar used car dealerships that offer Buy Here-Pay Here financing.

Proprietary Rights

Carbiz Inc. has registered the trademark and servicemark of “Carbiz.com” in Canada and the United States.

Employees

     We have 34 full-time employees. We also employ 90 seasonal employees that provide assist us with our tax refund and refund anticipation loan services during the months of December through March each year.

Description of Property

     Our principal executive office located at 7405 North Tamiami Trail, Sarasota, Florida 34243-1808 consists of approximately 4700 square feet of office space. We pay $6,250 in rent per month to lease this property, and our lease expires on May 31, 2009.

     Our Palmetto, Florida credit center located at 314 8^th Avenue W, Palmetto, Florida 34221-5161 consists of approximately 1000 square feet of commercial space. We pay $3,000 in rent per month to lease this property, and our lease expires on March 31, 2009.

     Our St. Petersburg, Florida credit center located at 2324 Central Ave., St. Petersburg, Florida 33712-1149 consists of approximately 1500 square feet of commercial space. We pay $2,300 in rent per month to lease this property, and our lease expires on October 31, 2009.

     Our Tampa, Florida credit center located at 4102 N. Florida Ave., Tampa, Florida 33603-3818 consists of approximately 700 square feet of commercial space. We pay $2,500 in rent per month to lease this property, and our lease expires on March 31, 2010.

     We do not currently maintain any investments or interests in real estate, real estate mortgages or securities of persons primarily engaged in real estate activities, nor do we expect to do so in the foreseeable future.

Legal Proceedings

     We are not currently a party to any legal proceeding or governmental proceeding nor are we currently aware of any pending legal proceeding or governmental proceeding proposed to be initiated against us.

MANAGEMENT

Executive Officers and Directors

Our directors, executive officers and key employees as of July 31, 2005 are as follows:

Name	Age	Position
Carl Ritter (1)	45	Chairman, Chief Executive Officer and a Director

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Richard Lye	60	President, Corporate Secretary and a Director
Ross Quigley(1)	59	Director
Theodore Popel(1)	57	Director
Aldo Sistilli	45	Chief Financial Officer and Vice President Finance
Stanton Heintz	56	Chief Operating Officer

(1) Indicates member of our Audit Committee.

Biographical information for directors and executive officers:

     Carl Ritter - Chairman, Chief Executive Officer and a Director. Mr. Ritter has been the Chief Executive Officer and a director of Carbiz since March 1998. Prior to joining Carbiz, Mr. Ritter was the President of Data Gathering Service Inc. from August 1995 until March 1998, a private company engaged in software development for Automotive F&I Software. Prior to co-founding Data Gathering Service Inc. with Mr. Lye, Mr. Ritter held several senior management positions in the retail automotive industry in Canada, including operating several car dealerships as President and Dealer Principal of North Toronto Mazda and Durham Mazda.

     Richard Lye – President, Corporate Secretary and a Director. Mr. Lye has been with Carbiz since March 1998, and has been the President of Carbiz since April 2001 and Corporate Secretary and a director of Carbiz since June 2004. Prior to joining Carbiz, Mr. Lye was the Vice President of Data Gathering Service Inc. from August 1995 until March 1998. Prior to co-founding Data Gathering Service Inc. with Mr. Ritter, Mr. Lye held several senior management positions in the retail automotive industry in Canada, including serving as the General Manager for a major Canadian Chevrolet dealership located in Toronto. Mr. Lye holds a permanent teaching certificate from the Province of Ontario and also is a graduate of the NADA Dealer Academy.

     Ross Quigley - Director. Mr. Quigley has been a director of Carbiz since March 1998. Since May 1988, Mr. Quigley has been the Chief Executive Officer of the Medipac International Group of Companies, a private corporate group that provides administration services and medical insurance coverage for traveling Canadians, and Reed Mather Insurance Group Inc., a private multi-line insurance brokerage. Mr. Quigley attended Dalhousie University, Halifax, Nova Scotia, Canada for four years in the engineering physics, mathematics and psychology disciplines. Mr. Quigley has completed several actuarial and insurance courses and holds several general and life insurance licenses in various provinces of Canada.

     Theodore Popel - Director. Mr. Popel has been a director of Carbiz since June 2004. Since January 1995, Mr. Popel has been the Vice President of Medipac Assistance International Inc., which is a company that provides emergency medical assistance and managed care for traveling Canadians.

     Aldo Sistilli - Chief Financial Officer and Vice President Finance. Mr. Sistilli has been the Chief Financial Officer of Carbiz since February 2001 and the Vice President Finance of Carbiz since November 1999. Mr. Sistilli is also in the sole proprietor of Aldo Sistilli, CMA. Mr. Sistilli graduated from Ryerson University with a Bachelor of Business Management Degree in 1985, and obtained the Certified Management Accountant designation in 1989.

     Stanton Heintz - Chief Operating Officer. Mr. Heintz has been the Chief Operating Officer of Carbiz since May 2002. Mr. Heintz joined Carbiz in May 2000 as a Vice President following the acquisition of TaxMax, Inc. by Carbiz, which was a company founded by Mr. Heintz. Prior to the acquisition of TaxMax, Inc. by Carbiz, Mr. Heintz had been the President of TaxMax, Inc. since September 1996. Mr. Heintz graduated from Bluffton College in Bluffton, Ohio with a Bachelor of Arts in Business Administration in 1971.

     All directors are elected annually and serve until the next annual meeting of shareholders or until the election and qualification of their successors. All executive officers serve at the discretion of our board of directors. There are no family relationships between any of our directors or executive officers.

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Director compensation

     Our directors do not currently receive any cash compensation for service on our board of directors or any committee, although we do reimburse directors for their reasonable out-of-pocket expenses associated with attending meetings. Directors are eligible for option grants under our stock option plan. See “Stock Option Plan” below. The following table sets forth the aggregate number of options granted to each of our current non-employee directors in each of the last three fiscal years.

	Fiscal Year Ended		Fiscal Year Ended		Fiscal Year Ended
	January 31, 2005		January 31, 2004		January 31, 2003
		Exercise		Exercise		Exercise
Non-employee director	Shares	Price	Shares	Price	Shares	Price
Ross Quigley	Nil		100,000 (1)	$0.24	129,000(6)	$0.24
			100,000 (2)	$0.24	200,000(7)	$0.19
			106,000 (3)	$0.16
Theodore Popel	Nil		92,000 (4)	$0.24	Nil
			106,000 (5)	$0.16	Nil

______________

(1)	These options expire on March 31, 2009.
(2)	These options expire on July 1, 2009.
(3)	These options expire on December 14, 2009.
(4)	These options expire on July 1, 2009.
(5)	These options expire on December 14, 2009.
(6)	These options expire on December 15, 2008.
(7)	These options expire on November 28, 2008.

Board committees

     Our board of directors has established an audit committee. We have not established a compensation committee and, therefore, the full board of directors performs the functions of such committee. Our audit committee currently consists of Messrs. Ritter, Quigley and Popel. Our audit committee is responsible for reviewing our financial reporting procedures and internal controls, the scope of annual and any special audit examinations carried our by our auditors, the performance, independence, and compensation of our auditors, systems and disclosure controls established to comply with regulatory requirements and our annual financial statements before they are reviewed and approved by our board of directors. Such reviews are carried out with the assistance of our auditors and our senior financial management.

Executive Compensation

     The following table sets forth information for each of the three most recently completed fiscal years ending January 31^st concerning the compensation of (i) our chief executive officer and (ii) all other executive officers of Carbiz who earned over $100,000 in salary and bonus in the fiscal year ended January 31, 2005. We refer to these individuals in this prospectus as our “named executive officers.”

		Annual Compensation			Long-term Compensation
					Awards		Payouts
Name and Principal Position	Year	Salary(1) ($)	Bonus ($)	Other Annual Compensation(2)(3) ($)	Restricted Stock Award(s)	Securities Underlying Options/ SARS (#)	LTIP Payouts ($)	All Other Compensation ($)
Carl Ritter	2005	174,890	Nil	Nil	Nil	306,000	Nil	Nil
Chief Executive	2004	70,631	Nil	66,245	Nil	100,000	Nil	Nil
Officer	2003	Nil	Nil	112,058	Nil	Nil	Nil	Nil

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		Annual Compensation			Long-term Compensation
					Awards		Payouts
Name and Principal Position	Year	Salary(1) ($)	Bonus ($)	Other Annual  Compensation(2)(3)  ($)	Restricted Stock Award(s)	Securities Underlying   Options/ SARS (#)	LTIP Payouts ($)	All Other Compensation ($)
Richard Lye	2005	138,019	Nil	Nil	Nil	306,950	Nil	Nil
President and	2004	104,753	Nil	Nil	Nil	104,050	Nil	Nil
Corporate	2003	74,831	Nil	Nil	Nil	Nil	Nil	Nil
Secretary(4)
Stanton Heintz	2005	120,122	Nil	Nil	Nil	306,062	Nil	Nil
Chief Operating	2004	112,669	Nil	Nil	Nil	104,050	Nil	Nil
Officer	2003	73,858	Nil	Nil	Nil	Nil	Nil	Nil

Notes:

(1)	These figures represent payments made through Carbiz USA Inc., Carbiz’s wholly-owned US subsidiary.
(2)	Perquisites and other personal benefits did not exceed the lesser of $50,000 and 10% of the total annual salary and bonuses for the named executive officers.
(3)	These figures represent payments made in accordance with the provisions of applicable management and consulting agreements which have expired as of December 2004.
(4)	As at the year ended January 31, 2005, Carbiz owed Mr. Lye $26,050 in past wages.

Options Granted During the Most Recently Completed Financial Year

     The following table sets forth certain information relating to stock options granted to our named executive officers for the fiscal year ended January 31, 2005:

	Securities	% of Total
	Underlying	Options/SARs	Exercise or
	Options/SARs	Granted to	Base Price
	Granted	Employees in	($/Security)
	(#)	Fiscal Year		Expiration Date
Carl Ritter	100,000	15.9%	$0.24	March 31, 2009
	100,000		$0.24	July 1, 2009
	106,000		$0.16	December 14, 2009
Richard Lye	100,000	16.0%	$0.24	March 31, 2009
	100,000		$0.24	July 1, 2009
	106,950		$0.16	December 14, 2009
Stanton Heintz	100,000	15.9%	$0.24	March 31, 2009
	100,000		$0.24	July 1, 2009
	106,062		$0.16	December 14, 2009

Aggregated Option/SAR Exercises During the Last Fiscal Year and Financial Year-end Option/SAR Values

     The following table sets forth certain information respecting the numbers and accrued value of unexercised stock options as at January 31, 2005 and options exercised by the named executive officers during the fiscal year ended January 31, 2005:

	Securities		Number of Securities Underlying		Value of Unexercised
	Acquired on	Value	Unexercised Options/SARs at		In-the-Money Options/SARs at
	Exercise	Realized	Fiscal Year End		Fiscal Year End (1)
	(#)	($)	(#)		($)
			Exercisable	Unexercisable	Exercisable	Unexercisable
Carl Ritter	200,136	21,327	300,000	106,000	Nil	Nil
Richard Lye	100,000	15,760	354,050	106,950	Nil	Nil

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	Securities		Number of Securities Underlying		Value of Unexercised
	Acquired on	Value	Unexercised Options/SARs at		In-the-Money Options/SARs at
	Exercise	Realized	Fiscal Year End		Fiscal Year End (1)
	(#)	($)	(#)		($)
			Exercisable	Unexercisable	Exercisable	Unexercisable
Stanton Heintz	Nil	Nil	418,938	106,062	Nil	Nil

(1) Calculated as the difference in the market value of the securities underlying the options at January 31, 2005 and the exercise price.

Long-Term Incentive Plans

We do not have any long-term incentive plans.

Stock Option Plan

     Our stock option plan authorizes our board of directors to issue stock options to directors, officers, key employees and others who are in a position to contribute to the future success and growth of Carbiz. Under our stock option plan, the aggregate number of common shares issuable upon exercise of options granted may not exceed 10% of the total number of our outstanding common shares at the time the options are granted. Further, the aggregate number of common shares issuable upon the exercise of the options granted to any one individual may not exceed 5% of the total number of our outstanding common shares. Options issued pursuant to our stock option plan must have an exercise price not less than that permitted by the stock exchange on which our common shares are then listed or quoted. The period during which an option may be exercised shall be determined by our board of directors at the time the option is granted. No option may be exercisable for a period exceeding five years from the date the option is granted, unless specifically approved by our board of directors and which cannot exceed a maximum of 10 years from the date the option is granted.

     The options granted under our stock option plan expire on the earlier of the expiration date of the option or 30 days after the date a holder ceases to be employed or retained by us. In the event of the death or permanent disability of a holder, any option previously granted to the holder shall be exercisable until the earlier of the expiration date of the option or 12 months after the date of death or permanent disability of the holder.

     In the event of a sale of all or substantially all of our assets or in the event of a change in control of Carbiz, each holder shall be entitled to exercise, in whole or in part, the options granted to such holder, either during the term of the option or within 90 days after the date of the sale or change of control, whichever first occurs.

Termination of Employment, Change in Responsibilities and Employment Contracts

     Except as disclosed in this prospectus, we do not have any employment contracts with our executive officers. In addition, there are no compensatory plans or arrangements with any executive officer (including payments to be received from Carbiz or any subsidiary), which result or will result from the resignation, retirement or any other termination of employment of such executive officer or from a change of control of Carbiz or any subsidiary or any change in such executive officer’s responsibilities following a change in control.

Report on Repricing of Options/SARS

We did not reprice any options or SARs outstanding during the fiscal year ended January 31, 2005.

Indemnification of Directors and Officers and Related Matters

     Subject to the limitations contained in the Business Corporation Act (Ontario), our bylaws provide that our directors and officers, former directors or officers, or a person who acts or acted at our request as a director or officer of another body corporate of which we are or were a shareholder or creditor, and all of their heirs and legal representatives, shall be indemnified against all costs, charges and expenses reasonably incurred by such persons in connection with the defense of any civil, criminal or administrative action or proceeding to which they are made a party by reason of being or having held such positions, provided that the person seeking indemnity:

37

• acted honestly and in good faith with a view to our best interests; and

•   in the case of a criminal or administrative action or proceeding that is enforced by a monetary penalty, had reasonable grounds for believing that his or her conduct was lawful.

Our bylaws also provide that our directors and officers shall not be liable for:

• any acts or omissions of any other officer or director;

•   any loss, damage or expenses related to an insufficiency or deficiency of title to any property acquired for or on behalf of Carbiz;

•   any loss or damage arising from the bankruptcy, insolvency or tortuous acts of any person occasioned by any error of judgment or oversight on the part of the officer or director; or

•   any other loss, damage or misfortune that happens in the execution of the duties of his or her office or in relation thereto, unless it results from his or her own willful neglect or default;

provided, however, that nothing in the bylaws relieves any director or officer from the duty to act in accordance with the Business Corporation Act (Ontario)and the regulations thereunder or from liability for any breach thereof.

     Insofar as indemnification for liabilities arising under the Securities Act of 1933 may be permitted to directors, officers and controlling persons of us pursuant to the foregoing provisions, or otherwise, we have been advised that it is the opinion of the Securities and Exchange Commission that such indemnification is against public policy as expressed in the Securities Act of 1933 and is, therefore, unenforceable.

CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS

     Except for the transactions described below, none of our directors, named executive officers or greater than 5% shareholders, nor any associate or affiliate of any of the above named persons have any interest, direct or indirect, in any transaction within the last two years of the date of this prospectus, or in any proposed transaction which has materially affected or will materially affect us.

     During the year ended January 31, 2005 the Company paid $45,252 (2004 - $44,493) for director, officers and property insurance to a company owned and operated by the spouse of a significant shareholder. At year-end, $19,362 (2004 - $35,450) of this amount was still outstanding, which was reduced to zero as of July 31, 2005. This transaction was measured at the exchange amount, which is the amount of consideration established and agreed to by both parties.

     For the years ended January 31, 2004 and January 31, 2005, pursuant to the terms of a management agreement dated October 12, 1999 between Carbiz and 1043917 Ontario Inc., we paid $70,631 and $nil, respectively, to 1043917 Ontario Inc., a corporation controlled by Mr. Ritter. This agreement with 1043917 Ontario Inc. expired on January 31, 2005. In addition, in consideration for services rendered pursuant to this management agreement, Mr. Ritter also received compensation, including benefits, of $66,245 and $174,890, respectively, through Carbiz USA Inc., one of our wholly-owned subsidiaries.

     On October 6, 2005, we completed a non-brokered private placement of Cdn$809,119 principal amount 5% convertible debentures with Mr. Ritter, Mr. Ritter’s wife, Mr. Quigley and Medipac International Inc., which is an entity controlled by Mr. Quigley, who is one of our directors, and for which Mr. Popel, who is also one of our directors, is an officer.

     On July 29, 2005, we completed a non-brokered private placement of a $150,000 principal amount promissory note that bears an interest rate of 17.7% with Medipac (US) International Inc., which is a wholly-owned subsidiary of Medipac International Inc. which is an entity controlled by Mr. Quigley, who is one of our directors, and Mr. Popel, who is also one of our directors. This note calls for payments of $15,000 including principal and interest to begin on October 1, 2005 and will mature on August 1, 2006.

     On February 28, 2005, Carbiz entered into a joint venture agreement with Jonross, Inc., an entity controlled by Mr. Quigley, who is a director of Carbiz, by forming Carbiz Auto Credit JV1, LLC, a Florida limited liability

38

company. Under the terms of the operating agreement, we agreed to provide management and license certain intellectual property to the joint venture company and Jonross, Inc. agreed to invest $500,000 in the joint venture company each in exchange for a 50% interest. We also have a revolving loan agreement with the joint venture company with no fixed repayment term at an annual interest rate of the U.S. prime rate plus 1.5% .

SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT

     The following tables set forth certain information regarding beneficial ownership of our common shares as of July 31, 2005, by (i) each person or entity who is known by us to own beneficially more than 5% of our outstanding common shares, (ii) each of our directors, (iii) each of our named executive officers, and (iv) all directors and executive officers as a group. As of July 31, 2005, we had 41,090,514 common shares issued and outstanding. Assuming the conversion of all the 5% convertible debentures, we will have 51,714,329 common shares issued and outstanding.

     Beneficial ownership is determined in accordance with the rules of the Securities and Exchange Commission, and includes voting and investment power with respect to our common shares. Common shares subject to convertible debentures, warrants or options that are currently convertible or exercisable or convertible or exercisable within 60 days after July 31, 2005 are deemed to be beneficially owned by the person holding those securities for the purpose of computing the percentage ownership of that person but are not treated as outstanding for the purpose of computing the percentage ownership of any other shareholder. Unless otherwise indicated, the address for each person listed in the following table is c/o Carbiz Inc., 7405 North Tamiami Trail, Sarasota, Florida 34243.

