UNITED ~~STATES SECURITIES~~STATESSECURITIES AND EXCHANGE ~~COMMISSION Washington~~COMMISSIONWashington, D.C. 20549 ~~_______________ FORM 10-Q _______________~~

FORM 10-Q

(Mark One)

[ Xx ] QUARTERLY REPORT UNDER SECTION 13 OR 15(d) OF THE ~~THESECURITIES~~SECURITIES EXCHANGE ACT OF 1934

For the quarterly period ended July 31, ~~2008~~2009

[ ] TRANSITION REPORT UNDER SECTION 13 OR 15(d) OF ~~THEEXCHANGE~~THE EXCHANGE ACT

For the transition period from ________________to _______________

Commission file Number: 000-52209

~~______________CARBIZ~~ CARBIZ INC.(Exact name of registrant as specified in its charter)~~______________~~

Ontario, Canada	Not Applicable
(State or other jurisdiction of	(IRS Employer Identification No.)
incorporation or organization)

7115 16th Street East, Suite ~~105Sarasota,~~ 105 Sarasota, Florida 34243(Address of principal executive offices)

(941) 952-9255 (Registrant's telephone number, including area code)

~~______________~~Indicate by check mark whether the Registrant: (1) has filed all reports required to be filed by Section 13 or 15(d) of the Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the Registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes [ x ] No[ ]

Indicate by check mark whether the ~~Registrant:~~registrant ~~(1)~~ has ~~filed~~submitted electronically ~~all~~and posted on its corporate Web site, if any, every Interactive ~~reports~~Data File required to be ~~filed~~submitted byand ~~Section~~posted 13pursuant orto ~~15(d)~~Rule 405 of ~~the~~regulation S-T ~~Exchange~~(Section ~~Act~~229.405) ~~of 1934~~ during the preceding 12 months (or for such shorter period that the ~~Registrant~~ registrant was required to ~~file~~submit ~~such reports),~~ and ~~(2)~~post ~~has been subject to~~ such ~~filing requirements for the past 90 days~~files). Yes [ X ] No [ ]

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

Large accelerated filer [ ] Accelerated filer [ ] Non-accelerated filer [ ] Smaller reporting company [ Xx ] (Do not check if a smaller reporting company)

Indicate by check mark whether the Registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act): Yes [ ] No [ Xx ]

As of September 1210, ~~2008~~2009, 68104,~~588~~560,~~549~~373 common shares of the Registrant were issued and outstanding.

Transitional Small Business Disclosure Format (Check one): Yes [ ] No [ X ]

CARBIZ INC.

FORM 10-Q

For the Quarterly Period Ended July 31, ~~2008~~2009

INDEX

PART I	Financial Information
Item 1.	Financial Statements	1
Item 2.	Management’s Discussion and Analysis of Financial Condition and Results of Operations	1723
Item 4.	Controls and Procedures	25
Item 3.	Quantitative and Qualitative Disclosures about Market Risk	35
Item 4T	Controls and Procedures	36
PART II	Other Information
Item 1.	Legal Proceedings	2537
Item 2.	Unregistered Sales of Equity Securities and Use of Proceeds	2537
Item 3.	Defaults Upon Senior Securities	25
Item 4.	Submission of Matters to a Vote of Security Holders	37
Item 4.	Submission of Matters to a Vote of Security Holders	26
Item 5.	Other Information	37
Item 5.	Other Information	26
Item 6.	Exhibits	37
Item 6.	Exhibits	26

NOTE REGARDING FORWARD-LOOKING STATEMENTS

Except for statements of historical fact, certain information contained herein constitutes “forward-looking statements,” within Section 21E of the Securities Exchange Act of 1934, as amended (the “Exchange Act”). In some cases, you can identify the forward-looking statements by our use of the words such as “may,” “will,” “should,” “could,” “expect,” “plan,” “estimate,” “predict,” “potential,” “continue,” “believe,” “anticipate,” “intend,” “expect,” or the negative or other variations of these words, or other comparable words or phrases.