			Common Shares Beneficially Owned
	Common Shares Beneficially Owned		(assuming conversion of all 5%
Name and Address of			convertible debentures) (13)
Beneficial Owner	Number	Percentage	Number	Percentage
John Gallucci	4,862,511 (1)	11.8%	4,862,511 (1)	9.4%
Stanton Heintz	744,709 (2)	1.9%	744,709 (2)	1.5%
Richard Lye	1,163,200 (3)	2.8%	1,163,200 (3)	2.2%
Medipac International, Inc.	2,340,000	5.7%	12,459,130 (8)	21.5%
Theodore Popel	817,100 (4)	2.0%	1,698,580 (4)(9)	3.2%
Ross Quigley	8,495,995 (5)	20.4%	22,282,560 (5)(10)	36.6%
Carl Ritter	2,854,930 (6)	6.9%	3,920,642 (6)(11)	7.4%
All directors and executive	14,830,067 (7)	33.8%	30,563,824 (7)(12)	47.6%
officers as a group (6 persons)

_________________
(1) Includes 4,223,511 common shares held in the name of 1144822 Ontario Inc., a company of which Mr. Gallucci is the President and owner of one-third of the outstanding securities.
(2) Includes 525,000 common shares issuable upon exercise of options.
(3) Includes 411,000 common shares issuable upon exercise of options.
(4) Includes 198,000 common shares issuable upon exercise of options. Although Mr. Popel is an officer of Medipac International Inc., he disclaims beneficial ownership of the securities held by Medipac International Inc.
(5) Includes (i) 635,000 common shares issuable upon exercise of options, (ii) 2,340,000 common shares held in the name of Medipac International Inc., a company wholly-owned and controlled by Mr. Quigley, and (iii) 1,189,000 common shares held in the name of Samual A. Quigley, who is Mr. Quigley’s son.
(6) Includes 406,000 common shares issuable upon exercise of options.
(7) Includes 2,840,429 common shares issuable upon exercise of options.
(8) Includes 3,907,000 common shares, 4,141,420 common shares underlying class A common share purchase warrants and 2,070,710 common shares underlying class B common share purchase warrants that will be issued upon conversion of a Cdn$586,050 convertible debenture.

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(9) Includes 340,593 common shares, 360,592 common shares underlying class A common share purchase warrants and 180,295 common shares underlying class B common share purchase warrants that will be issued upon conversion of a Cdn$50,000 convertible debenture.
(10) Includes (i) 340,593 common shares, 360,592 common shares underlying class A common share purchase warrants and 180,295 common shares underlying class B common share purchase warrants that will be issued upon conversion of a Cdn$50,000 convertible debenture, and (ii) 3,907,000 common shares, 4,141,420 common shares underlying class A common share purchase warrants and 2,070,710 common shares underlying class B common share purchase warrants that will be issued upon conversion of a Cdn$586,050 convertible debenture held by Medipac International, Inc., a corporation wholly-owned and controlled by Mr. Quigley.
(11) Includes (i) 78,140 common shares, 82,828 common shares underlying class A common share purchase warrants and 41,414 common shares underlying class B common share purchase warrants that will be issued upon conversion of a Cdn$11,721 convertible debenture held directly by Mr. Ritter, (ii) 333,333 common shares, 353,332 common shares underlying class A common share purchase warrants and 176,665 common shares underlying class B common share purchase warrants that will be issued upon conversion of a Cdn$50,000 convertible debenture held by Mr. Ritter’s wife.
(12) Includes 6,075,318 common shares, 6,438,962 common shares underlying class A common share purchase warrants and 3,219,477 common shares underlying class B common share purchase warrants that will be issued upon conversion of Cdn$909,119.94 in convertible debentures.
(13) Includes any interest that has accrued on the convertible debentures through October 6, 2005.

DESCRIPTION OF SECURITIES

Common Shares

     We have authorized an unlimited number of common shares with no par value. The holders of common shares are entitled to one vote for each share held of record on all matters submitted to a vote of the shareholders, other than meetings of the holders of another class of shares. No holder of our common shares may cumulate votes in voting for our directors. Subject to preferences that may be applicable to any preferred shares currently outstanding or to be issued in the future, holders of common shares are entitled to receive ratably such dividends as may be declared by our board of directors out of funds legally available therefore. In the event of our liquidation, dissolution or winding up, holders of the common shares are entitled to all assets remaining after payment of liabilities and the liquidation preference of any then outstanding preferred shares. Holders of common shares have no preemptive rights and no right to convert their common shares into any other securities of Carbiz.

Preferred Shares

     We have authorized an unlimited number of preferred shares. Our articles of incorporation authorize our board of directors to issue, by resolution and without any action by our shareholders, one or more series of preferred shares and may establish the designations, dividend rights, dividend rate, conversion rights, voting rights, terms of redemption, terms of retraction, liquidation preference, sinking fund or purchase fund terms and all other preferences and rights of any series of preferred shares, including rights that could adversely affect the voting power of the holders of our common shares.

     One of the effects of undesignated preferred shares may be to enable our board of directors to render more difficult or to discourage an attempt to obtain control of us by means of a tender offer, proxy contest, merger or otherwise, and thereby to protect the continuity of our management. The issuance of preferred shares pursuant to board of director’s authority described above may adversely affect the rights of holder of our common shares. For example, preferred shares issued by us may rank prior to the common shares as to dividend rights, liquidation preferences or both, may have full or limited voting rights and may be convertible into common shares. Accordingly, the issuance of preferred shares may discourage bids for our common shares at a premium or may otherwise adversely affect the market price of our common shares.

Series 1 Preferred Shares

     We have authorized a total of 10,000,000 series 1 preferred shares, none of which are outstanding.

     Voting

     Except as provided in the Business Corporation Act (Ontario), each holder of series 1 preferred shares is not entitled to receive notice of or to attend any meeting of our shareholders and is not entitled to vote at any meeting of our shareholders.

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     Dividends

     In priority to holders of our common shares and all other shares ranking junior to the series 1 preferred shares, each holder of series 1 preferred shares is entitled to receive a fixed 10% cumulative preferential cash dividend on the principal amount of each preferred share during each fiscal year when declared by our board of directors. Except with the unanimous written consent of the holders of the series 1 preferred shares, no dividend may be declared and paid on our common shares or on any other shares ranking junior to the series 1 preferred shares unless and until the preferential non-cumulative cash dividends on all series 1 preferred shares have been declared and paid or set apart for payment.

     Liquidation

     In the event of a liquidation, dissolution or winding up of Carbiz or any other distribution by way of repayment of capital, each holder of series 1 preferred shares shall be entitled to receive Cdn$0.10 per share together with any accrued but unpaid fixed preferential cash dividends before any amount is paid or distributed to the holders of our common shares.

     Redemption or Conversion

     The series 1 preferred shares will be automatically redeemed for Cdn$0.10 per share together with any accrued but unpaid fixed preferential cash dividends on the first day following the second anniversary of their date of issuance.

     Prior to the mandatory redemption date, the holders of series 1 preferred shares may convert each series 1 preferred share into one common share and all accrued but unpaid dividends on any series 1 preferred shares into common shares on the basis of one common share for each $0.10 of dividend amount to be converted by the holder.

Transfer Agent

     CIBC Mellon Trust Company at its principal offices in Vancouver, British Columbia, Canada, is the registrar and transfer agent of our common shares.

SELLING SHAREHOLDERS

     The table below lists the selling shareholders and other information regarding the beneficial ownership of the common shares by each of the selling shareholders. The second column lists the number of common shares beneficially owned by each selling shareholder as of July 31, 2005. The third column lists the number of common shares that may be resold under this prospectus. The fourth and fifth columns list the number of common shares owned and the percentage of common shares owned after the resale of the common shares registered under this prospectus. Except for their ownership of the common shares, none of the selling shareholders, other than Messrs. Quigley, Popel, Gallucci, Ritter, Heintz, Sistilli, and Lye and Medipac International Inc. have had any material relationship with us within the past three years. With respect to Messrs. Quigley, Popel, Ritter, Heintz, Sistilli and Lye, they are all currently directors and/or officers of Carbiz, and Mr. Gallucci was formerly a director of Carbiz. An entity controlled by Mr. Quigley is a joint venture partner of Carbiz. Mr. Popel and a wholly-owned subsidiary of Medipac International Inc., which is an entity controlled by Mr. Quigley, recently entered into a $150,000 principal amount promissory note with Carbiz. Midtown Partners & Co., LLC, formerly Innovation Capital, LLC, served as our placement agent in October 2004 relating to our offer and sale of certain of our 5% convertible debentures. The total number of common shares outstanding as of July 31, 2005 was 41,090,514. Assuming the conversion of all the 5% convertible debentures, we will have 51,714,329 common shares issued and outstanding.

     Beneficial ownership is determined in accordance with the rules of the Securities and Exchange Commission, and includes voting and investment power with respect to our common shares. Common shares subject to convertible debentures, warrants or options that are currently convertible or exercisable or convertible or exercisable within 60 days after July 31, 2005 are deemed to be beneficially owned by the person holding those securities for the purpose of computing the percentage ownership of that person but are not treated as outstanding for the purpose of computing the percentage ownership of any other shareholder.

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			Common Shares
Name of Selling Shareholder	Common Shares Beneficially Owned	Common Shares Offered by this	Beneficially Owned
	Prior to Offering (22)	Prospectus (23)	After Offering
			Number	Percentage
Carr, Steven P. (1)	443,380	443,380	-	*
Fusani, Jerry T. (2)	110,843	110,843	-	*
Gallucci, John (3)	4,862,511	4,862,511	-	*
Heintz, Stanton (4)	744,709	219,709	525,000	1.0%
Hoefer, Debra J. (5)	110,843	110,843	-	*
Hughes, John (6)	443,380	443,380	-	*
Kochevar, G. Raymond (7)	110,843	110,843	-	*
Kochevar, Jon R. (8)	3,879,628	3,879,628	-	*
Lye, Richard (9)	1,163,200	752,200	411,000	*
Medipac International, Inc. (10)	12,459,130	12,459,130	-	*
Midtown Capital, LLC (11)	428,296	428,296	-	*
Moore, Bruce (12)	110,843	110,843	-	*
Moore, Keith A. (13)	243,858	243,858	-	*
Moore, Kent Ashley (14)	554,228	554,228	-	*
Popel, Theodore (15)	1,698,580	1,500,580	198,000	*
Quigley, Ross (16)	22,282,560	21,647,560	635,000	1.2%
Quigley, Samuel	1,189,000	1,189,000	-	*
Ritter, Carl (17)	2,854,930	2,448,930	406,000	*
Ritter, Carol (18)	863,330	863,330	-	*
Sistilli, Aldo (19)	654,133	88,704	565,429	1.1%
Snively, Richard L. (20)	221,687	221,687	-	*
Vicis Capital Master Fund (21)	5,542,325	5,542,325	-	*

____________________
* Indicates less than one percent (1%).

(1) Includes 171,317 common shares, 181,376 common shares underlying class A common share purchase warrants and 90,687 common shares underlying class B common share purchase warrants that will be issued upon conversion of a Cdn$25,150 convertible debenture. This convertible debenture will convert automatically upon the listing of our common shares for trading on the United States Over-The-Counter Bulletin Board and the delisting of our common shares for trading on the TSX Venture Exchange. Each class A common share purchase warrant may be exercised through October 12, 2009 for one common share at an exercise price of Cdn$0.15 per common share, each class B common share purchase warrant may be exercised through October 12, 2009 for one common share at an exercise price of Cdn$0.15 per common share.

(2) Includes 42,829 common shares, 45,343 common shares underlying class A common share purchase warrants and 22,671 common shares underlying class B common share purchase warrants that will be issued upon conversion of a Cdn$6,287.50 convertible debenture. This convertible debenture will convert automatically upon the listing of our common shares for trading on the United States Over-The-Counter Bulletin Board and the delisting of our common shares for trading on the TSX Venture Exchange. Each class A common share purchase warrant may be exercised through October 12, 2009 for one common share at an exercise price of Cdn$0.15 per common share, each class B common share purchase warrant may be exercised through October 12, 2009 for one common share at an exercise price of Cdn$0.15 per common share.

(3) Includes 4,223,511 common shares held in the name of 1144822 Ontario Inc., a company of which Mr. Gallucci is the President and owner of one-third of the outstanding securities.

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(4) Includes 525,000 common shares issuable upon exercise of options.

(5) Includes 42,829 common shares, 45,343 common shares underlying class A common share purchase warrants and 22,671 common shares underlying class B common share purchase warrants that will be issued upon conversion of a Cdn$6,287.50 convertible debenture. This convertible debenture will convert automatically upon the listing of our common shares for trading on the United States Over-The-Counter Bulletin Board and the delisting of our common shares for trading on the TSX Venture Exchange. Each class A common share purchase warrant may be exercised through October 12, 2009 for one common share at an exercise price of Cdn$0.15 per common share, each class B common share purchase warrant may be exercised through October 12, 2009 for one common share at an exercise price of Cdn$0.15 per common share.

(6) Includes 171,317 common shares, 181,376 common shares underlying class A common share purchase warrants and 90,687 common shares underlying class B common share purchase warrants that will be issued upon conversion of a Cdn$25,150 convertible debenture. This convertible debenture will convert automatically upon the listing of our common shares for trading on the United States Over-The-Counter Bulletin Board and the delisting of our common shares for trading on the TSX Venture Exchange. Each class A common share purchase warrant may be exercised through October 12, 2009 for one common share at an exercise price of Cdn$0.15 per common share, each class B common share purchase warrant may be exercised through October 12, 2009 for one common share at an exercise price of Cdn$0.15 per common share.

(7) Includes 42,829 common shares, 45,343 common shares underlying class A common share purchase warrants and 22,617 common shares underlying class B common share purchase warrants that will be issued upon conversion of a Cdn$6,287.50 convertible debenture. This convertible debenture will convert automatically upon the listing of our common shares for trading on the United States Over-The-Counter Bulletin Board and the delisting of our common shares for trading on the TSX Venture Exchange. Each class A common share purchase warrant may be exercised through October 12, 2009 for one common share at an exercise price of Cdn$0.15 per common share, each class B common share purchase warrant may be exercised through October 12, 2009 for one common share at an exercise price of Cdn$0.15 per common share.

 (8) Includes 1,499,037 common shares, 1,587,061 common shares underlying class A common share purchase warrants and 793,530 common shares underlying class B common share purchase warrants that will be issued upon conversion of a Cdn$220,062.50 convertible debenture. This convertible debenture will convert automatically upon the listing of our common shares for trading on the United States Over-The-Counter Bulletin Board and the delisting of our common shares for trading on the TSX Venture Exchange. Each class A common share purchase warrant may be exercised through October 12, 2009 for one common share at an exercise price of Cdn$0.15 per common share, each class B common share purchase warrant may be exercised through October 12, 2009 for one common share at an exercise price of Cdn$0.15 per common share.

(9) Includes 411,000 common shares issuable upon exercise of options.

(10) Includes 3,907,000 common shares, 4,141,420 common shares underlying class A common share purchase warrants and 2,070,710 common shares underlying class B common share purchase warrants that will be issued upon conversion of a Cdn$586,050 convertible debenture. This convertible debenture will convert automatically upon the listing of our common shares for trading on the United States Over-The-Counter Bulletin Board and the delisting of our common shares for trading on the TSX Venture Exchange. Each class A common share purchase warrant may be exercised through October 6, 2010 for one common share at an exercise price of Cdn$0.15 per common share, each class B common share purchase warrant may be exercised through October 6, 2010 for one common share at an exercise price of Cdn$0.15 per common share.

(11) Includes 214,148 common shares underlying agent’s first warrants and 214,148 common shares underlying agent’s second warrants that will be issued upon the conversion of certain convertible debentures. These convertible debentures will convert automatically upon the listing of our common shares for trading on the United States Over-The-Counter Bulletin Board and the delisting of our common shares for trading on the TSX Venture Exchange. Each agent’s first warrant and each agent’s second warrant may be exercised through five years following the date the convertible are converted at an exercise price Cdn$0.23 and Cdn$0.22, respectively.

(12) Includes 42,829 common shares, 45,343 common shares underlying class A common share purchase warrants and 22,671 common shares underlying class B common share purchase warrants that will be issued upon conversion of a Cdn$6,287.50 convertible debenture. This convertible debenture will convert automatically upon the listing of our common shares for trading on the United States Over-The-Counter Bulletin Board and the delisting of our common shares for trading on the TSX Venture Exchange. Each class A common share purchase warrant may be exercised through October 12, 2009 for one common share at an exercise price of Cdn$0.15 per common share, each class B common share purchase warrant may be exercised through October 12, 2009 for one common share at an exercise price of Cdn$0.15 per common share.

(13) Includes 94,224 common shares, 99,756 common shares underlying class A common share purchase warrants and 49,878 common shares underlying class B common share purchase warrants that will be issued upon conversion of a Cdn$13,832.50 convertible debenture. This convertible debenture will convert automatically upon the listing of our common shares for trading on the United States Over-The-Counter Bulletin Board and the delisting of our common shares for trading on the TSX Venture Exchange. Each class A common share purchase warrant may be exercised through October 12, 2009 for one common share at an exercise price of Cdn$0.15 per common share,

43

each class B common share purchase warrant may be exercised through October 12, 2009 for one common share at an exercise price of Cdn$0.15 per common share

(14) Includes 214,147 common shares, 226,721 common shares underlying class A common share purchase warrants and 113,360 common shares underlying class B common share purchase warrants that will be issued upon conversion of a Cdn$31,437.50 convertible debenture. This convertible debenture will convert automatically upon the listing of our common shares for trading on the United States Over-The-Counter Bulletin Board and the delisting of our common shares for trading on the TSX Venture Exchange. Each class A common share purchase warrant may be exercised through October 12, 2009 for one common share at an exercise price of Cdn$0.15 per common share, each class B common share purchase warrant may be exercised through October 12, 2009 for one common share at an exercise price of Cdn$0.15 per common share.

(15) Includes (i) 198,000 common shares issuable upon exercise of options, and (ii) 340,593 common shares, 360,592 common shares underlying class A common share purchase warrants and 180,295 common shares underlying class B common share purchase warrants that will be issued upon conversion of a Cdn$50,000 convertible debenture. This convertible debenture will convert automatically upon the listing of our common shares for trading on the United States Over-The-Counter Bulletin Board and the delisting of our common shares for trading on the TSX Venture Exchange. Each class A common share purchase warrant may be exercised through October 12, 2009 for one common share at an exercise price of Cdn$0.15 per common share, each class B common share purchase warrant may be exercised through October 12, 2009 for one common share at an exercise price of Cdn$0.15 per common share. Although Mr. Popel is an officer of Medipac International Inc., he disclaims beneficial ownership of the securities held by Medipac International Inc.

(16) Includes (i) 635,000 common shares issuable upon exercise of options, (ii) 2,340,000 common shares held in the name of Medipac International Inc., a company wholly-owned and controlled by Mr. Quigley, (iii) 1,189,000 common shares held in the name of Samuel A. Quigley, who is Mr. Quigley’s son, (iv) 340,593 common shares, 360,592 common shares underlying class A common share purchase warrants and 180,295 common shares underlying class B common share purchase warrants that will be issued upon conversion of a Cdn$50,000 convertible debenture, and (v) 3,907,000 common shares, 4,141,420 common shares underlying class A common share purchase warrants and 2,070,710 common shares underlying class B common share purchase warrants that will be issued upon conversion of a Cdn$586,050,000 convertible debenture held by Medipac International, Inc., a corporation wholly-owned and controlled by Mr. Quigley. The Cdn$50,000 convertible debenture will convert automatically upon the listing of our common shares for trading on the United States Over-The-Counter Bulletin Board and the delisting of our common shares for trading on the TSX Venture Exchange. Each class A common share purchase warrant may be exercised through October 12, 2009 for one common share at an exercise price of Cdn$0.15 per common share, each class B common share purchase warrant may be exercised through October 12, 2009 for one common share at an exercise price of Cdn$0.15 per common share. The Cdn$586,050 convertible debenture will convert automatically upon the listing of our common shares for trading on the United States Over-The-Counter Bulletin Board and the delisting of our common shares for trading on the TSX Venture Exchange. Each class A common share purchase warrant may be exercised through October 6, 2010 for one common share at an exercise price of Cdn$0.15 per common share, each class B common share purchase warrant may be exercised through October 6, 2010 for one common share at an exercise price of Cdn$0.15 per common share.

(17) Includes (i) 406,000 common shares issuable upon exercise of options, (ii) 78,140 common shares, 82,828 common shares underlying class A common share purchase warrants and 41,414 common shares underlying class B common share purchase warrants that will be issued upon conversion of a Cdn$11,721 convertible debenture, and (iii) 333,333 common shares, 353,332 common shares underlying class A common share purchase warrants and 176,665 common shares underlying class B common share purchase warrants that will be issued upon conversion of a Cdn$50,000 convertible debenture held by Carol Ritter, who is Mr. Ritter’s wife. These convertible debentures will convert automatically upon the listing of our common shares for trading on the United States Over-The-Counter Bulletin Board and the delisting of our common shares for trading on the TSX Venture Exchange. Each class A common share purchase warrant may be exercised through October 6, 2010 for one common share at an exercise price of Cdn$0.15 per common share, each class B common share purchase warrant may be exercised through October 6, 2010 for one common share at an exercise price of Cdn$0.15 per common share.

(18) Includes 333,333 common shares, 353,332 common shares underlying class A common share purchase warrants and 176,665 common shares underlying class B common share purchase warrants that will be issued upon conversion of a Cdn$50,000 convertible debenture. This convertible debenture will convert automatically upon the listing of our common shares for trading on the United States Over-The-Counter Bulletin Board and the delisting of our common shares for trading on the TSX Venture Exchange. Each class A common share purchase warrant may be exercised through October 6, 2010 for one common share at an exercise price of Cdn$0.15 per common share, each class B common share purchase warrant may be exercised through October 6, 2010 for one common share at an exercise price of Cdn$0.15 per common share.

(19) Includes 565,429 common shares issuable upon exercise of options.

(20) Includes 85,658 common shares, 90,687 common shares underlying class A common share purchase warrants and 45,342 common shares underlying class B common share purchase warrants that will be issued upon conversion of a Cdn$12,575 convertible debenture. This convertible debenture will convert automatically upon the listing of our common shares for trading on the United States Over-The-Counter Bulletin Board and the delisting of our common shares for trading on the TSX Venture Exchange. Each class A common share purchase warrant may be exercised through October 12, 2009 for one common share at an exercise price of Cdn$0.15 per common share, each class B

44

common share purchase warrant may be exercised through October 12, 2009 for one common share at an exercise price of Cdn$0.15 per common share.

(21) Includes 2,141,481 common shares, 2,267,230 common shares underlying class A common share purchase warrants and 1,133,614 common shares underlying class B common share purchase warrants that will be issued upon conversion of a Cdn$314,375 convertible debenture. This convertible debenture will convert automatically upon the listing of our common shares for trading on the United States Over-The-Counter Bulletin Board and the delisting of our common shares for trading on the TSX Venture Exchange. Each class A common share purchase warrant may be exercised through October 12, 2009 for one common share at an exercise price of Cdn$0.15 per common share, each class B common share purchase warrant may be exercised through October 12, 2009 for one common share at an exercise price of Cdn$0.15 per common share.

(22) Includes any interest that has accrued on the convertible debenture(s) through October 6, 2005.

(23) Excludes certain common shares issuable upon exercise of options held by certain of the selling shareholders.

PLAN OF DISTRIBUTION

Resales by selling shareholders

     We are registering the resale of the shares on behalf of the selling shareholders. The selling shareholders may offer and resell the shares from time to time, either in increments or in a single transaction. They may also decide not to sell all the shares they are allowed to resell under this prospectus. The selling shareholders will act independently of us in making decisions with respect to the timing, manner, and size of each sale.

Donees and Pledgees

     The term “selling shareholders” includes donees, i.e., persons who receive shares from a selling shareholder after the date of this prospectus by gift. The term also includes pledgee, i.e., persons who, upon contractual default by a selling shareholder, may seize shares which the selling shareholder pledged to such person. If a selling shareholder notifies us that a donee or pledge intends to sell more than 500 shares, we will file a supplement to this prospectus.

Costs and commissions

     We will pay all costs, expenses, and fees in connection with the registration of the shares. The selling shareholders will pay all brokerage commissions and similar selling expenses, if any, attributable to the sale of shares.

Types of sale transactions

     The selling shareholders may sell the shares in one or more types of transactions (which may include block transactions):

• in the over-the-counter market, when our common shares are listed on the Over-The Counter Bulletin Board;

• in negotiated transactions;

• through put or call option transactions;

• through short sales; or

• any combination of such methods of sale.

     The shares may be sold at market prices prevailing at the time of sale or at negotiated prices. Such transactions may or may not involve brokers or dealers. The selling shareholders have informed us that they have not entered into any agreements, understandings, or arrangements with any underwriters or broker-dealers regarding sale of the shares. They have also informed us that no one is acting as underwriter or coordinating broker in connection with the proposed sale of shares.

45

Sales to or through broker-dealers

     The selling shareholders may conduct such transactions either by selling shares directly to purchasers, or by selling shares to, or through, broker-dealers. Such broker-dealers may act either as an agent of a selling shareholder, or as a principal for the broker-dealer’s own account. Such broker-dealers may receive compensation in the form of discounts, concessions, or commissions from the selling shareholders and/or the purchasers of shares. This compensation may be received both if the broker-dealer acts as an agent or as a principal. This compensation might also exceed customary commissions.

Deemed underwriting compensation

     The selling shareholders and any broker-dealers that act in connection with the sale of shares might be deemed to be “underwriters” within the meaning of Section 2(a)(11) of the Securities Act of 1933. Any commissions received by such broker-dealers, and any profit on the resale of shares sold by them while acting as principals, could be deemed to be underwriting discounts or commissions under the Securities Act of 1933.

Indemnification

     We have agreed to indemnify each selling shareholder against certain liabilities, including liabilities arising under the Securities Act of 1933. The selling shareholders may agree to indemnify any agent, dealer or broker-dealer that participates in transactions involving sales of shares against certain liabilities, including liabilities arising under the Securities Act of 1933.

Prospectus delivery requirements

     Because they may be deemed underwriters, the selling shareholders must deliver this prospectus and any supplements to this prospectus in the manner required by the Securities Act of 1933.

State requirements

     Some states require that any shares sold in that state only be sold through registered or licensed brokers or dealers. In addition, some states require that the shares have been registered or qualified for sale in that state, or that there exist an exemption from the registration or qualification requirement and that the exemption has been complied with.

Sales under rule 144

     Selling shareholders may also resell all or a portion of the shares in open market transactions in reliance upon Rule 144 under the Securities Act of 1933. To do so, they must meet the criteria and conform to the requirements of Rule 144, including the minimum one year holding period.

Distribution arrangements with broker-dealers

     If a selling shareholder notifies us that any material arrangement has been entered into with a broker-dealer for the sale of shares through:

• a block trade;

• special offering;

• exchange distribution or secondary distribution; or

• a purchase by a broker or dealer,

we will then file, if required, a supplement to this prospectus under Rule 424(b) under the Securities Act of 1933.

     The supplement will disclose:

• the name of each such selling shareholder and of the participating broker-dealer(s);

46

• the number of shares involved;

• the price at which such shares were sold;

• the commissions paid or discounts or concessions allowed to such broker-dealer(s), where applicable;

• that such broker-dealer(s) did not conduct any investigation to verify the information in this prospectus; and

• any other facts material to the transaction.

     The Securities and Exchange Commission may deem the selling shareholders and any underwriters, broker-dealers or agents that participate in the distribution of the common shares to be “underwriters” within the meaning of the Securities Act of 1933. The Securities and Exchange Commission may deem any profits on the resale of our common shares and any compensation received by any underwriter, broker-dealer or agent to be underwriting discounts and commissions under the Securities Act of 1933. Each selling shareholder has purchased the common shares in the ordinary course of its business, and at the time the selling shareholder purchased the common shares, it was not a party to any agreement or other understanding to distribute the securities, directly or indirectly.

     Under the Securities Exchange Act of 1934, any person engaged in the distribution of the common shares may not simultaneously engage in market-making activities with respect to the common shares for five business days prior to the start of the distribution. In addition, each selling shareholder and any other person participating in a distribution will be subject to the Securities Exchange Act of 1934, which may limit the timing of purchases and sales of common shares by the selling shareholder or any such other person.

LEGAL MATTERS

The validity of the common shares offered hereby will be passed upon for us by Harris + Harris LLP.

CHANGE IN CERTIFYING ACCOUNTANTS

     Due to the move of Carbiz’s senior management and head offices to Florida, a change in accountants to a U.S.-based firm was considered necessary. On October 3, 2005, our board of directors engaged Christopher, Smith, Leonard, Bristow & Stanell, P.A. to serve as our principal accountant and independent auditor following the resignation of the Canadian offices of Deloitte & Touche LLP on October 3, 2005. Christopher, Smith, Leonard, Bristow & Stanell, P.A. has been engaged to serve as our principal accountant and independent auditor for all periods following the fiscal year ended January 31, 2005.

     The reports of Deloitte & Touche LLP for the past two fiscal years did not contain an adverse opinion or a disclaimer of opinion or were modified as to uncertainty, audit scope or accounting principles. During our two most recent fiscal years, there have been no disagreements with Deloitte & Touche LLP on any matter of accounting principles or practices, financial statement disclosure, or auditing scope and procedure which, if not resolved to the satisfaction of Deloitte & Touche LLP, would have caused Deloitte & Touche LLP to make reference to the matter in their report.

EXPERTS

     The financial statements as of and for the years ended January 31, 2005 and 2004 included in this prospectus have been audited by Deloitte & Touche LLP, independent registered chartered accountants, as set forth in their reports appearing herein (which audit report expresses an unqualified opinion on the financial statements and includes a separate report titled Comments by Independent Registered Chartered Accountants on Canada-United States of America Reporting Differences describing conditions that raise substantial doubt about our ability to continue as a going concern as described in Note 1 to the financial statements, and relating to a change in accounting principal that had an effect on the comparability of the financial statements), and have been so included in reliance upon the reports of such firm given upon their authority as experts in accounting and auditing.

47

WHERE TO FIND ADDITIONAL INFORMATION

     We do not currently file reports with the Securities and Exchange Commission. We have filed a registration statement on Form SB-2 under the Securities Act of 1933 with the Securities and Exchange Commission with respect to our common shares offered pursuant to this prospectus. This prospectus, which forms a part of the registration statement, does not contain all of the information included in the registration statement and amendments thereof and the exhibits thereto, which may be read and copied at the SEC’s Public Reference Room at 100 F. Street, N.E., Washington, D.C. 20549. Information on the operation of the Public Reference Room may be obtained by calling the Securities and Exchange Commission at 1-800-SEC-0330. In addition, the Securities and Exchange Commission maintains a website that contains the registration statement of which this prospectus is a part. The address of the Securities and Exchange Commission’s website is http://www.sec.gov. Statements contained in this prospectus as to the intent of any contract or other document referred to are not necessarily complete, and in each instance reference is made to the copy of such contract or other document filed as an exhibit to this registration statement, each such statement being qualified in all respects by such reference.

48

CARBIZ INC.

INDEX TO CONSOLIDATED FINANCIAL STATEMENTS

Audited Financial Statements		Page
	Report of Independent Registered Chartered Accountants	F-2
	Consolidated Balance Sheets as of January 31, 2004 and 2005	F-5
	Consolidated Statements of Operations for the Years Ended January 31, 2004 and 2005	F-6
	Consolidated Statements of Changes in Capital Deficiency for the Years Ended January 31, 2004 and 2005	F-7
	Consolidated Statements of Cash Flows for the Years Ended January 31, 2004 and 2005	F-8
	Notes to Consolidated Financial Statements	F-9
Unaudited Financial Statements
	Consolidated Balance Sheets as of July 31, 2005 (unaudited) and January 31, 2005 (audited)	F-34
	Consolidated Statements of Operations (unaudited) for the Six-Months Ended July 31, 2005 and 2004	F-35
	Consolidated Statements of Cash Flow (unaudited) for the Six-Months Ended July 31, 2005 and 2004	F-36
	Notes to Consolidated Financial Statements	F-37

49

Consolidated Financial Statements of

CARBIZ INC.

January 31, 2005 and 2004

F-1

Deloitte & Touche LLP
5140 Yonge Street
Suite 1700
Toronto ON M2N 6L7
Canada

Tel: 416-601-6150
Fax: 416-643-8998
www.deloitte.ca

Report of Independent Registered Chartered Accountants

To the Board of Directors of
Carbiz Inc.

We have audited the consolidated balance sheets of Carbiz Inc. as at January 31, 2005 and 2004 and the consolidated statements of operations, changes in capital deficiency and cash flows for the years then ended. These financial statements are the responsibility of the Company’s management. Our responsibility is to express an opinion on these financial statements based on our audits.

We conducted our audits in accordance with Canadian generally accepted auditing standards and the standards of the Public Company Accounting Oversight Board (United States). These standards require that we plan and perform an audit to obtain reasonable assurance whether the financial statements are free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements. An audit also includes assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall financial statement presentation. We believe that our audits provide a reasonable basis for our opinion.

In our opinion, these consolidated financial statements present fairly, in all material respects, the financial position of Carbiz Inc. as at January 31, 2005 and 2004 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.

The Company is not required to have, nor were we engaged to perform, an audit of its internal control over financial reporting. Our audit included consideration of internal control over financial reporting as a basis for designing audit procedures that are appropriate in the circumstances, but not for the purpose of expressing an opinion on the effectiveness of the Company's internal control over financial reporting. Accordingly, we express no such opinion.

On March 25, 2005, we reported separately to the shareholders of Carbiz Inc. on our audits, conducted in accordance with Canadian generally accepted auditing standards, of the consolidated financial statements for the same periods presented in accordance with Canadian generally accepted accounting principles.

Independent Registered Chartered Accountants

/s/ Deloitte & Touche LLP

Toronto, Canada
March 25, 2005 (except for Note 21, which is as at April 10, 2005)

F-2

Deloitte & Touche LLP
5140 Yonge Street
Suite 1700
Toronto ON M2N 6L7
Canada

Tel: 416-601-6150
Fax: 416-601-6151
www.deloitte.ca

Comments by Independent Registered Chartered Accountants on
Canada-United States of America Reporting Differences

The standards of the Public Company Accounting Oversight Board (United States) require the addition of an explanatory paragraph when the financial statements are affected by conditions and events that cast substantial doubt on the Company's ability to continue as a going concern, such as those described in Note 1 to the financial statements. Although we conducted our audits in accordance with both Canadian generally accepted auditing standards and the standards of the Public Company Accounting Oversight Board (United States), our report to the Board of Directors dated March 25, 2005 is expressed in accordance with Canadian reporting standards which do not permit a reference to such conditions and events in the auditors’ report when these are adequately disclosed in the financial statements.

The standards of the Public Company Accounting Oversight Board (United States) also require the addition of an explanatory paragraph when there are changes in accounting principle that have a material effect on the comparability of the Company’s financial statements, such as the change in functional currency described in Note 2 to the financial statements. Although we conducted our audits in accordance with both Canadian generally accepted auditing standards and the standards of the Public Company Accounting Oversight Board (United States), our report to the Board of Directors dated March 25, 2005 is expressed in accordance with Canadian reporting standards which do not require a reference to such conditions and events in the auditors’ report when these are adequately disclosed in the financial statements.

Independent Registered Chartered Accountants

/s/ Deloitte & Touche LLP

Toronto, Canada
March 25, 2005 (except for Note 21, which is as at April 10, 2005)

F-3

CARBIZ INC.

Table of Contents

January 31, 2005 and 2004

(expressed in U.S. dollars)

	Page
Consolidated Balance Sheets	1
Consolidated Statements of Operations	2
Consolidated Statements of Changes in Capital Deficiency	3
Consolidated Statements of Cash Flows	4
Notes to the Consolidated Financial Statements	5-28

F-4

CARBIZ INC.

Consolidated Balance Sheets

January 31

(expressed in U.S. dollars)

		2005			2004
ASSETS
CURRENT
Cash and cash equivalents	$	130,520		$	86,331
Accounts receivable (Note 5)		452,881			63,074
Prepaids and other assets		74,413			60,943
Inventory		51,347			-
Deferred costs		144,468			144,664
		853,629			355,012
LONG-TERM RECEIVABLES (Note 5)		78,591			-
DEFERRED COSTS		65,766			58,154
FIXED ASSETS (Note 6)		535,788			882,868
INTANGIBLE ASSETS (Note 7)		-			23,640
	$	1,533,774		$	1,319,674
LIABILITIES
CURRENT
Accounts payable and accrued liabilities (Note 8)	$	1,044,157		$	834,651
Deferred revenue		164,937			156,041
Current portion of capital lease (Note 9)		12,833			9,547
Current portion of long-term debt (Note 10)		127,046			135,370
		1,348,973			1,135,609
DEFERRED REVENUE		438,439			387,691
CAPITAL LEASES (Note 9)		31,715			18,893
LONG-TERM DEBT (Note 10)		296,266			397,568
CONVERTIBLE DEBENTURE (Note 11)		501,966			-
		2,617,359			1,939,761
REDEEMABLE PREFERRED SHARES (Note 12)		-			297,147
CAPITAL DEFICIENCY
COMMON STOCK
41,002,014 and 33,422,358 Common Shares issued and
outstanding as at January 31, 2005 and 2004 respectively		14,185,863			13,462,160
WARRANTS		118,457			16,169
ADDITIONAL PAID-IN CAPITAL		6,264,383			5,470,342
OTHER COMPREHENSIVE LOSS		(385,197	)		(286,356	)
DEFICIT		(21,267,091	)		(19,579,549	)
		(1,083,585	)		(917,234	)
	$	1,533,774		$	1,319,674

APPROVED BY THE BOARD
/s/ Carl Ritter	Director
/s/ Richard Lye	Director

F-5

CARBIZ INC.

Consolidated Statements of Operations

Years ended January 31

(expressed in U.S. dollars)

		2005			2004
SALES	$	3,359,551		$	2,960,865
COST OF SALES		1,486,506			1,491,122
GROSS PROFIT		1,873,045			1,469,743
OPERATING EXPENSES		3,415,695			2,541,110
OPERATING LOSS		(1,542,650	)		(1,071,367	)
INTEREST AND OTHER EXPENSES (Note 16)		(144,892	)		(97,119	)
NET LOSS FOR THE YEAR		(1,687,542	)		(1,168,486	)
OTHER COMPREHENSIVE LOSS		(98,841	)		(26,524	)
COMPREHENSIVE LOSS FOR THE YEAR	$	(1,786,383	)	$	(1,195,010	)
NET LOSS PER SHARE
Basic and diluted (Note 13 (g))	$	(0.05	)	$	(0.04	)
WEIGHTED AVERAGE NUMBER OF COMMON
SHARES OUTSTANDING		37,370,738			31,323,146

F-6

CARBIZ INC.