Such forward-looking statements involve known and unknown risks, uncertainties and other factors which may cause our actual results or achievements to be materially different from any of our future results or achievements expressed or implied by such forward-looking statements. Such factors include, but are not limited to the following:

	(i)	whether we are successful in implementing our business strategy;
	(ii)	our ability to increase revenues in the future and to continue as a going concern;
	(iii)	our ability to obtain additional financing on terms favorable to us, if at all, if our operating revenues fail to increase;
	(iv)	our ability to attract and retain key personnel;
	(v)	the impact on the market price of our common shares of the concentration of common share ownership by our directors, officers and greater than 5% shareholders, which may delay, deter or prevent actions that would result in a change of control;
	(vi)	the significant fluctuation of the market price of our common shares;
	(vii)	costly difficulties we may face in the assimilation of the operations, technologies and products of companies that we may acquire in the future;
	(viii)	the adequacy of our insurance coverage to cover all losses or liabilities that may be incurred in our operations;
	(ix)	our dividend policy;
	(x)	the impact on our financial position, liquidity and results of operations if we underestimate the default risk of sub-prime borrowers;
	(xi)	general economic conditions;
	(xii)	general competition;
	(xiii)	our ability to comply with federal and state government regulations;
	(xiv)	potential infringement by us of third parties’ proprietary rights;
	(xv)	defects in our products;
	(xvi)	our compliance with privacy laws;
	(xvii)	our ability to obtain adequate remedies in the event that our intellectual property rights are violated;
	(xviii)	our ability to develop and market on a timely and cost-effective basis new products that meet changing market conditions, and
	(xix)	the risk factors identified in our most recent Annual Report on Form 10-~~KSB~~K, including factors identified under the headings “Description of Business,” “Risk Factors” and “Management’s Discussion and Analysis or Plan of Operation.”

Although we believe that expectations reflected in these forward-looking statements are reasonable, we cannot guarantee future results, levels of activity, performance, achievements or other future events. Moreover, neither we nor anyone else assumes responsibility for the accuracy and completeness of these forward-looking statements. We are under no duty to update any of these forward-looking statements after the date of this report. You should not place undue reliance on these forward-looking statements. Unless otherwise indicated, all dollar amounts expressed herein are in U.S. dollars.

PART 1 – FINANCIAL INFORMATION

Item 1. Financial Statements

CARBIZ INC. Condensed Consolidated Balance Sheets ~~(Unaudited) (expressed in U.S. dollars)~~

		July 31, 2008			January 31, 2008
		July 31, 2009			January 31, 2009
		(unaudited)
ASSETS
CURRENT
Cash and cash equivalents	$	~~374~~818,~~894~~625		$	1674,~~141,271~~624
Accounts receivable		41,905			84,916
Accounts receivable, net		281,782			85,649
Current portion of notes receivable		15,522,756			16,389,259
Current portion of notes receivable, net		8,042,225			5,945,345
Inventory		4,546,924			2,554,836
Current portion net investment in direct
Prepaids and other assets		247,074			465,500
financing and sales-type leases		6,481,824			-
Deferred costs		-			3,707
Inventory		5,116,750			2,923,696
		20,733,553			20,639,489
Prepaid and other assets		553,386			333,046
NOTES RECEIVABLE, NET LESS CURRENT PORTION		8,358,407			8,649,284
		21,294,592			9,962,360
DEFERRED FINANCING COSTS		976,950			1,362,593
NON-CURRENT
PROPERTY AND EQUIPMENT		823,787			767,995
Notes receivable, less current portion		8,929,567			13,999,053
GOODWILL		438,283			438,283
Net investment in direct financing and
	$	31,330,980		$	31,857,644
sales-type leases, less current portion		4,997,213			-
Deferred financing costs and prepaid interest		4,019,712			625,197
Property plant and equipment, net		693,050			596,415
	$	39,934,134		$	25,183,025
LIABILITIES
CURRENT
Accounts payable and accrued liabilities	$	3,~~343~~841,~~022~~360		$	34,~~078~~527,~~560~~041
Note payable, related party		200,000			200,000
Notes Payable
Current portion of long-term debt:
Line of credit		5,355,684			36,696,175
Lines of credit		14,831,332			17,580,169
Inventory floor plan		5,830,135			4,596,590
Inventory floor plan		5,483,169			1,421,151
Short Term		452,227			-
Current portion of capital leases		3,996			8,104
Other Debt		756,771			-
Current portion of convertible debentures		1,572,980			435,597
Related party		-			200,000
Derivative liabilities		4,628,207			8,844,036
Current portion of capital lease obligation		-			2,620
Deferred revenue		150			59,753
Current portion of convertible debentures		96,935			255,113
		30,062,856			31,627,370
Derivative liabilities		7,807,054			11,796,217
CAPITAL LEASES, NET OF CURRENT PORTION		2,621			2,621
Deferred revenue		153,240			1,985
CONVERTIBLE DEBENTURE, LESS CURRENT PORTION		159,707			312,405
		24,293,406			58,075,741
Includes $49,283 and $25,093 respectively to related parties
NON-CURRENT
LONG-TERM DEBT, LESS CURRENT PORTION		16,752,837			17,423,298
Line of credit, less current portion		15,833,763			-
		46,978,021			49,365,694
Convertible debenture, less current portion		472,649			1,855,330
COMMITMENTS AND CONTINGENCIES (Note 12)		-			-
		40,599,818			59,931,071
COMMITMENTS AND CONTIGENCIES		-			-
STOCKHOLDERS' DEFICIENCY
COMMON SHARES		1620,~~274~~818,~~119~~928			1619,~~274~~364,~~119~~233
Unlimited shares authorized, 65,868,549 and 64,870,681 common shares
Unlimited shares authorized, 102,520,603 and 87,744,296 common shares
issued and outstanding as at July 31, 2008 and January 31, 2008
issued and outstanding at July 31, 2009 and January 31, 2009
ADDITIONAL PAID-IN CAPITAL		7,~~984~~727,~~066~~647			76,~~679~~788,~~205~~937
ACCUMULATED OTHER COMPREHENSIVE LOSS		(385,197	)		(385,197	)
ACCUMULATED DEFICIT		(3928,~~520~~827,~~029~~062	)		(4160,~~076~~516,~~177~~019	)
		(15,647,041	)		(17,508,050	)
		(665,684	)		(34,748,046	)
	$	3139,~~330~~934,~~980~~134		$	3125,~~857~~183,~~644~~025