Consolidated Statements of Changes in Capital Deficiency

Years ended January 31

(expressed in U.S. dollars)

												Additional		Other						Total
												Paid-in		Comprehensive			Accumulated			Capital
	Common Stock					Warrants						Capital		Loss			Deficit			Deficiency
	Shares			Amount		Number			Amount
Balance at February 1, 2003	30,772,546		$	13,375,568		-		$	-		$	5,306,729	$	(259,832	)	$	(18,411,063	)	$	11,402
Private placement (Note 13(b))	1,500,000			90,612		750,000			18,455			-		-			-			109,067
Exercise of stock options (Note 13(f))	1,343,000			134,544		-			-			-		-			-			134,544
Exercise of warrants (Note 13(b))	90,080			10,525		(90,800	)		(2,286	)		-		-			-			8,239
Cancellation of shares (Note 13(d))	(283,268	)		(149,089	)	-			-			149,089		-			-			-
Stock compensation expense	-			-		-			-			14,524		-			-			14,524
Foreign currency translation adjustment	-			-		-			-			-		(26,524	)		-			(26,524	)
Net loss for the year	-			-		-			-			-		-			(1,168,486	)		(1,168,486	)
Balance at January 31, 2004	33,422,358			13,462,160		659,920			16,169			5,470,342		(286,356	)		(19,579,549	)		(917,234	)
Private placement (Note 13(c))	1,980,217			296,210		1,980,217			91,567			-		-			-			387,777
Issuance of Agent’s Warrants (Note 13(c))	-			-		377,843			26,890			-		-			-			26,890
Issuance of Convertible Debenture (Note 11)	-			-		-			-			768,632		-			-			768,632
Conversion of redeemable
preferred shares (Note 12)	4,538,543			301,163		-			-			-		-			-			301,163
Exercise of stock options (Note 13(f))	423,136			47,530		-			-			-		-			-			47,530
Exercise of 2004 warrants (Note 13(b))	625,760			78,800		(625,760	)		(15,484	)		-		-			-			63,316
Expiry of 2004 warrants (Note 13(b))	-			-		(34,160	)		(685	)		685		-			-			-
Stock compensation expense	-			-		-			-			24,724		-			-			24,724
Foreign currency translation adjustment	-			-		-			-			-		(98,841	)		-			(98,841	)
Net loss for the year	-			-		-			-			-		-			(1,687,542	)		(1,687,542	)
Balance at January 31, 2005	41,002,014		$	14,185,863		2,358,060		$	118,457		$	6,264,383	$	(385,197	)	$	(21,267,091	)	$	(1,083,585	)

F-7

CARBIZ INC.

Consolidated Statements of Cash Flows

Years ended January 31

(expressed in U.S. dollars)

		2005			2004
NET INFLOW (OUTFLOW) OF CASH RELATED
TO THE FOLLOWING ACTIVITIES
OPERATING
Net loss for the year	$	(1,687,542	)	$	(1,168,486	)
Items not affecting cash
Depreciation of fixed assets		489,670			554,882
Amortization of computer software development costs		25,456			11,791
Accretion of convertible debenture (Note 11)		46,750			-
Stock compensation		24,724			14,524
Net changes in working capital balances (Note 15)		(324,848	)		343,484
		(1,425,790	)		(243,805	)
INVESTING
Acquisition of fixed assets		(75,683	)		(17,404	)
FINANCING
Repayment of capital leases		(13,918	)		(3,846	)
Repayment of long-term debt		(140,427	)		(57,505	)
Issuance of convertible debenture (Note 11)		1,247,570			-
Issuance of common stock (Note 13)		407,056			233,395
Issuance of warrants (Note 13)		118,457			18,455
		1,618,738			190,499
EFFECT OF EXCHANGE RATE CHANGES ON CASH
AND CASH EQUIVALENTS		(73,076	)		16,808
INCREASE (DECREASE) IN CASH AND
CASH EQUIVALENTS		44,189			(53,902	)
CASH AND CASH EQUIVALENTS,
BEGINNING OF YEAR (Note 15)		86,331			140,233
CASH AND CASH EQUIVALENTS,
END OF YEAR (Note 15)	$	130,520		$	86,331

F-8

CARBIZ INC.

Notes to the Consolidated Financial Statements

January 31, 2005 and 2004

(expressed in U.S. dollars)

1.	BASIS OF PRESENTATION
	Carbiz Inc. (the “Company”) is a publicly traded company on the TSX Venture Exchange, formerly the Canadian Venture Exchange (CDNX). The Company was incorporated pursuant to the provisions of the Business Corporations Act of Ontario (“OBCA”) under the name “Data Gathering Capital Corp.” on March 31, 1998. On September 1, 1999, the Company changed its name by articles of amendment under the OBCA to Carbiz.com Inc., and then changed its name again on July 15, 2003 to Carbiz Inc.
	References to the Company typically include the Company’s consolidated subsidiaries. The Company’s operations are principally conducted through its two operating subsidiaries Carbiz USA Inc., a Delaware corporation, and Carbiz Auto Credit, Inc. (“CAC”). Collectively, Carbiz Inc., Carbiz USA Inc., and CAC are referred to herein as “Carbiz” or the “Company”.
	The Company is in the business of developing, marketing, distributing and supporting software and Internet products for the automotive sales finance industry. The Company also supplies a seasonal lead generation product that facilitates tax-refund loans which are primarily used for down payments on car loans. During the year ended January 31, 2005, the Company opened two new CAC dealerships, which sells and finances used vehicles.
	Going concern assumption
	While these financial statements have been prepared on the basis of accounting principles applicable to a going concern, several adverse conditions and events cast substantial doubt upon the validity of this assumption.
	The Company has incurred significant losses in the current year and in each of the past several years. In addition, the Company has a working capital deficiency of $495,344 as at January 31, 2005. The Company’s continued existence is dependent upon its ability to achieve profitable operations and to obtain additional financing. The Company believes that the new CAC dealerships, combined with its existing software, consulting and TaxMax businesses will improve its operating cash flows going forward. However, there can be no assurance that the Company will be able to achieve profitable operations, nor that financing efforts will be successful.
	If the going concern assumption were not appropriate to these financial statements, then adjustments would be necessary in the carrying values of assets and liabilities, the reported net loss and the balance sheet classifications used.
2.	CHANGE IN FUNCTIONAL CURRENCY
	Historically, the Canadian dollar has been the functional currency of the Company, and the financial statements were reported in Canadian dollars. During the year ended January 31, 2005, the Company determined that as a result of the continued move of its operations and personnel, combined with significant debt issuances in the United States, the functional currency of the Company had changed to U.S. dollars. In addition, the Company determined that it would report its financial statements in U.S. dollars. All amounts presented in these financial statements are expressed in U.S. dollars unless otherwise indicated.

F-9

CARBIZ INC.

Notes to the Consolidated Financial Statements

January 31, 2005 and 2004

(expressed in U.S. dollars)

2.	CHANGE IN FUNCTIONAL CURRENCY (continued)
	In accordance with Statement of Financial Accounting Standards (“SFAS”) No. 52 “Foreign Currency Translation”, the Company has translated into U.S. dollars the financial statements as at and for the years ended January 31, 2005 and 2004. The method of translation used has resulted in the financial statements of prior years presented for comparison being translated as if the U.S. dollar had always been used as the reporting currency.
	Prior to November 1, 2004, the date on which the Company determined that its functional currency had changed to U.S. dollars, this translation was done using the current rate method. Under the current rate method, the Company’s assets and liabilities were translated to U.S. dollars at the exchange rate at the balance sheet date. Revenue, costs and expenses were translated at average rates prevailing during the periods. Translation adjustments arising prior to November 1, 2004 were reported as a component of other comprehensive income.
	Subsequent to November 1, 2004, this translation was done using the temporal method. Under the temporal method, the Company’s monetary assets and liabilities were translated to U.S. dollars at the exchange rate at the balance sheet date, while equity and non-monetary assets and liabilities were translated at their historical rates. Revenue, costs and expenses were translated at average rates prevailing during the periods. Translation adjustments arising subsequent to November 1, 2004 were reported as a component of net loss for the year.
3.	SUMMARY OF ACCOUNTING POLICIES
	These consolidated financial statements have been prepared in accordance with accounting principles generally accepted in the United States of America (“GAAP”) and reflect the following significant accounting policies:
	Principles of consolidation
	The consolidated financial statements include the accounts of the company and its subsidiary companies, which are located in Canada and the United States of America (“U.S.”). All intercompany transactions and balances have been eliminated.
	Cash and cash equivalents
	Cash and cash equivalents consist of cash balances with banks and investments in term deposits and money market instruments that are readily convertible into cash. This includes investments that have an original term to maturity of 90 days or less.
	Accounts receivable
	Accounts receivable shown is net of bad debt provisions. The amount includes short term notes received through the selling of used automobiles. The notes are for terms no greater than 80 weeks and require weekly or bi-weekly payments. Interest is calculated daily based on the balance outstanding at the time.

F-10

CARBIZ INC.

Notes to the Consolidated Financial Statements

January 31, 2005 and 2004

(expressed in U.S. dollars)

3.	SUMMARY OF ACCOUNTING POLICIES (continued)
	Allowance for doubtful accounts
	The allowance for doubtful accounts reflects the Company’s best estimate of probable losses inherent in the accounts receivable balance. The Company determines the allowance based on known troubled accounts, historical experience, and other currently available evidence.
	Inventory
	Inventory consists of used vehicles and is related to the CAC operations. Inventory is stated at the lower of cost or net realizable value. Cost is determined on a specific item basis.
	Fixed assets
	Fixed assets are stated at cost, net of accumulated depreciation and amortization. Expenditures for maintenance and repairs have been charged to the statement of operations as incurred. Depreciation is provided over the estimated useful life of the assets as follows:

Furniture and equipment	-	20% declining-balance
Computer equipment	-	30% declining-balance
Leasehold improvements	-	straight-line over the lesser of the useful life of the assets or term of the leases

The Company regularly reviews the carrying values of its fixed assets by comparing the carrying amount of the asset to the expected undiscounted future cash flows to be generated by the asset. If the carrying value exceeds the amount recoverable, a write-down is charged to the statement of operations based on the difference between the carrying value and the future discounted cash flows. Upon retirement or sale of an asset its cost and related accumulated depreciation or amortization are removed from the accounts and any gain or loss is recorded in income or expense.

Product development costs

The Company expenses research costs when they are incurred. Software development costs are expensed as incurred unless they meet the criteria for deferral and amortization required by GAAP. Development costs incurred prior to the establishment of technological feasibility are expensed, as they do not meet the criteria. Capitalized costs are amortized on a straight-line basis over the remaining economic life of the related product, which is three years. The Company reassesses the relevant criteria for deferral and amortization at each reporting date. There have been no costs capitalized and amortized for the periods presented.

F-11

CARBIZ INC.

Notes to the Consolidated Financial Statements

January 31, 2005 and 2004

(expressed in U.S. dollars)

3.	SUMMARY OF ACCOUNTING POLICIES (continued)
	Income taxes
	The Company follows the liability method of accounting for income taxes. Under this method, deferred income tax assets and liabilities are determined based on differences between the financial reporting and tax basis of assets and liabilities, and measured using the enacted tax rates and laws that will be in effect when the differences are expected to reverse. Valuation allowances are established when necessary to reduce future income tax assets to the amount expected to be realized.
	Revenue recognition
	The Company’s revenue is derived from the sale of licenses, services and commissions, the sale of products to dealers in the automobile industry and the sale of used vehicles. The Company recognizes revenue in accordance with Statement of Position (“SOP”) 97-2, “Software Revenue Recognition”, issued by the American Institute of Certified Public Accountants (“AICPA”) in October 1997 as amended by SOP 98-9 issued in December 1998 for all software or software related revenue. For all non-software or non-software related revenue, the Company recognizes revenue in accordance with SEC Staff Accounting Bulletin (“SAB”) 104, “Revenue Recognition”, which was preceded by SAB 101, “Revenue Recognition in Financial Statements”. For contracts involving multiple deliverables, where the deliverables are governed by more than one authoritative accounting standard, the Company generally applies the FASB Emerging Issues Task Force (“EITF”) Issue No. 00-21, “Revenue Arrangements with Multiple Deliverables” to determine whether deliverables should be accounted for separately.
	(a)	Licenses
		The Company records product revenue from licenses when persuasive evidence of an arrangement exists, the software product has been shipped, there are no significant uncertainties surrounding product acceptance, the fees are fixed or determinable and collection is considered probable. For software license agreements in which customer acceptance is a condition of earning the license fees, revenue is not recognized until acceptance occurs. The Company uses the residual method to recognize revenue on delivered elements when a license agreement includes one or more elements to be delivered at a future date if evidence of the fair value of all undelivered elements exists. If an undelivered element for the arrangement exists under the license arrangement, revenue related to the undelivered element is deferred based on vendor-specific objective evidence (“VSOE”) of the fair value of the undelivered element.

F-12

CARBIZ INC.

Notes to the Consolidated Financial Statements

January 31, 2005 and 2004

(expressed in U.S. dollars)

3.	SUMMARY OF ACCOUNTING POLICIES (continued)
	Revenue recognition (continued)
	(a)	Licenses (continued)
		The majority of the Company’s license revenues is derived from arrangements where a customer will pay an initial set-up fee and then continue on either month-to-month or annual contracts which may be cancelled with appropriate notice. Upon cancellation, the software ceases to function as originally intended. In these cases, the initial set-up fees are deferred and amortized over the expected life of the relationship, which is four years. The month-to-month or annual fees are recognized on a monthly basis, subject to collection of such amounts being probable.
		Certain of the Company’s other license revenues are derived from arrangements where the customer purchases a perpetual software license. In these cases, the Company will enter into a multiple-element arrangement that includes the software license and the associated post contract support (“PCS”). The Company has established VSOE of the fair value of the undelivered PCS element based on the contracted price for renewal PCS included in the original multiple element sales arrangement, as substantiated by contractual terms and the Company’s significant PCS renewal experience. The Company’s multiple element sales arrangements generally include rights for the customer to renew PCS after the bundled term ends.
		The Company assesses whether payment terms are customary or extended in accordance with normal practice relative to the market in which the sale is occurring. The Company’s sales arrangements generally include standard payment terms. These terms effectively relate to all customers, products, and arrangements regardless of customer type, product mix or arrangement size.
	(b)	Services and Commissions
		The Company generates non-recurring revenue from consulting fees for implementation, installation, data conversion and training related to the use of the Company’s software and for other training seminars and consulting. When sold as part of a software license arrangement, these services are accounted for separately from the license revenue because the services are not essential to the functionality of the software, and the Company has established VSOE of their fair value.
		Revenue from services is recognized when a signed contract has been executed, the services have been delivered, fees are fixed or determinable, collectability is probable and when all obligations have been fulfilled. For services that extend over a period of time, revenue is recognized ratably over the term of the contract.

F-13

CARBIZ INC.

Notes to the Consolidated Financial Statements

January 31, 2005 and 2004

(expressed in U.S. dollars)

3.	SUMMARY OF ACCOUNTING POLICIES (continued)
	Revenue recognition (continued)
	(c)	Products
		The Company generates non-recurring revenue from the sale of various products to automotive dealerships. Revenue is recognized when a signed contract is executed, the product has been delivered, fees are fixed or determinable, collectability is probable and when all significant obligations have been fulfilled. Generally, this occurs at the time of shipment. The Company does not offer product warranties related to these sales.
	(d)	Used vehicle sales
		The Company recognizes revenue on the sale of automobiles at the time vehicles are delivered to the customer and title has passed. In cases where the Company finances the vehicles the interest is recognized over the term of the loan, which is generally 80 weeks, based on the principal outstanding at the time.
	Deferred revenue represents unearned income where payments are received in advance of revenue recognition. Where revenue is deferred, all direct and incremental costs incurred to earn the revenue are also deferred.
	Sales and marketing
	Sales and marketing expenses include payroll, employee benefits, equity compensation, and other headcount-related costs as well as expenses related to advertising, promotions, tradeshows, seminars, and other programs. Advertising costs are expensed as incurred. Advertising expense was $150,184 in fiscal 2005, and $82,106 in fiscal 2004.
	Foreign currency translation
	Subsequent to November 1, 2004 (see Note 2), the Company’s monetary assets and liabilities are translated to U.S. dollars at the exchange rate at the balance sheet date, while equity and non- monetary assets and liabilities are translated at their historical rates. Revenue, costs and expenses are translated at average rates prevailing during the periods. Translation adjustments are reported as a component of net loss for the year.
	Earnings per share
	Earnings per share are based on the weighted average number of common shares outstanding (basic) adjusted, to the extent they are dilutive, for outstanding stock options and stock purchase warrants (diluted). The calculation of diluted earnings per share excludes any potential conversion of warrants or options that would increase earnings per share or decrease a loss per share.

F-14

CARBIZ INC.

Notes to the Consolidated Financial Statements

January 31, 2005 and 2004

(expressed in U.S. dollars)

3.	SUMMARY OF ACCOUNTING POLICIES (continued)
	Leases
	Leases entered into by the Company as lessee that transfer substantially all the benefits and risks of ownership to the Company are recorded as capital leases and are included in capital assets and long- term debt. All other leases are classified as operating leases under which leasing costs are recorded as expenses in the period in which they are incurred.
	Stock-based compensation
	The Company accounts for stock-based compensation in accordance with Accounting Principles Board (“APB”) Opinion No. 25, “Accounting for Stock Issued to Employees”. Pursuant to this accounting standard, the Company records deferred compensation for share options granted to employees at the date of grant based on the difference between the exercise price of the options and the market value of the underlying shares at that date. Deferred compensation is amortized to compensation expense over the vesting period of the underlying options. No compensation expense is recorded for stock options that are granted to employees and directors when the exercise price is equal to the fair market value of the shares at the time of the grant.
	Had the Company applied a fair value based method described by SFAS No. 123 “Accounting for Stock-based Compensation” and the corresponding amendments under SFAS No.148 “Accounting for Stock-based Compensation - Transition and Disclosure”, which recognizes the fair values of the stock options granted as compensation cost over the vesting period, compensation related to stock options would have effected the amounts indicated below for the following years:

		2005			2004
Net loss - as reported	$	(1,687,542	)	$	(1,168,486	)
Stock compensation expense recorded		24,724			14,524
Pro-forma stock compensation expense		(291,645	)		(62,163	)
Net loss - pro-forma	$	(1,954,463	)	$	(1,216,125	)
Basic and diluted loss per share:
As reported	$	(0.05	)	$	(0.04	)
Pro-forma	$	(0.05	)	$	(0.04	)

The fair value of stock options used to compute the pro-forma net loss and loss per common share disclosure is estimated at grant using the Black-Scholes option-pricing model with the following weighted averages assumptions:

	2005	2004
Expected dividend	0%	0%
Expected volatility	90%	90%
Risk-free interest rate	3.6%	3.9%
Expected option life in years	5	5

F-15

CARBIZ INC.

Notes to the Consolidated Financial Statements

January 31, 2005 and 2004

(expressed in U.S. dollars)

3.	SUMMARY OF ACCOUNTING POLICIES (continued)
	Stock-based compensation (continued)
	The weighted average fair value of stock options, calculated using the Black-Scholes option pricing model, granted during the year ended January 31, 2005 was $0.13 per option (2004 - $0.11 per option). The Black-Scholes option-pricing model was developed for use in estimating the fair value of options that have no vesting restrictions. In addition, option-pricing models require the input of highly subjective assumptions. Changes in the subjective input assumptions can materially affect the fair value estimates and therefore the existing models do not necessarily provide a reliable single measure of the fair value of the stock options.
	During the years ended January 31, 2005 and 2004 stock options were granted to consultants in exchange for services performed. The Company accounts for stock options granted to consultants in accordance with SFAS 123 and SFAS 148. Accordingly the fair value of any stock options granted to consultants is recorded as stock compensation. The stock compensation expense recognized as a result of this was $24,724 in fiscal 2005 and $14,524 in fiscal 2004.
	Guarantees
	In November 2002, the FASB issued FASB Interpretation No. 45 (“FIN 45”), “Guarantor’s Accounting and Disclosure Requirements for Guarantees, Including Indirect Guarantees and Indebtedness of Others,” an interpretation of FASB Statement Nos. 5, 57 and 107, and rescission of FIN 34, “Disclosure of Indirect Guarantees of Indebtedness of Others.” FIN 45 elaborates on the disclosures to be made by the guarantor in its interim and annual financial statements about its obligations under certain guarantees that it has issued. It also requires that a guarantor recognize, at the inception of a guarantee, a liability for the fair value of the obligation undertaken in issuing the guarantee. The provisions related to recognizing a liability at inception of the guarantee for the fair value of the guarantor’s obligations does not apply to product warranties or to guarantees accounted for as derivatives. The Company has not issued any guarantees.
	Comprehensive loss
	SFAS No. 130, “Reporting Comprehensive Income”, requires the reporting and display of comprehensive income and its components in financial statements. Other comprehensive loss, which includes only foreign currency translation adjustments, is shown on the Statements of Changes in Capital Deficiency.