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

CARBIZ INC. Condensed Consolidated Statements of Operations (Unaudited) ~~(expressed in U.S. dollars)~~

		For the three months ended						For the six months ended
		July 31,						July 31,
		2008			2007			2008			2007
		2009			2008			2009			2008
SALES
Used car sales	$	68,~~909~~198,~~797~~338		$	~~341~~6,~~760~~909,797		$	1312,~~409~~951,~~831~~801		$	~~596~~13,~~782~~409,831
Software and consulting services (Note 9)		412,942			581,674			988,259			1,191,653
Used car sales from sales type leases		2,577,323						4,682,061
Interest income		1,461,209			19,957			3,309,130			35,541
Consulting and collection services		139,612			412,942			325,012			988,259
		8,783,948			943,391			17,707,220			1,823,976
Interest and lease income		1,904,107			1,461,209			3,375,883			3,309,130
		12,819,380			8,783,948			21,334,757			17,707,220
COST OF SALES
Used car sales		5,100,731			275,189			9,520,092			472,991
Used car costs		6,901,427			5,100,731			11,531,911			9,520,092
Software and consulting services		274,951			243,652			655,283			461,803
Consulting and collection services		386,850			274,951			624,145			655,283
		5,375,682			518,841			10,175,375			934,794
		7,288,277			5,375,682			12,156,056			10,175,375
GROSS PROFIT		35,~~408~~531,~~266~~103			~~424~~3,~~550~~408,266			79,~~531~~178,~~845~~701			~~889~~7,~~182~~531,845
Gain on debt foregiveness		-			-			-			(391,337	)
OPERATING EXPENSES
Personnel expenses		~~654~~753,~~486~~606			~~288~~654,~~887~~486			1,~~293~~312,~~811~~648			~~530~~1,~~805~~293,811
Selling expenses		~~202~~134,~~928~~883			~~116~~202,~~875~~928			~~396~~291,~~245~~874			~~189~~396,~~235~~245
Professional fees		~~178~~253,~~305~~798			~~268~~178,~~113~~305			~~662~~551,~~607~~992			~~527~~662,~~352~~607
Provision for credit losses		21,~~403~~786,~~110~~480			182,~~239~~403,110			43,~~134~~375,~~151~~526			(64,~~113~~134,151	)
Other operating expenses		1,~~086~~196,~~190~~488			~~871~~1,~~869~~086,190			2,~~264~~444,~~411~~103			12,~~001~~264,~~519~~411
		4,525,019			1,563,983			8,751,225			1,851,461
		4,125,255			4,525,019			7,976,143			8,751,225
OPERATING LOSS		(1,116,753	)		(1,139,433	)		(1,219,380	)		(962,279	)
OPERATING INCOME (LOSS)		1,405,848			(1,116,753	)		1,202,558			(1,219,380	)
INTEREST AND OTHER EXPENSES		(1,~~877~~060,~~114~~237	)		(~~149~~1,~~430~~877,114	)		(32,~~783~~022,~~535~~069	)		(~~238~~3,~~937~~783,535	)
GAIN (LOSS) ON DERIVATIVE LIABILITIES		24,~~010~~709,~~476~~781			(12,~~430~~010,~~363~~476	)		4(53,~~044,834~~319	)		~~(751~~4,~~742~~044,834	)
GAIN ON SALE OF SOFTWARE DIVISION		~~2,514,229~~-			-2,514,229			~~2,514,229~~			-2,514,229
MINORITY INTEREST IN LOSSES		-			7,128			-			1,034
LOAN PORTFOLIO PURCHASE
NET INCOME (LOSS) FOR THE PERIOD	$	1,530,838		$	(2,712,098	)	$	1,556,148		$	(1,951,924	)
TRANSACTION COSTS		(637,500	)		-			(637,500	)		-
NET INCOME (LOSS) PER SHARE (basic and diluted)	$	0.02		$	(0.04	)	$	0.02		$	(0.03	)
GAIN ON EXTINGUISHMENT OF DEBT		-			-			33,199,287			-
WEIGHTED AVERAGE NUMBER OF COMMON
NET INCOME FOR THE PERIOD	$	4,417,892		$	1,530,838		$	31,688,957		$	1,556,148
SHARES OUTSTANDING (Basic)		65,809,853			64,224,404			65,520,687			64,224,404
NET INCOME PER SHARE:
WEIGHTED AVERAGE NUMBER OF COMMON
Basic	$	0.04		$	0.02		$	0.32		$	0.02
SHARES OUTSTANDING (Diluted)		66,759,852			64,224,404			66,505,061			64,224,404
Diluted	$	-		$	0.02		$	0.16		$	0.02
WEIGHTED AVERAGE SHARES OUTSTANDING
Basic		102,520,603			65,809,853			100,454,161			65,520,687
Diluted		201,815,672			66,759,852			197,821,868			66,505,061