F-16

CARBIZ INC.

Notes to the Consolidated Financial Statements

January 31, 2005 and 2004

(expressed in U.S. dollars)

3.	SUMMARY OF ACCOUNTING POLICIES (continued)
	Derivatives
	The Company’s net earnings and cash flows may be negatively impacted by fluctuating foreign exchange rates. To effectively manage this risk, the Company may enter into foreign currency swaps. The Company applies the recommendations of SFAS No. 133 “Accounting for Derivative Instruments and Hedging Activities” and the corresponding amendments under SFAS 138 and 149. Pursuant to these accounting standards, for a derivative designated as an accounting hedge, the effective portions of the changes in the fair value of the derivative are recorded in other comprehensive income (loss) and are recognized in net earnings (loss) when the hedged item affects net earnings (loss). Ineffective portions of changes in the fair value of the hedge are recognized in net earnings (loss). If the derivative used is not designated as an accounting hedge relationship or if it becomes ineffective, changes in fair value of the derivative are recognized in net earnings (loss). During the years ended January 31, 2005 and 2004, the Company did not enter into any derivative instruments.
	Use of estimates
	In preparing the Company’s financial statements in accordance with GAAP, management is required to make estimates and assumptions that affect the reported amount of assets, liabilities, and the disclosure of contingent 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. Estimates are used when accounting for items and matters such as the allowance for doubtful accounts, deferred revenue and related costs and contingencies.
4.	EFFECT OF RECENT ACCOUNTING PRONOUNCEMENTS
	Share-based compensation
	In December 2004 the FASB issued SFAS No. 123R “Share Based Payment”. The new Statement is effective for fiscal years beginning on or after June 15, 2005. SFAS 123R addresses the accounting for transactions in which an enterprise receives services in exchange for (a) equity instruments of the enterprise or (b) liabilities that are based on the fair value of the enterprise’s equity instruments or that may be settled by the issuance of such equity instruments. This Statement eliminates the ability to account for share-based compensation transactions using APB 25, and requires that such transactions be accounted for using a fair-value based method. As required by FAS 123R, the Company will be required to recognize an expense for compensation cost related to share-based payment arrangements including stock options and compensatory employee stock purchase plans. The new rules will be effective for the Company beginning February 1, 2006.
	The Company is currently evaluating option valuation methodologies and assumptions in light of the evolving accounting standards related to share-based payments, and also the impact of other aspects of SFAS 123R, including transitional adoption alternatives.

F-17

CARBIZ INC.

Notes to the Consolidated Financial Statements

January 31, 2005 and 2004

(expressed in U.S. dollars)

4.	EFFECT OF RECENT ACCOUNTING PRONOUNCEMENTS (continued)
	Inventory
	In November 2004, the FASB issued SFAS No. 151, “Inventory Costs” (“SFAS 151”). SFAS 151 requires that abnormal amounts of idle facility expense, freight, handling costs, and wasted material (spoilage), be recognized as current-period charges rather than capitalized as a component of inventory costs. In addition, SFAS 151 requires that allocation of fixed production overheads to inventory be based on the normal capacity of the production facilities. This statement is effective for inventory costs incurred in fiscal periods beginning after June 15, 2005. The guidance should be applied prospectively. The Company does not expect this standard to impact its consolidated financial statements.
	Earnings per share
	On September 30, 2004, the EITF reached a consenus on Issue No. 04-8, “The Effect of Contingently Convertible Debt on Diluted Earnings Per Share” (“EITF 04-8), which addresses when the dilutive effect of contingently convertible debt instruments should be included in diluted earnings (loss) per share. EITF 04-8 requires that contingently convertible debt instruments be included in the computation of diluted earnings (loss) per share regardless of whether the market price trigger has been met. EITF 04-8 also requires that prior period diluted earnings (loss) per share amounts presented for comparative purposes be restated. EITF 04-8 is effective for reporting periods ending after December 15, 2004. As the Company is in a loss position, the adoption of EITF 04-8 did not have an impact on the Company’s diluted earnings (loss) per share.
	Variable interest entities
	In January 2003, the FASB issued interpretation No. 46 ("FIN 46"),"Consolidation of Variable Interest Entities". The primary objectives of this interpretation are to provide guidance on the identification of entities for which control is achieved through means other than through voting rights ("variable interest entities") and how to determine when and which business enterprise (the "primary beneficiary") should consolidate the variable interest entity. This new model for consolidation applies to an entity in which either (i) the equity investors (if any) do not have a controlling financial interest; or (ii) the equity investment at risk is insufficient to finance that entity's activities without receiving additional subordinated financial support from other parties. In addition, FIN 46 requires that the primary beneficiary, as well as all other enterprises with a significant variable interest entity, make additional disclosures. Certain disclosure requirements of FIN 46 were effective for financial statements issued after January 31, 2003. In December 2003, the FASB issued FIN 46 (revised December 2003), "Consolidation of Variable Interest Entities" ("FIN 46-R") to address certain FIN 46 implementation issues. The effective dates and impact of FIN 46 and FIN 46-R are as follows: (i) Special-purpose entities ("SPEs") created prior to February 1, 2003. The Company must apply either the provisions of FIN 46 or early adopt the provisions of FIN 46-R at the end of the first interim or annual reporting period ending after December 15, 2003. (ii) Non-SPEs created prior to February 1, 2003. The Company is required to adopt FIN 46-R at the end of the first interim or annual reporting period ending after March 15, 2004. (iii) All entities, regardless of whether an SPE, that were created subsequent to January 31, 2003. The provisions of FIN 46 were applicable for variable interests in entities obtained after January 31, 2003. The Company does not have any arrangements with variable interest entities that will require consolidation of their financial information in the financial statements.

F-18

CARBIZ INC.

Notes to the Consolidated Financial Statements

January 31, 2005 and 2004

(expressed in U.S. dollars)

5. ACCOUNTS RECEIVABLE

		2005		2004
Trade receivables from product	$	121,009	$	84,536
Less: Allowance for doubtful accounts		15,067		21,462
		105,942		63,074
Notes receivable from vehicle sales		462,399		-
Less: Allowance for doubtful accounts		36,869		-
		425,530		-
Total accounts receivable		531,472		63,074
Long-term portion of notes receivable		78,591		-
Current portion of accounts receivable	$	452,881	$	63,074

During the year ended January 31, 2005, the Company earned $22,762 (2004 - $Nil) of financing income on the notes receivable. This amount has been included with revenue in these financial statements.

Activity in the allowance for doubtful accounts is as follows:

		Balance at						Balance
Year Ended		Beginning		Charged to		Write-offs		at End of
January 31,		of Period		Expenses		and Other		Period
2005	$	21,462	$	53,430	$	22,956	$	51,936
2004		15,031		14,541		8,110		21,462

F-19

CARBIZ INC.

Notes to the Consolidated Financial Statements

January 31, 2005 and 2004

(expressed in U.S. dollars)

6. FIXED ASSETS

				2005
				Accumulated		Net Book
		Cost		Depreciation		Value
Furniture and equipment	$	491,926	$	277,825	$	214,101
Computer equipment		1,216,360		908,995		307,365
Leasehold improvements		29,459		15,137		14,322
	$	1,737,745	$	1,201,957	$	535,788

				2004
				Accumulated		Net Book
		Cost		Depreciation		Value
Furniture and equipment	$	421,261	$	210,534	$	210,727
Computer equipment		1,110,940		721,215		389,725
Leasehold improvements		1,039,846		757,430		282,416
	$	2,572,047	$	1,689,179	$	882,868

7.	INTANGIBLE ASSETS
	Intangible assets represent software acquired through previous acquisitions. During the year ended January 31, 2005, the Company determined that due to technological changes there was no remaining value to these assets, and as such the remaining net book value was written off. As at January 31, 2004, the cost of these assets was $504,502, with accumulated amortization of $480,862. The net impairment charge of $23,640 is included in operating expenses.
8.	ACCOUNTS PAYABLE AND ACCRUED LIABILITES

		2005		2004
Accounts payable - trade	$	296,386	$	409,815
Accruals
Professional fees		475,502		194,539
Trade payables		181,372		165,936
Payroll related		60,770		59,425
Other		30,127		4,936
	$	1,044,157	$	834,651

F-20

CARBIZ INC.

Notes to the Consolidated Financial Statements

January 31, 2005 and 2004

(expressed in U.S. dollars)

9.	CAPITAL LEASES
	The Company has the following capital lease obligations, net of interest, for computer and office equipment:

2006	$	12,833
2007		10,828
2008		9,077
2009		8,769
2010		3,041
		44,548
Current portion		12,833
Long-term portion	$	31,715

10.	LONG-TERM DEBT
	The Company has a note payable to a U.S. public company. The note which is secured by the general assets of the Company, bears interest at the daily U.S. prime rate plus 1.5% per annum, with interest payable monthly and the principal due on specific dates.
	Principal repayments due in each of the next four years are as follows:

2006	$	127,046
2007		127,046
2008		127,046
2009		42,174
	$	423,312

F-21

CARBIZ INC.

Notes to the Consolidated Financial Statements

January 31, 2005 and 2004

(expressed in U.S. dollars)

11.	CONVERTIBLE DEBENTURE
	On October 12, 2004 (the “Closing Date”), the Company completed a Convertible Debenture financing for net proceeds of $1,223,848. The proceeds are primarily to be used to pursue an Over- the-Counter (“OTC-BB”) listing in the U.S. and to expand the Company’s CAC operations. Upon the successful listing of the Company’s common shares on the OTC-BB and concurrent delisting from the TSX Venture Exchange (the “Conversion Date”), the principal and interest amount of the debentures will be automatically converted into a minimum of 7,336,500 units (a “Unit”). Each Unit will consist of one common share and one Class A purchase warrant and one-half of one Class B purchase warrant. Each whole Class A Warrant will be exercisable into one common share at a price of $0.23 CDN per share and each whole class B purchase warrant will be exercisable into one common share at a price of $0.30 CDN per share. Both Class A and B warrants issued will be exercisable for a period of five years following the Closing Date. The Convertible Debentures are unsecured, bear interest at 5% per annum, beginning on May 1, 2005. Prior to May 1, 2005, the Convertible Debentures were non-interest bearing.
	Carbiz has engaged an agent for this debenture financing. In addition to a commission which has been included in the cost of issuance, on the Conversion Date the Agent shall receive warrants (the “Agent Warrants”) equal to an aggregate 10 percent of the number of Units to be issued on the Conversion Date. Each warrant shall be exercisable into two common shares upon payment of $0.22 CDN and $0.23 CDN respectively, for a period of five years following the Closing Date. Also, the Agent shall receive a 2 percent cash fee on the exercise of Warrants exercised within 12 months of the Conversion Date. The Agent Warrants and cash fee that may be incurred should the Company complete an OTC-BB listing have not been recorded in these financial statements.
	Should the Company be unable to obtain an OTC-BB listing by April 10, 2005, the Company shall issue to the subscribers, Class A Warrants and Class B Warrants equal in number to 2% of the number of each of the Class A Warrants and Class B Warrants to be issued upon conversion of the Convertible Debenture plus an additional 1% for each subsequent 30 day period (the “Additional Warrants”). The aggregate of the Additional Warrants is limited to 6% of the Class A Warrants and the Class B Warrants to be issued upon conversion of the Convertible Debenture. The subscriber retains these Additional Warrants in the event that the principal and interest of the Convertible Debentures are repaid.
	The Convertible Debenture contains a beneficial conversion feature represented by the excess of the fair value of common shares and warrants issuable on conversion of the Debenture, measured on the commitment date, over the amount of the proceeds to be allocated to the common shares upon conversion. The portion of the proceeds from the issuance of the Convertible Debenture allocated to the beneficial conversion feature of $768,632 is presented as additional paid in capital and results in a discount on the Convertible Debenture that is accreted over the term of the Debenture, which is five years. The accretion expense recorded during the year ended January 31, 2005, is $46,750.

F-22

CARBIZ INC.

Notes to the Consolidated Financial Statements

January 31, 2005 and 2004

(expressed in U.S. dollars)

12.	REDEEMABLE PREFERRED SHARES
	On December 6, 2002, the Company issued 4,000,000 Series 1 Preferred Shares for proceeds of $400,000 CDN. Each share was convertible into common shares on a one for one basis at the option of the holder, and yielded a cumulative 10% annual dividend rate. If not converted, the shares were repayable in cash on December 6, 2004.
	During the year ended January 31, 2005, the Redeemable Preferred Shares and accrued dividends were converted into 4,538,543 common shares in accordance with their conversion terms.
13.	COMMON SHARES
	(a)	Authorized
		The Company’s authorized share capital consists of the following:
		Unlimited number of common shares with voting rights Unlimited number of preference shares, issuable in series
	(b)	Fiscal 2004 private placement
		On September 26, 2003, the Company completed a private placement of 1,500,000 common shares and 750,000 Warrants for net proceeds of $109,067. The fair value of the warrants was determined to be $18,455. Each Warrant entitled the holder to purchase one additional common share at a price of $0.12 CDN per share, and expired one year after issuance.
		During the year ended January 31, 2004, 90,080 Warrants were exercised into common shares for cash proceeds of $8,239. During the year ended January 31, 2005, an additional 625,760 Warrants were exercised into common shares for cash proceeds of $63,316. The remaining 34,160 Warrants were not converted and expired.
	(c)	Fiscal 2005 private placement
		During the year ended January 31, 2005, the Company completed a series of private placements for an aggregate of 1,980,217 common shares and 1,980,217 Warrants for net proceeds of $387,777. The fair value of the warrants was determined to be $91,567. Each Warrant entitles the holder to purchase one additional common share at a price of $0.30 CDN per share, and expires one year after issuance. As part of the cost of these transactions, the Company issued 377,843 Agent Warrants with an estimated fair value of $26,890. The Agent Warrants are subject to the same conditions as the regular Warrants.
	(d)	Cancellation of shares
		During the year ended January 31, 2004, the Company reached a legal settlement with the former shareholders of a previous acquisition. As a result of this settlement, 283,268 common shares were cancelled at no cost. The weighted average cost of these shares has been added to additional paid-in capital.

F-23

CARBIZ INC.

Notes to the Consolidated Financial Statements

January 31, 2005 and 2004

(expressed in U.S. dollars)

13.	COMMON SHARES (continued)
	(e)	Escrowed shares
		On December 18, 1998, 5,059,566 common shares issued to certain shareholders were placed in escrow pursuant to the regulatory requirements. This agreement allows for the common shares held to be released on the basis of one common share for each $0.20 CDN of cash flow realized through the operations of the Company. Cash flow is defined as net income adjusted for depreciation, depletion, deferred taxes, amortization of goodwill and research and development costs. While in escrow these shares retain voting and equity rights in the Company, but cannot be traded. To date, none of these common shares have been released from escrow pursuant to these terms, but these shares have been included in the number of shares outstanding.
		During the year ended January 31, 2005, the Company changed the terms of the escrow agreement to allow for a time-based method of release. During the year ended January 31, 2005, a total of 505,956 shares have been released from escrow.
	(f)	Stock options
		Under the Stock Option Plan (1998), options may be granted to directors, officers, employees, and consultants of the Company at an exercise price determined by the Board of Directors provided that such exercise price should not be less than permitted under the rules of any stock exchange where the shares are listed. The period during which an option may be exercised (the “Option Period”) is determined by the Board at the time the option is granted, subject to any vesting limitations which may be imposed by the Board in its sole unfettered discretion at the time such option is granted. The options are exercisable during a period not to exceed 5 years from the date the option is granted unless otherwise specifically provided by the Board, and in any event, no option shall be exercisable for a period exceeding 10 years from the date the option is granted. Options are exercisable as determined by the Board at the date of the grant. All options granted in the year ended January 31, 2004 and 2005 vest four months after the date of grant. Shares covered by options granted with respect to any year may not exceed 10% of the issued and outstanding shares of the Company, calculated on a non-diluted basis.
		The following tables reflect the movement and status of the stock options:

	2005				2004
				Weighted				Weighted
				Average				Average
	Number of			Exercise	Number of			Exercise
Options outstanding	Options			Price (*)	Options			Price (*)
Balance, beginning of the year	2,800,533		$	0.15	2,879,383		$	0.11
Options granted during the year	1,921,891			0.22	1,269,150			0.20
Options cancelled during the year	(197,300	)		0.20	(5,000	)		0.08
Options exercised during the year	(435,136	)		0.12	(1,343,000	)		0.11
Balance, end of the year	4,089,988		$	0.18	2,800,533		$	0.15

F-24

CARBIZ INC.

Notes to the Consolidated Financial Statements

January 31, 2005 and 2004

(expressed in U.S. dollars)

13.	COMMON SHARES (continued)
	(f)	Stock options (continued)

		January 31, 2005
	Options Outstanding		Options Exercisable
		Weighted		Weighted
Exercise		Average Life		Average Life
Price (*)	Number (*)	(Years)	Number (*)	(Years)
$0.08	612,876	1.7	612,876	1.7
$0.12	324,000	3.8	324,000	3.8
$0.13	415,071	0.7	415,071	0.7
$0.16	637,891	4.9	-	-
$0.19	200,000	3.8	200,000	3.8
$0.24	1,900,150	4.1	1,900,150	4.1
	4,089,988	3.4	3,452,097	3.1

		(*)	The exercise price has been converted into U.S. dollars based on the foreign exchange rate as at January 31, 2005. The number of options presented reflects the most current conversion price information.
	(g)	Earnings per share
		For the years ended January 31, 2005 and 2004, all options to purchase shares were excluded in the diluted share calculation because they were anti-dilutive for earnings per share purposes.
14.	INCOME TAXES
	The reconciliation of income taxes computed at the blended (Canadian and U.S.) statutory tax rate to the Company’s effective tax rate is as follows:

		2005			2004
Loss before income taxes	$	(1,687,542	)	$	(1,168,486	)
Combined basic federal and provincial rates		39.02%			35.57%
Income tax benefit based on statutory rate		658,000			416,000
Permanent differences		(57,000	)		(28,000	)
Valuation allowance		(601,000	)		(388,000	)
Income tax benefit	$	-		$	-

F-25

CARBIZ INC.

Notes to the Consolidated Financial Statements

January 31, 2005 and 2004

(expressed in U.S. dollars)

14.	INCOME TAXES (continued)
	Deferred income taxes reflect the tax effects of temporary differences between the carrying amounts of assets and liabilities for financial reporting purposes and the amounts used for income tax purposes. Significant components of the Company’s deferred income tax assets and liabilities are approximately as follows:
	Canada

		2005			2004
Non-capital loss carryforwards	$	1,103,000		$	773,000
Net capital loss carryforwards		80,000			80,000
Tax deductible financing costs		-			14,000
Capital assets		81,000			70,000
Total gross deferred tax assets		1,264,000			937,000
Valuation allowance		(1,264,000	)		(937,000	)
Income tax benefit	$	-		$	-

As at January 31, 2005, the Company has non-capital loss carryforwards (federal and provincial) which are available to offset taxable income in future years and expire approximately as follows:

Expiry Dates		Amount
2006	$	17,000
2007		125,000
2008		489,000
2009		817,000
2010		420,000
2011		520,000
2015		668,000
	$	3,056,000

As at January 31, 2005, the Company has net capital loss carryforwards of approximately $470,000 available to offset taxable capital gains in future years. These net capital loss carryforwards are available to carry forward indefinitely.

F-26

CARBIZ INC.

Notes to the Consolidated Financial Statements

January 31, 2005 and 2004

(expressed in U.S. dollars)

14.	INCOME TAXES (continued)
	United States

		2005			2004
Non-capital loss carryforwards	$	3,694,000		$	2,945,000
Tax method of accounting adjustments		-			153,000
Capital assets		8,000			231,000
Other temporary differences		9,000			2,000
Total gross deferred tax assets		3,711,000			3,331,000
Valuation allowance		(3,711,000	)		(3,331,000	)
Income tax benefit	$	-		$	-

As at January 31, 2005, the Company has U.S. net operating tax loss carryforwards which are available to offset taxable income and expire in future years as follows:

Expiry Dates		Amount
2019	$	273,000
2020		647,000
2021		2,159,000
2022		3,632,000
2023		487,000
2024		436,000
2025		1,943,000
	$	9,577,000

The use of the U.S. loss carryforwards will be limited in any given year as a result of previous changes in ownership.

F-27

CARBIZ INC.

Notes to the Consolidated Financial Statements

January 31, 2005 and 2004

(expressed in U.S. dollars)

15.	CASH FLOW INFORMATION
	(a)	Net change in working capital balances

		2005			2004
Accounts receivable	$	(441,772	)	$	43,918
Prepaids and other assets		(2,435	)		(4,102	)
Inventory		(48,591	)		-
Deferred costs		(2,589	)		35,488
Accounts payable and accrued liabilities		149,338			249,399
Deferred revenue		21,201			18,781
	$	(324,848	)	$	343,484

(b) Supplemental information

		2005		2004
Interest paid	$	31,110	$	39,211
Income taxes paid	$	-	$	-

	(c)	Non-cash transactions
		During the year ended January 31, 2005, the Company entered into certain capital leases. The resulting debt obligation and capital asset addition of $30,026 are considered non-cash transactions, and as such have not been included in the statement of cash flows.
16.	INTEREST AND OTHER EXPENSES

		2005		2004
Accretion of convertible debenture (Note 11)	$	46,750	$	-
Interest on preferred shares (Note 12)		18,111		29,048
Interest on long-term debt (Note 10)		26,593		37,825
Interest on capital leases (Note 9)		4,517		1,386
Other interest, bank charges and late fees		48,921		28,860
	$	144,892	$	97,119

F-28

CARBIZ INC.

Notes to the Consolidated Financial Statements

January 31, 2005 and 2004

(expressed in U.S. dollars)

17.	RELATED PARTY TRANSACTIONS
	The Company paid $45,252 (2004 - $44,493) for director, officers and property insurance to a company owned and operated by the spouse of a significant shareholder. At year-end, $19,362 (2004 - $35,450) of this amount was still outstanding. This transaction was measured at the exchange amount, which is the amount of consideration established and agreed to by both parties.
18.	COMMITMENTS AND CONTINGENCIES
	(a)	Future minimum annual payments under operating leases for equipment and premises (exclusive of realty taxes and other occupancy charges) are approximately as follows:

2006	$	207,000
2007		118,000
2008		116,000
2009		77,000
	$	518,000

	(b)	The Company has a $20,000 standby letter of credit for its leased premises, which will be reduced to nil in December 2005.
	(c)	Certain of the Company’s U.S. and Canadian government filings were not filed in accordance with the periods provided by statute. As such, the Company could be assessed certain penalties for lack of timely compliance.
19.	FINANCIAL INSTRUMENTS AND RISK MANAGEMENT
	The carrying amount of financial instruments including cash and cash equivalents, accounts receivable and accounts payable approximates fair value because of the limited term of these instruments. The carrying value of the long-term debt approximates fair value because the interest rate is tied to the daily U.S. prime rate. The carrying value of the convertible debenture approximates fair value because it was negotiated shortly before year-end.
	The Company is exposed to the following risks related to its financial assets and liabilities:
	Interest rate risk
	The Company currently has notes payable that incur interest based on the U.S. prime lending rate. The Company is therefore exposed to interest rate risk through fluctuations in the U.S. prime- lending rate. The Company does not use derivative instruments to reduce its exposure to interest rate risk.

F-29

CARBIZ INC.

Notes to the Consolidated Financial Statements

January 31, 2005 and 2004

(expressed in U.S. dollars)

19.	FINANCIAL INSTRUMENTS AND RISK MANAGEMENT (continued)
	Credit risk
	Credit risk arises from the possibility that the Company’s customers may experience financial difficulty and be unable to fulfill their financial obligations. The risk is mitigated through proactive credit screening, a stringent collection policy, and the ability to restrict user access on certain products.
	Foreign currency risk
	The Company conducts most of its business in the United States of America. The Company’s exposure to foreign currency risk arises from purchases denominated in Canadian dollars. The Company does not use derivative instruments to reduce its exposure to foreign currency risk. During the year ended January 31, 2005, the Company recorded a foreign exchange loss of $417,762 (2004 - $822,817).
20.	SEGMENTED INFORMATION
	The Company operates and manages its business in three segments, being its tax preparation services (“Taxmax”), used car sales and financing (“Carbiz Auto Credit” or “CAC”), and various software and consulting services offered to independent car dealerships (“Software and Other Products”). Approximately 99% of the Company’s revenue is generated in the United States of America (“USA”). In addition almost all of the Company’s assets are located in the USA.
	Taxmax generates revenues from two sources, being the sign up fees and the tax preparation fees. Sign up fees are received between October and December, with tax preparation fees being earned between January and April. As a majority of the tax preparation fees is earned subsequent to year end, a portion of the sign up fees and related expenses is deferred and recognized as the tax preparation services are rendered in the first quarter following the year end.
	CAC purchases automobiles through auctions and sells them to end users at two car lots located in the state of Florida. When required, the Company will also finance these sales with loans that are generally 65 weeks in length. The Company did not operate in the CAC segment during the year ended January 31, 2004.
	Software and other products consists of new sales and recurring monthly revenues for software products, and new sales and recurring monthly revenues of consulting products, and other related revenue from credit bureau fees, supply sales and forms programming.

F-30

CARBIZ INC.

Notes to the Consolidated Financial Statements

January 31, 2005 and 2004

(expressed in U.S. dollars)

20. SEGMENTED INFORMATION (continued)

		2005
				Carbiz			Software and
		Taxmax		Auto Credit			Other Products			Total
Sales	$	641,055	$	594,722		$	2,123,774		$	3,359,551
Cost of sales		331,725		300,977			853,804			1,486,506
Gross profit		309,330		293,745			1,269,970			1,873,045
Operating expenses (¹)		240,272		315,269			2,345,028			2,900,569
Income (loss) from
segments		69,058		(21,524	)		(1,075,058	)		(1,027,524	)
Depreciation and
amortization		-		-			-			(515,126	)
Operating loss	$	69,058	$	(21,524	)	$	(1,075,058	)	$	(1,542,650	)

		2004
				Software and
		Taxmax		Other Products			Total
Sales	$	798,567	$	2,162,298		$	2,960,865
Cost of sales		353,351		1,137,771			1,491,122
Gross profit		445,216		1,024,527			1,469,743
Operating expenses (¹)		307,640		1,666,797			1,974,437
Income (loss) from segments		137,576		(642,270	)		(504,694	)
Depreciation and amortization		-		-			(566,673	)
Operating loss	$	137,576	$	(642,270	)	$	(1,071,367	)

(¹) Excluding depreciation and amortization

The Company’s Chief Operating Decision Maker (“CODM”), which is the CEO, does not review each segment’s operations or financial position in any further detail than presented above.

F-31

CARBIZ INC.

Notes to the Consolidated Financial Statements

January 31, 2005 and 2004

(expressed in U.S. dollars)

21.	SUBSEQUENT EVENTS
	On February 28, 2005, the Company entered into a joint venture agreement with a member of the Company's Board of Directors. The purpose of this joint venture is to add five additional CAC centres in the state of Florida over five years. Under the agreement, the Company will contribute its intellectual property and permanent, non-exclusive license agreements in exchange for a 50% share of the joint venture. The partner will contribute $500,000 for the remaining 50% share. In April 2005, the joint venture signed a five-year lease for the premises of the first centre, at a price of $31,200 annually.
	As of April 10, 2005, the Company had not completed an OTC-BB filing as required under the terms of the Convertible Debenture (Note 11). Therefore, the holders of the Convertible Debentures will be issued certain Additional Warrants upon the Conversion Date. The Company is in the process of completing its OTC-BB filing.

F-32

Consolidated Financial Statements of

CARBIZ INC.

Period ending July 31, 2005 and 2004

F-33

Carbiz Inc.
Consolidated Balance Sheets
(unaudited)

		Period ended			Year ended
(expressed in U.S. dollars)		July 31, 2005			January 31, 2005
ASSETS
CURRENT
Cash and cash equivalents	$	56,309		$	130,520
Accounts receivable		562,142			452,881
Other receivable		195,000			-
Prepaids and other assets		84,956			74,413
Inventory		95,214			51,347
Deferred costs		25,900			144,468
		1,019,521			853,629
LONG-TERM RECEIVABLES		110,045			78,591
DEFERRED COSTS		26,629			65,766
FIXED ASSETS		458,674			535,788
	$	1,614,869		$	1,533,774
LIABILITIES
CURRENT
Accounts payable and accrued liabilities	$	931,121		$	1,044,157
Deferred revenue		220,427			164,937
Current portion of capital leases		8,442			12,833
Current portion of long-term debt		177,562			127,046
		1,337,552			1,348,973
DEFERRED REVENUE		177,528			438,439
CAPITAL LEASES		22,309			31,715
LONG-TERM DEBT		238,984			296,266
CONVERTIBLE DEBENTURE		578,197			501,966
		2,354,570			2,617,359
MINORITY INTEREST		236,995			--
CAPITAL DEFICIENCY
COMMON SHARES		14,197,260			14,185,863
41,090,514 and 41,002,014 Common Shares issued and
outstanding as at July 31, 2005 and Jan 31, 2005 respectively
WARRANTS		70,328			118,457
ADDITIONAL PAID-IN CAPITAL		6,562,512			6,264,383
OTHER COMPREHENSIVE LOSS		(385,197	)		(385,197	)
DEFICIT		(21,421,599	)		(21,267,091	)
		(976,696	)		(1,083,585	)
	$	1,614,869		$	1,533,774

The accompanying notes are an integral part of these consolidated financial statements.

F-34

Carbiz Inc.
Consolidated Statements of Operations
(unaudited)

		For the six months ended
		July 31
(expressed in U.S. dollars)		2005			2004
SALES	$	2,295,669		$	1,703,434
COST OF SALES		1,109,475			757,893
GROSS PROFIT		1,186,194			945,541
PERSONNEL EXPENSES		466,591			328,438
SELLING EXPENSES		262,417			296,729
OTHER OPERATING EXPENSES		506,030			994,558
		1,235,038			1,619,725
OPERATING LOSS		(48,844	)		(674,184	)
INTEREST AND OTHER EXPENSES		(118,669	)		(40,988	)
MINORITY INTEREST		13,005			0
NET LOSS	$	(154,508	)	$	(715,172	)
OTHER COMPREHENSIVE INCOME		0			26,022
COMPREHENSIVE LOSS FOR THE PERIOD	$	(154,508	)	$	(689,150	)
PROFIT (LOSS) PER SHARE
Basic and diluted	$	(0.00	)	$	(0.02	)
WEIGHTED AVERAGE NUMBER OF COMMON
SHARES OUTSTANDING - Basic and diluted		41,082,691			35,575,358

The accompanying notes are an integral part of these consolidated financial statements.

F-35

Carbiz Inc.
Consolidated Statements of Cash Flow
(unaudited)

		For the six months ended
		July 31
(expressed in U.S. dollars)		2005			2004
NET INFLOW (OUTFLOW) OF CASH RELATED
TO THE FOLLOWING ACTIVITIES
OPERATING
Net income (loss) for the period	$	(154,508	)	$	(715,172	)
Items not affecting cash
Depreciation of capital assets		71,099			366,388
Minority interest		(13,005	)		-
Loss on disposal of assets		19,181			-
Amortization of computer software development costs		-			3,890
Accretion of convertible debenture		76,231			-
Stock compensation		-			23,325
Net changes in working capital balances
Accounts receivable		(140,716	)		(136,254	)
Prepaids and other assets		(10,544	)		(21,790	)
Inventory		(43,867	)		(37,667	)
Deferred charges		157,705			137,251
Accounts payable and accrued liabilities		(113,037	)		18,342
Deferred revenue		(205,420	)		(59,798	)
		(356,881	)		(421,485	)
INVESTING
Acquisition of capital assets		(13,165	)		(24,558	)
FINANCING
Repayment of capital leases		(13,797	)		(3,843	)
Proceeds from Borrowing		50,000			-
Repayment of long-term debt		(56,766	)		(68,143	)
Investment from Joint Venture		305,000			-
Issuance of share capital		11,398			302,536
Issuance of warrants		-			149,842
		295,835			380,392
EFFECT OF EXCHANGE RATE CHANGES ON CASH
AND CASH EQUIVALENTS		-			18,142
INCREASE (DECREASE) IN CASH AND
CASH EQUIVALENTS		(74,211	)		(47,509	)
CASH AND CASH EQUIVALENTS,
BEGINNING OF YEAR		130,520			86,004
CASH AND CASH EQUIVALENTS,
END OF PERIOD	$	56,309		$	38,495

The accompanying notes are an integral part of these consolidated financial statements.

F-36

Carbiz Inc.
Notes to Consolidated Financial Statements (Unaudited)
(expressed in U.S. dollars)

1 - Organization and Business

     Carbiz Inc. (the “Company”) is a publicly traded company on the TSX Venture Exchange, formerly the Canadian Venture Exchange (CDNX). The Company was incorporated pursuant to the provisions of the Business Corporations Act of Ontario (“OBCA”) under the name “Data Gathering Capital Corp.” on March 31, 1998. On September 1, 1999, the Company changed its name by articles of amendment under the OBCA to Carbiz.com Inc., and then changed its name again on July 15, 2003 to Carbiz Inc.

     References to the Company typically include the Company’s consolidated subsidiaries. The Company’s operations are principally conducted through its two operating subsidiaries, Carbiz USA Inc., a Delaware corporation, and Carbiz Auto Credit, Inc. (“CAC”) and its joint venture, Carbiz Auto Credit JV1, LLC (“JV1”). Collectively, Carbiz Inc., Carbiz USA Inc., CAC and JV1 are referred to herein as “Carbiz”.

     The Company is in the business of developing, marketing, distributing and supporting, software, training and consulting services, mainly to the automotive Buy Here-Pay Here industry in the United States. The Company’s products fall into four primary categories: software products for operation of auto dealers, business model consulting and training for Buy Here-Pay Here operations, tax return processing for auto purchase down payment assistance, and direct auto sales and financing. During the six month period ended July 31, 2005 the Company operated two facilities called “Carbiz Auto Credit” (CAC) dealerships, which sells and finances used vehicles.

Going concern assumption
     While these financial statements have been prepared on the basis of accounting principles applicable to a going concern, several adverse conditions and events cast substantial doubt upon the validity of this assumption.

     The Company has incurred significant losses in the current period to date and each of the past several years. In addition, the Company has a working capital deficiency of $318,031 as at July 31, 2005. The Company’s continued existence is dependent upon its ability to achieve profitable operations and to obtain additional financing. However, there can be no assurance that the Company will be able to achieve profitable operations, nor that financing efforts will be successful.

     If the going concern assumption were not appropriate to these financial statements, then adjustments would be necessary in the carrying values of assets and liabilities, the reported net loss and the balance sheet classifications used.

2 - Change in Functional Currency

     Historically, the Canadian dollar has been the functional currency of the Company, and the financial statements were reported in Canadian dollars. During the year ended January 31, 2005, the Company determined that as a result of the continued move of its operations and personnel, combined with significant debt issuances in the United States, the functional currency of the Company had changed to U.S. dollars. In addition, the Company determined that it would report its financial statements in U.S. dollars. All amounts presented in these financial statements are expressed in U.S. dollars unless otherwise indicated.

     In accordance with Statement of Financial Accounting Standards (“SFAS”) No. 52 “Foreign Currency Translation”, the Company has translated into U.S. dollars the financial statements at July 31, 2005 and January 31, 2005 and for the periods ended July 31, 2005 and 2004. The method of translation used has resulted in the financial statements of prior years presented for comparison being translated as if the U.S. dollar had always been used as the reporting currency.

     Prior to November 1, 2004, the date on which the Company determined that its functional currency had changed to U.S. dollars, this translation was done using the current rate method. Under the current rate method, the Company’s assets and liabilities were translated to U.S. dollars at the exchange rate at the balance sheet date. Revenue, costs and expenses were translated at average rates prevailing during the periods. Translation adjustments arising prior to November 1, 2004 were reported as a component of other comprehensive income.

     Subsequent to November 1, 2004, this translation was done using the temporal method. Under the temporal method, the Company’s monetary assets and liabilities were translated to U.S. dollars at the exchange rate at the balance sheet date, while equity and non-monetary assets and liabilities were translated at their historical rates. Revenue, costs and expenses were translated at average rates prevailing during the periods. Translation adjustments arising subsequent to November 1, 2004 were reported as a component of net loss for the year.

3 - Summary of Significant Accounting Policies

General
     The accompanying unaudited financial statements have been prepared in accordance with generally accepted accounting principles for interim financial information and with the instructions to Form 10-QSB and Article 10 of Regulation S-X, Accordingly, they do not include all of the information and footnotes required by accounting principles generally accepted in the United States of America for complete 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 six month period ended July 31, 2005 are not necessarily indicative of the

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results that may be expected for the year ended January 31, 2006. For further information, refer to the consolidated financial statements and footnotes thereto included in the Company’s annual report on for the year ended January 31, 2005.

Use of Estimates
     In preparing the Company’s financial statements in accordance with Generally Accepted Accounting Principles of the United States, management is required to make estimates and assumptions that affect the reported amount of assets, liabilities, and the disclosure of contingent 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. Estimates are used when accounting for items and matters such as the allowance for doubtful accounts, deferred revenue and related costs and contingencies.

Accounts receivable
     Accounts receivable shown is net of bad debt provisions. The amount includes short term notes received through the selling of used automobiles. The notes are for terms no greater than 80 weeks and require weekly payments. Interest is calculated weekly based on the balance outstanding at the time. The allowance for doubtful accounts reflects the Company’s best estimate of probable losses inherent in the accounts receivable balance. The Company determines the allowance based on known troubled accounts, historical experience, and other currently available evidence.

Revenue recognition
     The Company’s revenue is derived from the sale of software related licenses, services and the sale of products to dealers in the automobile industry, and the sale of used vehicles.

a) Licenses
Software license revenue is recognized upon the execution of a license agreement, when the licensed product has been delivered, fees are fixed or determinable, collectability is probable and when all significant obligations have been fulfilled. For software license agreements in which customer acceptance is a condition of earning the license fees, revenue is not recognized until acceptance occurs. The majority of the Company’s license revenues are month-to-month contracts which may be cancelled with appropriate notice. In these cases, revenue is recognized monthly. For those license revenues that extend over a period of time, revenue is recognized ratably over the term of the contract.

b) Services
The Company generates recurring revenue from several sources, including the sale of maintenance and support on its software products. The Company also generates nonrecurring revenue from consulting fees for implementation, installation, data conversion and training related to the use of the Company’s software, and for other training seminars and consulting. Revenue is recognized when a signed contract has been executed, the services have been delivered, fees are fixed or determinable, and collectability is probable and when all significant obligations have been fulfilled. Therefore, for services that extend over a period of time, revenue is recognized ratably over the term of the contract.

c) Products
The Company generates non-recurring revenue from the sale of various products to automotive dealerships. Revenue is recognized when a signed contract is executed, the product has been delivered, fees are fixed or determinable, and collectability is probable and when all significant vendor obligations have been fulfilled. Generally, this occurs at the time of shipment. The Company does not offer product warranties related to these sales.

d) Used vehicle sales
The Company recognizes revenue on the sale of automobiles at the time vehicles are delivered to the customer and title has passed. In cases where the Company finances the vehicles the interest is recognized over the term of the loan, which is generally 65 weeks, based on the principal outstanding at the time.