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

CARBIZ INC. Condensed Consolidated Statements of Cash Flows (unaudited) ~~(expressed in U.S. dollars)~~

		For the Six Months Ended
		July 31, 2008			July 31, 2007
		July 31, 2009			July 31, 2008
NET INFLOW (OUTFLOW) OF CASH RELATED
TO THE FOLLOWING ACTIVITIES:
OPERATING ACTIVITIES
Net income (loss)	$	1,556,148		$	(1,951,924	)
Net Income	$	31,688,957		$	1,556,148
Items not affecting cash
Items not affecting cash:
Depreciation of property and equipment		7977,~~678~~280			3879,~~642~~678
Minority interest		-			(1,034	)
(Gain) loss on derivative liabilities		53,319			(4,044,834	)
(Gain) loss on derivative liabilities		(4,044,834	)		751,742
Gain on sale of software operations		-			(2,514,229	)
Gain on debt forgiveness		-			(391,337	)
Gain on extinguishment of debt		(33,199,287	)		-
Gain on sale of software operations		(2,514,229	)		-
Amortization of deferred financing costs		189,784			340,973
Amortization of deferred financing costs		340,973			33,818
Amortization of prepaid interest		129,411			-
Amortization of debt discount		1636,~~051,383~~161			891,~~912~~051,383
Share-based compensation		~~187~~195,~~290~~525			~~120~~187,~~600~~290
Provision for bad debts		4,134,151			(11,085	)
Provision for credit losses		3,375,526			4,134,151
Net changes in operating assets and liabilities:
Accounts receivable		25(196,~~116~~132	)		~~(966~~25,116	)
Notes receivable		(2,~~979~~448,~~897~~413	)		(~~212~~2,~~308~~979,897	)
Prepaids and other assets		210,926			30,295
Net investment in direct financing and sales-type leases		(12,328,236	)		-
Inventory		(1,992,088	)		(77,352	)
Prepaids and other assets		(220,340	)		210,926
Deferred costs		2,490			7,754
Inventory		(2,193,054	)		(1,992,088	)
Accounts payable and accrued liabilities		345,943			(355,220	)
Deferred costs		-			2,490
Deferred revenue		-			(44,470	)
Accounts payable and accrued liabilities		(659,281	)		345,943
NET CASH FLOWS FROM OPERATING ACTIVITIES		(3,596,950	)		(1,972,933	)
Deferred revenue		151,255			-
NET CASH FLOWS FROM OPERATING ACTIVITIES		(9,850,699	)		(3,596,950	)
INVESTING ACTIVITIES
Proceeds from sale of software operations		~~2,500,000~~-			-2,500,000
Acquisition of property and equipment		(153,493	)		(22,138	)
Acquisition of Star Financial assets		(7,921,997	)
NET CASH FLOW FROM INVESTING ACTIVITIES		2,346,507			(22,138	)
Acquisition of property and equipment		(163,915	)		(153,493	)
NET CASH FLOWS FROM INVESTING ACTIVITIES		(8,085,912	)		2,346,507
FINANCING ACTIVITIES
Repayment of capital leases		(42,~~108~~620	)		(34,~~742~~108	)
Proceeds from credit facilites, net		642,720			257,725
Proceeds from line of credit, net		6,401,904			642,720
Repayment of convertible debentures		(154,211	)		(215,990	)
Payments on term loan financing		(5,646,589	)
Repayment of related party debt		-			(230,000	)
Proceeds under term loan financing		16,428,637
Proceeds from Trafalgar debenture, including derivative components		-			2,412,051
Repayment of convertible debentures		-			(154,211	)
Payment of deferred financing costs		-			(446,087	)
Repayment of related party debt		(200,000	)		-
NET CASH FLOWS FROM FINANCING ACTIVITIES		484,401			1,773,957
Proceeds from exercise of warrants		1,099,280			-
NET CASH FLOWS FROM FINANCING ACTIVITIES		18,080,612			484,401
EFFECT OF EXCHANGE RATE CHANGES ON CASH
AND CASH EQUIVALENTS		~~(335~~-	)		~~244,408~~(335	)
INCREASE (DECREASE) IN CASH AND
CASH EQUIVALENTS		~~(766~~144,~~377~~001	)		23(766,~~294~~377	)
CASH AND CASH EQUIVALENTS,
BEGINNING OF PERIOD		1674,~~141,271~~624			671,~~990~~141,271
CASH AND CASH EQUIVALENTS,
END OF PERIOD	$	~~374~~818,~~894~~625		$	91374,~~284~~894

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