     Deferred revenue represents unearned income where payments are received in advance of revenue recognition. Where revenue is deferred, all related costs incurred to earn the revenue are also deferred.

Stock-based compensation
     The Company accounts for stock-based compensation in accordance with Accounting Principles Board (“APB”) Opinion No. 25, “Accounting for Stock Issued to Employees.” Pursuant to this accounting standard, the Company records deferred compensation for share options granted to employees at the date of grant based on the difference between the exercise price of the options and the market value of the underlying shares at that date. Deferred compensation is amortized to compensation expense over the vesting period of the underlying options. No compensation expense is recorded for stock options that are granted to employees and directors when the exercise price is equal to the fair market value of the shares at the time of the grant.

     Had the Company applied a fair value based method described by SFAS No.123 “Accounting for Stock-based Compensation” and the corresponding amendments under SFAS No.148 “Accounting for Stock-based Compensation – Transition and Disclosure,” which recognizes the fair values of the stock options granted as compensation cost over the vesting period, compensation related to stock options would have effected the amounts indicated below for the following periods:

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		For the six months ended
		July 31
		2005			2004
Net loss – as reported	$	(154,508	)	$	(715,172	)
Stock compensation expense recorded		-			23,325
Pro-forma stock compensation expense		(23,614	)		(182,302	)
Net loss – pro-forma	$	(178,122	)	$	(874,149	)
Basic and diluted loss per share:
As reported	$	(0.00	)	$	(0.02	)
Proforma	$	(0.00	)	$	(0.02	)

     The fair value of stock options used to compute the pro-forma net loss and loss per common share disclosure is estimated at grant using the Black-Scholes option-pricing model with the following weighted averages assumptions:

	2005	2004
Expected Dividend	0%	0%
Expected volatility	90%	90%
Risk-free interest rate	3.5%	3.7%
Expected option life in years	5	5

     The weighted average fair value of stock options, calculated using the Black-Scholes option pricing model, granted during the six months ended July 31, 2005 was $0.13 per option (2004 - $0.11) . The Black-Scholes option value model was developed for use in estimating the fair value of traded options that have no vesting restrictions and are fully transferable, and requires the input of assumptions, including the expected stock price volatility. The options granted to employees have characteristics significantly different from those of traded options, and changes in the input assumptions can materially affect the fair value estimates. The Company uses the Black-Scholes option-pricing model, with the following weighted average assumptions, to measure the fair value of stock options issued during the period, which is allocated to compensation expense on a straight-line basis over the vesting period of the award.

     During the six months ended July 31, 2004 stock options were granted to consultants in exchange for services performed. The Company accounts for stock options granted to consultants in accordance with SFAS 123 and SFAS 148. Accordingly the fair value of any stock options granted to consultants is recorded as stock compensation. The stock compensation expense recognized as a result of this was $0 for the six months ended July 31, 2005 and $23,325 for the same period last year.

Comprehensive Income
     SFAS No. 130, “Reporting Comprehensive Income”, requires the reporting and display of comprehensive income and its components in financial statements. Other comprehensive income, which includes only foreign currency translation adjustments, is shown on the Consolidated Statements of Operations.

Recent Accounting Pronouncements
     In March 2005, the Financial Accounting Standards Board (FASB) issued Interpretation No. 47, “Accounting for Conditional Asset Retirement Obligations, an interpretation of FASB Statement No. 143” (FIN 47). This interpretation clarifies the timing of liability recognition for legal obligations associated with the retirement of tangible long-lived assets when the timing and/or method of settlement of the obligation are conditional on a future event and where an entity would have sufficient information to reasonably estimate the fair value of an asset retirement obligation. FIN 47 is effective for conditional asset retirement obligations occurring during fiscal years ending after December 15, 2005. The adoption of this interpretation is not expected to have a material effect on the Company’s consolidated financial position, results of operations or cash flows.

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4 – Accounts Receivable

		Period ended		Year ended
(expressed in U.S. dollars)		July 31, 2005		January 31, 2005
Trade receivables from product	$	63,080	$	121,009
Less: Allowance for doubtful accounts		11,462		15,067
		51,618		105,942
Notes receivable from vehicle sales		711,129		462,399
Less: Allowance for doubtful accounts		90,560		36,869
		620,569		425,530
Total accounts receivable	$	672,187	$	531,472
Long-term portion of notes receivable	$	110,045	$	78,591
Current portion of accounts receivable	$	562,142	$	452,881

     During the six months ended July 31, 2005 and July 31, 2004, the Company earned $49,497 and $1,885 of financing income on the notes receivable respectively. These amounts have been included with revenue in these financial statements.

5 – Convertible Debenture

     On October 12, 2004 (the “Closing Date”), the Company completed a Convertible Debenture financing for net proceeds of $1,223,848. The proceeds are primarily to be used to pursue an Over-the-Counter (“OTC-BB”) listing in the U.S. and to expand the Company’s CAC operations. Upon the successful listing of the Company’s common shares on the OTC-BB and concurrent delisting from the TSX Venture Exchange (the “Conversion Date”), the principal and interest amount of the debentures will be automatically converted into a minimum of 7,336,500 units (a “Unit”). Each Unit will consist of one common share and one Class A purchase warrant and one-half of one Class B purchase warrant. Each whole Class A Warrant will be exercisable into one common share at a price of $0.23 CDN per share and each whole class B purchase warrant will be exercisable into one common share at a price of $0.30 CDN per share. Both Class A and B warrants issued will be exercisable for a period of five years following the Closing Date. The Convertible Debentures are unsecured, bear interest at 5% per annum, beginning on May 1, 2005. Prior to May 1, 2005, the Convertible Debentures are non-interest bearing.

     Carbiz has engaged an agent for this debenture financing. In addition to a commission which has been included in the cost of issuance, on the Conversion Date the Agent shall receive warrants (the “Agent Warrants”) equal to an aggregate 10 percent of the number of Units to be issued on the Conversion Date. Each warrant shall be exercisable into one common share upon payment of $0.22 CDN and one Class A Warrant upon payment of $0.23 CDN for a period of five years following the Closing Date. Also, the Agent shall receive a 2 percent cash fee on the exercise of Warrants exercised within 12 months of the Conversion Date. The Agent Warrants and cash fee that may be incurred should the Company complete an OTC-BB listing have not been recorded in these financial statements. Should the Company be unable to obtain an OTC-BB listing by April 10, 2005, the Company shall issue to the subscribers, Class A Warrants and Class B Warrants equal in number to 2% of the number of each of the Class A Warrants and Class B Warrants to be issued upon conversion of the Convertible Debenture plus an additional 1% for each subsequent 30 day period (the “Additional Warrants”). The aggregate of the Additional Warrants are limited to 6% of the Class A Warrants and the Class B Warrants to be issued upon conversion of the Convertible Debenture. The subscriber retains these Additional Warrants in the event that the principal and interest of the Convertible Debentures are repaid. The Convertible Debentures are financial instruments that contain both a debt and equity component. As a result, the Convertible Debentures were allocated to debt and equity based on a pro-rata allocation of the fair values of each component. The debt component of the Convertible Debentures will be accreted to their face value over their five-year term, with the resulting charge recorded to interest expense.

     During the six months ended July 31, 2005 and July 31, 2004, the Company recorded interest expense relating to the accretion of the debt component of $76,231 and $0 respectively.

6 – Related Party Transactions

     On February 28, 2005, the Company entered into a joint venture agreement (“JV1”) with a member of the Company's Board of Directors. The purpose of this joint venture is to add five additional Carbiz Auto Credit centers in the state of Florida over five years. Under the agreement, the Company will contribute its intellectual property and permanent, non-exclusive license agreements in exchange for a 50% share of the joint venture. The partner contributed $500,000 for the remaining 50% share. In April 2005, the joint venture signed a five-year lease for the premises of the first center, at a price of $31,200 annually.

     The Company accounts for the joint venture using FASB Statement No. 94 “Consolidation of All Majority-owned Subsidiaries—an amendment of ARB No. 51, with related amendments of APB Opinion No. 18 and ARB No. 43, Chapter 12.” Accordingly all assets and

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liabilities are fully consolidated. The 50% share of the joint venture not owned by the Company is presented on the Minority Interest line on the Consolidated Balance Sheets. Included in the current assets is an amount due, from a member of the Company’s Board of Directors, $195,000. This amount per the joint venture agreement will be paid in August of 2005.

     During the second quarter, the Company entered into a short-term loan agreement with a company owed by a significant shareholder. Under the terms of the financing the Company will receive $150,000. The loan proceeds are made up of three installments of $50,000 each, and the first was received in the month of July 2005. The remaining two draws are to be received in August and September 2005. Interest on the loan will be at a rate of 17.7% per annum. Repayment of the loan and interest will commence on October 1, 2005 and is expected to be fully repaid by August 1, 2006.

7 – Financial Instruments and Risk Management

     The carrying amount of financial instruments including cash and cash equivalents, accounts receivable and accounts payable approximates fair value because of the limited term of these instruments. The carrying value of the long-term debt approximates fair value because the interest rate is tied to the daily U.S. prime rate. The carrying value of the convertible debenture approximates fair value because it was negotiated shortly before year-end.

The Company is exposed to the following risks related to its financial assets and liabilities:

Interest rate risk
     The Company currently has notes payable that incur interest based on the U.S. prime lending rate. The Company is therefore exposed to interest rate risk through fluctuations in the U.S. prime-lending rate. The Company does not use derivative instruments to reduce its exposure to interest rate risk.

Credit risk
     Credit risk arises from the possibility that the Company’s customers may experience financial difficulty and be unable to fulfill their financial obligations. The risk is mitigated through proactive credit screening, a stringent collection policy, and the ability to restrict user access on certain products.

Foreign currency risk
     The Company conducts most of its business in the United States of America. The Company’s exposure to foreign currency risk arises from purchases denominated in Canadian dollars. The Company does not use derivative instruments to reduce its exposure to foreign currency risk. During the six months ended July 31, 2005 and July 31, 2004, the Company recorded a foreign exchange loss of $20,958 and a gain of $1,325 respectively.

8 – Segment Information

     The Company operates and manages its business in four segments, being its tax preparation services (“TaxMax”), used car sales and financing (“Carbiz Auto Credit” or “CAC”), the Company’s Joint Venture CAC locations, and various software and consulting services offered to independent car dealerships (“Software and Other Products”). Approximately 99% of the Company’s revenue is generated in the United States of America (“USA”). In addition almost all of the Company’s assets are located in the USA.

     TaxMax generates revenues from two sources, being the sign up fees and the tax preparation fees. Sign up fees are received between October and December, with tax preparation fees being earned between January and April. As a majority of the tax preparation fees are earned subsequent to year end, a portion of the sign up fees and related expenses are deferred and recognized as the tax preparation services are rendered in the first quarter following to the year end.

     CAC purchases automobiles through auctions and sells them to end users at two car lots located in the state of Florida. When required, the Company will also finance these sales with loans that are generally no greater than 80 weeks in length. The Company had just started operating the CAC segment during the first quarter ended April 30, 2004. The Company entered into a Joint Venture agreement during the first quarter ended April 30, 2005, see note 6.

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		For the six months ended
		July 31, 2005
				Carbiz Auto						Software and
		TaxMax		Credit			Joint Venture			Other Products		Total
Sales	$	375,984	$	700,020		$	18,800		$	1,200,865	$	2,295,669
Cost of Sales		156,727		509,393			12,682			430,673		1,109,475
Gross Profit		219,257		190,627			6,118			770,192		1,186,194
Operating Expenses (1)		112,231		277,784			31,990			741,934		1,163,939
Income (Loss) From
Segments	$	107,026	$	(87,157	)	$	(25,872	)	$	28,258		22,255
Depreciation &
Amortization												(71,099	)
Total Operating
Income (Loss)											$	(48,844	)

		For the six months ended
		July 31, 2004
				Carbiz Auto				Software and
		TaxMax		Credit		Joint Venture		Other Products			Total
Sales	$	473,283	$	143,057	$	-	$	1,087,094		$	1,703,434
Cost of Sales		238,791		72,232		-		446,870			757,893
Gross Profit		234,492		70,825		-		640,224			945,541
Operating Expenses (1)		176,074		66,273		-		1,007,100			1,249,447
Income (Loss) From
Segments	$	58,418	$	4,552	$	-	$	(366,876	)		(303,906	)
Depreciation &
Amortization											(370,278	)
Total Operating
Income (Loss)										$	(674,184	)

(1) Excluding depreciation and amortization

9 - Contingencies

     Certain of the Company’s U.S. and Canadian government filings were not filed in accordance with the periods provided by statute. As such, the Company could be assessed certain penalties for lack of timely compliance.

10 – Subsequent Events

     On October 6, 2005, the Company completed a non-brokered private placement of 5% convertible debentures for gross proceeds of Cdn$809,119.94 issued to certain of the executive officers and directors. Prior to the maturity date, the debentures convert automatically upon the listing of the Company’s common shares for trading on the Over-The-Counter Bulletin Board and the delisting of the Company’s common shares for trading on the TSX Venture Exchange. The debentures convert into units, with each unit comprised of one common share, one class A common share purchase warrant and one-half of one class B common share purchase warrant, at a price of Cdn$0.15 per unit. Each class A common share purchase warrant may be exercised through October 6, 2010 for one common share at an exercise price of Cdn$0.15 per common share. Each whole class B common share purchase warrant may be exercised through October 6, 2010 for one common share at an exercise price of Cdn$0.15 per common share. The maturity date for the debentures is April 6, 2006, and interest immediately accrues on the debentures. All of the proceeds from this private placement were used to repay the principal and accrued interest on certain other debentures that matured on October 6, 2005, because the debenture holders would not extend the maturity date of those debentures until April 6, 2006.

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Up to 44,807,860 Common Shares

 

CARBIZ INC.

___________________
Prospectus
___________________

November 2, 2005

PART II

Information Not Required in Prospectus

Item 24. Indemnification of Directors and Officers.

     Subject to the limitations contained in the Business Corporation Act (Ontario), our bylaws provide that our directors and officers, former directors or officers, or a person who acts or acted at our request as a director or officer of another body corporate of which we are or were a shareholder or creditor, and all of their heirs and legal representatives, shall be indemnified against all costs, charges and expenses reasonably incurred by such persons in connection with the defence of any civil, criminal or administrative action or proceeding to which they are made a party by reason of being or having held such positions, provided that the person seeking indemnity:

• acted honestly and in good faith with a view to our best interests; and

•   in the case of a criminal or administrative action or proceeding that is enforced by a monetary penalty, had reasonable grounds for believing that his or her conduct was lawful.

provided, however, that nothing in the bylaws relieves any director or officer from the duty to act in accordance with the Business Corporation Act (Ontario) and the regulations thereunder or from liability for any breach thereof.

Item 25. Other Expenses of Issuance and Distribution.

     The following table sets forth the costs and expenses, other than underwriting discounts and commissions, payable in connection with the sale of the common shares being registered hereby. All amounts are estimates. No portion of these expenses will be paid by the selling shareholders.

Item	Amount
Registration Fees	$560
Legal fees and expenses	$80,000
Accounting fees and expenses	$80,000
Printing and engraving expenses	$1,000
Miscellaneous expenses	$1,000
Total	$162,560

Item 26. Recent Sales of Unregistered Securities.

     The following is a summary of the transactions by Carbiz during the last three years involving sales of our securities that were not registered under the Securities Act of 1933.

     On October 6, 2005, we completed a non-brokered private placement of Cdn$809,119.94 principal amount 5% convertible debentures to a group consisting of non-U.S. and U.S. purchasers. Prior to the maturity date, the debentures convert automatically upon the listing of our common shares for trading on the Over-The-Counter Bulletin Board and the delisting of our common shares for trading on the TSX Venture Exchange. The debentures convert into units, with each unit comprised of one common share, one class A common share purchase warrant and one-half of one class B common share purchase warrant, at a price of Cdn$0.15 per unit. Each class A common share purchase warrant may be exercised through October 6, 2010 for one common share at an exercise price of Cdn$0.15 per common share. Each whole class B common share purchase warrant may be exercised through October 6, 2010 for one common share at an exercise price of Cdn$0.15 per common share. The maturity date for the debentures is April 6, 2006, and interest immediately accrues on the debentures. All of the proceeds from this private placement were used to repay the principal and accrued interest on certain other debentures that matured on October 6, 2005, because the debenture holders would not extend the maturity date of those debentures until April 6, 2006. The debentures in this private placement were issued to the non-U.S. and U.S. purchasers in reliance upon the exemption from registration available

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under Rule 506 of Regulation D promulgated under the Securities Act of 1933, because such purchasers were each an “accredited investor,” as such term is defined in Regulation D promulgated under the Securities Act of 1933.

     On July 29, 2005, we completed a non-brokered private placement of $150,000 principal amount promissory note that bears interest at a rate of 17.7% with a U.S. purchaser and a non-U.S. purchaser. The promissory note was issued to the U.S. purchaser in reliance upon the exemption from registration available under Section 4(2) under the Securities Act of 1933. The promissory note was issued to the non-U.S. purchaser in reliance upon the exclusion from registration available under Regulation S promulgated under the Securities Act of 1933.

     On December 14, 2004, we granted an aggregate 637,891 options under our stock option plan to our directors and officers which are exercisable into common shares upon payment of Cdn$0.20 per share. These options expire on December 14, 2009. The options were issued to our directors and officers located inside the United States in reliance upon the exemption from registration available under Rule 701 promulgated under the Securities Act of 1933, and to our directors and officers located outside the United States in reliance upon the exclusion from registration available under Regulation S promulgated under the Securities Act of 1933.

     On October 12, 2004, we completed a brokered private placement of 5% convertible debentures for net proceeds of Cdn$1,614,030 issued to a group consisting of non-U.S. and U.S. purchasers. The debentures were to convert automatically upon the listing of our common shares for trading on the Over-The-Counter Bulletin Board and the delisting of our common shares from trading on the TSX Venture Exchange. The debentures were to convert into units, with each unit comprised of one common share, one class A common share purchase warrant and one-half of one class B common share purchase warrant, at a price of Cdn$0.22 per unit. Each class A common share purchase warrant was to be exercisable through October 12, 2009 for one common share at an exercise price of Cdn$0.23 per common share. Each whole class B common share purchase warrant was to be exercisable through October 12, 2009 for one common share at an exercise price of Cdn$0.30 per common share. Interest did not accrue on the debentures until May 1, 2005. If the conditions necessary for the conversion of these debentures were not met by October 6, 2005, the debentures matured and the principal and accrued interest would be due and payable in full on that date.

     As a result of not achieving a listing on the Over-The-Counter Bulletin Board by October 6, 2005 and not having sufficient cash on hand to repay the debentures, we negotiated with our debenture holders for an extension of the maturity date until April 6, 2006 in order to allow us additional time to list our common shares for trading on the Over-The-Counter Bulletin Board and delist our common shares from trading on the TSX Venture Exchange. In exchange for the extension of the maturity date, we offered to lower the conversion rate of the debentures to Cdn$0.15 per unit and the exercise price for each of the class A common share purchase warrants and the class B common share purchase warrants to Cdn$0.15. The holders of Cdn$846,297.50 principal amount of our debentures sought to be paid the principal and interest on their debentures, while the remaining debenture holders agreed to the extension of the maturity date.

     In consideration for the services provided by an agent related to the private placement on October 12, 2004, the agent received a cash commission equal to 10% of the gross proceeds raised by the agent, which totaled $61,974. The agent is also entitled to receive a cash fee equal to 2% of the gross proceeds from the subsequent exercise within twelve months from the date the debentures are converted of any class A common share purchase warrants or class B common share purchase warrants that were issued upon conversion of debentures placed by the agent. In addition, the agent will receive that number of units that is equal to 10% of the number of units to be issued on the date the debentures are converted with respect to debentures placed by the agent. Each unit shall consist of one first common share purchase warrant and one second common share purchase warrant. Each first common share purchase warrant may be exercised to acquire one common share at a price of Cdn$0.22 per share on or before the date that is five years from the date the debentures are converted into units. Each second common share purchase warrant may be exercised to acquire one common share at a price of Cdn$0.23 per share on or before the date that is five years from the date the debentures are converted into units.

     The securities were issued to the non-U.S., the U.S. purchasers and the agent in reliance upon the exemption from registration available under Rule 506 of Regulation D promulgated under the Securities Act of 1933, because such persons were each an “accredited investor,” as such term is defined in Regulation D promulgated under the Securities Act of 1933. The amendments to the convertible debentures were made in reliance upon the exemption from registration available under Section 3(a)(9) of the Securities Act of 1933.

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     On September 16, 2004, we completed a non-brokered private placement of 91,000 units at a purchase price of Cdn$0.30 per unit to a group consisting of U.S. purchasers for gross proceeds of Cdn$27,300. Each unit consists of one common share and one common share purchase warrant, with each common share purchase warrant exercisable for one common share until September 16, 2005 upon payment by the holder of Cdn$0.30 per common share. The common shares and the common share purchase warrants were issued to the U.S. purchasers in reliance upon the exemption from registration available under Rule 506 of Regulation D promulgated under the Securities Act of 1933, because such purchasers were each an “accredited investor,” as such term is defined in Regulation D promulgated under the Securities Act of 1933.

     On August 16, 2004, we completed a non-brokered private placement of 10% convertible debentures pursuant to which a total of Cdn$332,693 principal amount of debentures were issued to a group consisting of U.S. purchasers. The debentures matured in March 2005 with both principal and interest being convertible into our common shares. The principal is convertible at a price per share equal to the closing price of our shares on the TSX Venture Exchange on the day prior to conversion or the price of any financing completed by us prior to the maturity date, subject to a minimum conversion price of Cdn$0.22 per share. The interest is convertible on the maturity date at a price per share equal to the closing price of our shares on the TSX Venture Exchange on the day prior to the maturity date, subject to a minimum conversion price of Cdn$0.22 per share. The debentures were issued to the U.S. purchasers in reliance upon the exemption from registration available under Rule 506 of Regulation D promulgated under the Securities Act of 1933, because such purchasers were each an “accredited investor,” as such term is defined in Regulation D promulgated under the Securities Act of 1933.

     On July 9, 2004, we completed a brokered private placement of 602,431 units at a purchase price of Cdn$0.30 per unit to a group consisting of non-U.S. and U.S. purchasers for gross proceeds of Cdn$180,729. Each unit consists of one common share and one common share purchase warrant, with each common share purchase warrant exercisable for one common share until July 9, 2005 upon payment by the holder of Cdn$0.30 per common share. The agents involved in the private placement were issued 302,387 common share purchase warrants, with each common share purchase warrant exercisable for one common share until July 9, 2006 upon payment by the holder of Cdn$0.30 per common share. The common shares and the common share purchase warrants were issued to the non-U.S. purchasers in reliance upon the exclusion from registration available under Regulation S promulgated under the Securities Act of 1933, because such purchasers were located outside the United States. The common shares and the common share purchase warrants were issued to the U.S. purchasers and the agents in reliance upon the exemption from registration available under Rule 506 of Regulation D promulgated under the Securities Act of 1933, because such persons were each an “accredited investor,” as such term is defined in Regulation D promulgated under the Securities Act of 1933.

     On July 9, 2004, we issued 75,456 common share purchase warrants to a U.S. person in consideration for consulting services rendered to us. Each common share purchase warrant is exercisable for one common share until July 9, 2006 upon payment by the holder of Cdn$0.30 per common share. The common share purchase warrants were issued to the U.S. person in reliance upon the exemption from registration available under Rule 506 of Regulation D promulgated under the Securities Act of 1933, because such person was an “accredited investor,” as such term is defined in Regulation D promulgated under the Securities Act of 1933.

     On July 1, 2004, we granted an aggregate 584,000 options under our stock option plan to our directors and officers which are exercisable into common shares upon payment of Cdn$0.30 per share. These options expire on July 1, 2009. The options were issued to our directors and officers located inside the United States in reliance upon the exemption from registration available under Rule 701 promulgated under the Securities Act of 1933, and to our directors and officers located outside the United States in reliance upon the exclusion from registration available under Regulation S promulgated under the Securities Act of 1933.

     On May 4, 2004, we completed a non-brokered private placement of 232,628 units at a purchase price of Cdn$0.30 per unit to a group consisting of non-U.S. purchasers and U.S. purchasers for gross proceeds of Cdn$69,788. Each unit consists of one common share and one common share purchase warrant, with each common share purchase warrant exercisable into one common share until May 4, 2005 upon payment by the holder of Cdn$0.30 per common share. The common shares and the common share purchase warrants were issued to the non-U.S. purchasers in reliance upon the exclusion from registration available under Regulation S promulgated under the Securities Act of 1933, because such purchasers were located outside the United States. The common shares and common share purchase

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warrants were issued to the U.S. purchasers in reliance upon the exemption from registration available under Rule 506 of Regulation D promulgated under the Securities Act of 1933, because such purchasers were each an “accredited investor,” as such term is defined in Regulation D promulgated under the Securities Act of 1933.

     On April 1, 2004, we completed a non-brokered private placement of 1,054,157 units at a purchase price of Cdn$0.30 per unit to a group consisting of non-U.S. and U.S. purchasers for gross proceeds of Cdn$316,247. Each unit consists of one common share and one common share purchase warrant, with each common share purchase warrant exercisable into one common share until April 1, 2005 upon payment by the holder of Cdn$0.30 per common share. The common shares and the common share purchase warrants were issued to the non-U.S. purchasers in reliance upon the exclusion from registration available under Regulation S promulgated under the Securities Act of 1933, because such purchasers were located outside the United States. The common shares and common share purchase warrants were issued to the U.S. purchasers in reliance upon the exemption from registration available under Rule 506 of Regulation D promulgated under the Securities Act of 1933, because such purchasers were each an “accredited investor,” as such term is defined in Regulation D promulgated under the Securities Act of 1933.

     On March 31, 2004, we granted an aggregate 700,000 options under our stock option plan to our directors, officers, employees and consultants which are exercisable into common shares upon payment of Cdn$0.30 per share. These options expire on March 31, 2009. The options were issued to our directors and officers located inside the United States in reliance upon the exemption from registration available under Rule 701 promulgated under the Securities Act of 1933, and to our directors and officers located outside the United States in reliance upon the exclusion from registration available under Regulation S promulgated under the Securities Act of 1933.

     On December 15, 2003, we granted an aggregate 745,150 options under our stock option plan to our directors, officers and a consultant which are exercisable into common shares upon payment of Cdn$0.30 per share. These options expire on December 15, 2008. The options were issued to our directors and officers located inside the United States in reliance upon the exemption from registration available under Rule 701 promulgated under the Securities Act of 1933, and to our directors and officers located outside the United States in reliance upon the exclusion from registration available under Regulation S promulgated under the Securities Act of 1933.

     On November 28, 2003, we granted an aggregate 200,000 options under our stock option plan to our directors and officers which are exercisable into common shares upon payment of Cdn$0.24 per share. These options expire on November 28, 2008. The options were issued to our directors and officers located inside the United States in reliance upon the exemption from registration available under Rule 701 promulgated under the Securities Act of 1933, and to our directors and officers located outside the United States in reliance upon the exclusion from registration available under Regulation S promulgated under the Securities Act of 1933.

     On September 26, 2003, we completed a non-brokered private placement of 1,500,000 units at a purchase price of Cdn$0.10 per unit to a group consisting of non-U.S. and U.S. purchasers for gross proceeds of Cdn$150,000. Each unit consists of one common share and one-half of one common share purchase warrant, with each whole common share purchase warrant exercisable into one common share until September 26, 2004 upon payment by the holder of Cdn$0.12 per common share. The common shares and the common share purchase warrants were issued to the non-U.S. purchasers in reliance upon the exclusion from registration available under Regulation S promulgated under the Securities Act of 1933, because such purchasers were located outside the United States. The common shares and common share purchase warrants were issued to the U.S. purchasers in reliance upon the exemption from registration available under Rule 506 of Regulation D promulgated under the Securities Act of 1933, because such purchasers were each an “accredited investor,” as such term is defined in Regulation D promulgated under the Securities Act of 1933.

     On December 6, 2002, we completed a non-brokered private placement of 4,000,000 series 1 preferred shares at a purchase price of Cdn$0.10 per share to a group consisting of non-U.S. purchasers for gross proceeds of Cdn$400,000. The preferred shares are convertible at the option of the holder at any time before December 6, 2004 at a price of Cdn$0.10 per share, plus accrued interest. Upon conversion, the principal amount of the shares, plus accrued interest shall be paid in full by us in cash or converted into common shares at a price of one common share for every Cdn$0.10 of principal and accrued interest represented by the holder’s convertible preferred shares. If the shares are not converted by December 6, 2004, the shares are repayable in cash plus accrued interest. The preferred shares were issued to the non-U.S. purchasers in reliance upon the exclusion from registration available under Regulation S, because such purchasers were located outside the United States.

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Item 27. Exhibits.

EXHIBIT INDEX

The following exhibits are filed as part of this Form SB-2:

Exhibit
Number	Description
3.1	Articles of Incorporation dated March 31, 1998
3.2	Articles of Amendment dated April 15, 1998
3.3	Articles of Amendment dated April 22, 1998
3.4	Articles of Amendment dated September 1, 1999
3.5	Articles of Amendment dated October 30, 2002
3.6	Articles of Amendment dated July 15, 2003
3.7	Bylaw No. 1
3.8	Bylaw No. 2
4.1	Specimen of Common Share Certificate
4.2	Specimen of Preferred Share Certificate
4.3	Form of 5% Convertible Debenture (October 2004)
4.4	Form of Amendment of Debenture Agreement
4.5	Form of 5% Convertible Debenture (October 2005)
4.6	Form of Class A Common Share Purchase Warrant
4.7	Form of Class B Common Share Purchase Warrant
4.8	Form of Agent’s First Common Share Purchase Warrant
4.9	Form of Agent’s Second Common Share Purchase Warrant
4.10	Investors’ Rights Agreement dated October 6, 2004 among Carbiz and certain investors
4.11	Investors’ Rights Agreement dated October 6, 2005 among Carbiz and certain investors
5.1	Legal Opinion of Harris + Harris LLP
10.1*	Management Agreement dated October 12, 1999 between Carbiz and 1043917 Ontario Inc.
10.2	Lease Agreement dated April 1, 2004 between Carbiz and Tony and Julie Katsamakis with respect to premises located in Palmetto, Florida
10.3	Lease Agreement dated December _____, 2003 between Carbiz and Herrig Enterprises L.L.C. with respect to premises located in Sarasota, Florida
10.4	Lease Agreement dated September 22, 2004 between Carbiz Auto Credit Inc. and D.O. & M.G. Investment, Inc. with respect to the premises located in St. Petersburg, Florida
10.5	Lease Agreement dated April 1, 2005 between Carbiz Auto Credit JV1, LLC and Wilfredo and Violeta Quintero with respect to the premises located in Tampa, Florida
10.6*	Stock Option Plan
10.7	Form of 5% Convertible Debenture Subscription Agreement (October 2004)
10.8	Placement Agent Agreement dated September 29, 2004 between Carbiz and Innovation Capital, LLC
10.9	First Amendment dated October 12, 2004 to Placement Agent Agreement between Carbiz and Innovation Capital, LLC
10.10	Operating Agreement dated March 16, 2005 of Carbiz Auto Credit JV1, LLC
10.11	Software License Agreement dated March 4, 2005 between Carbiz and Carbiz Auto Credit JV1, LLC
10.12	Promissory Note dated July 29, 2005 issued to Medipac International
10.13	Debenture Instructions
21.1	List of Subsidiaries
23.1	Consent of Deloitte & Touche LLP
23.2	Consent of Harris + Harris LLP (Included as part of Exhibit 5.1)
24.1	Power of Attorney (Included on the signature pages to the registration statement)
99.1	Form F-X

* Indicates a management contract or compensatory plan or arrangement

Item 28. Undertakings.

     Insofar as indemnification for liabilities arising under the Securities Act of 1933 may be permitted to directors, officers and controlling persons of the small business issuer pursuant to the provisions described in Item 24, or

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otherwise, Carbiz has been advised that in the opinion of the Securities and Exchange Commission such indemnification is against public policy as expressed in the Securities Act of 1933 and is, therefore, unenforceable.

     In the event that a claim for indemnification against such liabilities (other than the payment by the registrant of expenses incurred or paid by a director, officer of controlling person of the registrant in the successful defense of any action, suit or proceeding) is asserted by such director, officer or controlling person in connection with the securities being registered, the registrant will, unless in the opinion of its counsel the matter has been settled by controlling precedent, submit to a court of appropriate jurisdiction the question whether such indemnification by it is against public policy as expressed in the Securities Act of 1933 and will be governed by the final adjudication of such issue.

     The undersigned registrant hereby undertakes that:

     (1) It will file, during any period in which it offers or sells securities, a post-effective amendment to this registration statement to:

               (i) Include any prospectus required by section 10(a)(3) of the Securities Act of 1933;

               (ii) Reflect in the prospectus any facts or events which, individually or together, represent a fundamental change in the information in the registration statement. Notwithstanding the foregoing, any increase or decrease in volume of securities offered (if the total dollar value of securities offered would not exceed that which was registered) and any deviation from the low or high end of the estimated maximum offering range may be reflected in the form of prospectus filed with the Securities and Exchange Commission pursuant to Rule 424(b) if, in the aggregate, the changes in volume and price represent no more than a 20% change in the maximum aggregate offering price set forth in the “Calculation of Registration Fee” table in the effective registration statement; and

               (iii) Include any additional or changed material information on the plan of distribution.

     (2) For determining liability under the Securities Act of 1933, registrant will treat each post-effective amendment as a new registration statement of the securities offered, and the offering of the securities at that time to be the initial bona fide offering.

     (3) It will file a post-effective amendment to remove from registration any of the securities that remain unsold at the end of the offering.

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SIGNATURES

     In accordance with the requirements of the Securities Act of 1933, the registrant certifies that it has reasonable grounds to believe that it meets all of the requirements of the filing on Form SB-2 and authorized this registration statement to be signed on its behalf by the undersigned in the City of Sarasota, State of Florida, on October 31, 2005.

CARBIZ INC.
By:	/s/ Carl Ritter
	Carl Ritter, Chief Executive Officer

POWER OF ATTORNEY

     We, the undersigned directors and officers of Carbiz Inc., do hereby constitute and appoint Carl Ritter and Stan Heintz, or either of them, our true and lawful attorneys and agents, to do any and all such acts and things in our name and on our behalf in our capacities as directors and officers and to execute any and all instruments for us and in our names in the capacities indicated below, which said attorneys and agents, or either of them, may deem necessary or advisable to enable said corporation to comply with the Securities Act of 1933 and any rules, regulations and requirements of the Securities and Exchange Commission, in connection with this registration statement, including specifically, but without limitation, power and authority to sign for us or in any of our names and in the capacities indicated below any and all amendments (including post-effective amendments) to this registration statement, or any related registration statement under the Securities Act of 1933; and we do hereby ratify and confirm all that the said attorneys and agents, or either of them, shall do or cause to be done by virtue hereof.

     Pursuant to the requirements of the Securities Act of 1933, this registration statement on Form SB-2 has been signed by the following persons in the capacities and on the dates stated:

Signature	Title	Date
/s/ Carl Ritter	Chief Executive Officer, Chairman and	October 31, 2005
Carl Ritter	a Director (Principal Executive Officer)
/s/ Aldo Sistilli	Chief Financial Officer and Vice	October 31, 2005
Aldo Sistilli	President Finance (Principal Financial
	and Accounting Officer)
/s/ Richard Lye	President, Corporate Secretary and a	October 31, 2005
Richard Lye	Director
		October 31, 2005
/s/ Ross Quigley	Director
Ross Quigley
		October 31, 2005
/s/ Theodore Popel	Director
Theodore Popel

AUTHORIZED REPRESENTATIVE

     Pursuant to the requirements of Section 6(a) of the Securities Act of 1933, as amended, the undersigned has signed this registration statement solely in the capacity of the duly authorized representative of Carbiz Inc. in the United States on November 1, 2005.

/s/ Carl Ritter

Carl Ritter

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EXHIBIT INDEX

Exhibit
Number	Description
3.1	Articles of Incorporation dated March 31, 1998
3.2	Articles of Amendment dated April 15, 1998
3.3	Articles of Amendment dated April 22, 1998
3.4	Articles of Amendment dated September 1, 1999
3.5	Articles of Amendment dated October 30, 2002
3.6	Articles of Amendment dated July 15, 2003
3.7	Bylaw No. 1
3.8	Bylaw No. 2
4.1	Specimen of Common Share Certificate
4.2	Specimen of Preferred Share Certificate
4.3	Form of 5% Convertible Debenture (October 2004)
4.4	Form of Amendment of Debenture Agreement
4.5	Form of 5% Convertible Debenture (October 2005)
4.6	Form of Class A Common Share Purchase Warrant
4.7	Form of Class B Common Share Purchase Warrant
4.8	Form of Agent’s First Common Share Purchase Warrant
4.9	Form of Agent’s Second Common Share Purchase Warrant
4.10	Investors’ Rights Agreement dated October 6, 2004 among Carbiz and certain investors
4.11	Investors’ Rights Agreement dated October 6, 2005 among Carbiz and certain investors
5.1	Legal Opinion of Harris + Harris LLP
10.1*	Management Agreement dated October 12, 1999 between Carbiz and 1043917 Ontario Inc.
10.2	Lease Agreement dated April 1, 2004 between Carbiz and Tony and Julie Katsamakis with respect to premises located in Palmetto, Florida
10.3	Lease Agreement dated December _____, 2003 between Carbiz and Herrig Enterprises L.L.C. with respect to premises located in Sarasota, Florida
10.4	Lease Agreement dated September 22, 2004 between Carbiz Auto Credit Inc. and D.O. & M.G. Investment, Inc. with respect to the premises located in St. Petersburg, Florida
10.5	Lease Agreement dated April 1, 2005 between Carbiz Auto Credit JV1, LLC and Wilfredo and Violeta Quintero with respect to the premises located in Tampa, Florida
10.6*	Stock Option Plan
10.7	Form of 5% Convertible Debenture Subscription Agreement (October 2004)
10.8	Placement Agent Agreement dated September 29, 2004 between Carbiz and Innovation Capital, LLC
10.9	First Amendment dated October 12, 2004 to Placement Agent Agreement between Carbiz and Innovation Capital, LLC
10.10	Operating Agreement dated March 16, 2005 of Carbiz Auto Credit JV1, LLC
10.11	Software License Agreement dated March 4, 2005 between Carbiz and Carbiz Auto Credit JV1, LLC
10.12	Promissory Note dated July 29, 2005 issued to Medipac International
10.13	Debenture Instructions
21.1	List of Subsidiaries
23.1	Consent of Deloitte & Touche LLP
23.2	Consent of Harris + Harris LLP (Included as part of Exhibit 5.1)
24.1	Power of Attorney (Included on the signature pages to the registration statement)
99.1	Form F-X

* Indicates a management contract or compensatory plan or arrangement