CARBIZ INC. Notes to the Condensed Consolidated Financial Statements July 31, ~~2008~~2009 and ~~2007~~2008 (unaudited)

1.	DESCRIPTION OF BUSINESS AND SUMMARY OF ACCOUNTING POLICIES
	(a) Business and organization
	Carbiz Inc. (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. As of October 3, 2006, the Company’s common shares are quoted on the United States Over the Counter Bulletin Board. Prior to such date, the Company’s common shares were traded on the TSX Venture Exchange (“TXSV”), formerly the Canadian Venture Exchange (“CDNX”).
	In the opinion of management, all adjustments, consisting of normal recurring adjustments, have been made in the July 31, 2008 and 2007 financial statements, which are necessary for a fair financial statement presentation. The results for the three and six months ended July 31, 2008 and 2007 are not necessarily indicative of financial operations for the full year. These financial statements are combined and condensed. For further information, refer to the financial statements and footnotes in the Company’s audited financial statements for the year ended January 31, 2008 which are included in the Company’s Form 10-KSB filed with the U.S. Securities and Exchange Commission (the “SEC”) on April 30, 2008 (“January 31, 2008 Form 10-KSB”). The year-end condensed consolidated balance sheet data was derived from audited financial statements, but does not include all disclosures required by accounting principles generally accepted in the United States of America.
	References to the Company typically include the Company’s consolidated subsidiaries and joint venture. The Company’s operations are principally conducted through its five operating subsidiaries, Carbiz USA, Inc., a Delaware corporation, Carbiz Auto Credit, Inc. (“CAC”), Carbiz Auto Credit, AQ Inc. (“AQ”), Texas Auto Credit, Inc. (“Texas Auto”) (CAC, AQ and Texas Auto are all Florida corporations) and Carbiz Auto Credit JV1, LLC, a Florida limited liability company (“JV1”). Collectively, Carbiz Inc., Carbiz USA, Inc., CAC , AQ, Texas Auto, and JV1 are referred to herein as “Carbiz”or the “Company”
	All dollar figures presented in this report are denominated in U.S. dollars unless otherwise indicated.
	The Company is in the business of selling and financing used automobiles. Until recently it was also developing, marketing, distributing and supporting software and Internet products for the automotive sales finance industry. During the three and six months ended July 31, 2008, the Company operated 26 dealerships which sell and finance used automobiles. Included in the 26, are 23 locations acquired on October 1, 2007 throughout the Midwest in Illinois, Indiana, Iowa, Kentucky, Nebraska, Ohio and Oklahoma in addition to the two dealerships it operates in Florida and one in Texas. The Company began operation of its Texas location on December 24, 2007 with the purchase of a portfolio of used automobile and light truck loans, and an inventory of used automobiles and light trucks located in Houston, Texas. Sales operations for the Texas location were not authorized by the State of Texas until March 28, 2008. On January 24, 2007 the Company purchased the remaining 50% share of Carbiz Auto Credit JV1, LLC that it did not previously own. On July 2, 2008 the Company sold certain assets and liabilities related to the software operation that were used in the development, marketing, distribution and support of software and Internet products for the automotive sales finance industry. It did retain its automotive consulting business.
	(b) Going concern assumption
	While these condensed consolidated 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.

1.	BASIS OF PREPARATION AND SUMMARY OF ACCOUNTING POLICIES

The ~~Company~~accompanying ~~has~~unaudited ~~incurred~~condensed consolidated ~~losses~~financial statements have been prepared in ~~the~~accordance with ~~current~~accounting ~~periods~~principles ~~(exclusive~~generally ofaccepted ~~gains~~in onthe ~~derivative~~United ~~instruments~~States (“GAAP”) for interim financial information and with the ~~sale~~instructions ofto Form 10-Q and Article ~~the~~10 ~~software~~of ~~operations~~Regulation inS-X. ~~2008)~~Accordingly, ~~and~~they indo ~~each~~not include all of the ~~past~~information and ~~several~~footnotes ~~years~~required by GAAP for complete financial statements. ~~The~~In the opinion ~~Company~~of ~~had~~management, all adjustments (consisting of normal recurring accruals) considered necessary for a ~~working~~fair ~~capital~~presentation ~~deficiency~~of the results of ~~$9,329,303~~operations atfor the periods presented have been included. Operating results for the six months ended July 31, ~~2008.~~2009 ~~The Company’s~~and ~~continued~~2008 ~~existence~~are isnot ~~dependent~~necessarily ~~upon~~indicative ~~its~~of ~~ability~~the toresults ~~achieve~~that ~~profitable~~may ~~operations~~be ~~and~~expected tofor ~~obtain~~the ~~additional~~fiscal ~~financing~~year. The ~~Company~~balance ~~believes~~sheet at January 31, 2009 has ~~that~~been derived from the ~~new~~audited ~~dealerships~~financial statements at that date, ~~combined~~but ~~with~~does ~~its~~not include ~~existing~~all of the information and footnotes required by GAAP for complete financial statements.

You should read these condensed consolidated financial statements together with the historical consolidated financial statements of the Company for the years ended January 31, 2009, and 2008, included in our Annual Report on Form 10-K for the year ended January 31, 2009, filed with the Securities and Exchange Commission (“SEC”) on April 24, 2009 (the “Annual Report”).

References to the Company or Carbiz include the Company’s consolidated subsidiaries. All dollar figures presented in the condensed consolidated financial statements are denominated in U.S. dollars unless otherwise indicated.

Accounts, notes receivable and net investment in direct financing and sales-type leases

Accounts receivable, notes receivable and net investment in direct financing and sales-type leases (referred to as “lease receivables”) consist of balances due from customers related to consulting and collections services and the sale or leasing of used automobiles. They are presented in the condensed consolidated balance sheet net of an allowance for credit losses. Accounts receivables typically have terms of net 30 days. Notes and lease receivables have remaining terms of 12 to 60 months requiring weekly, bi-weekly or monthly payments. For note receivables, interest is calculated weekly based on the outstanding balance. For lease receivables, the interest is imputed in the lease payments.

Allowance for credit losses and concentration of credit risk

The allowance reflects the Company’s best estimate of probable losses inherent in the accounts, notes and lease receivables. The Company determines the allowances based on known troubled accounts, historical experience, credit quality of customers and other industry and Company economic considerations.

The Company initiates steps to pursue collection of payments for notes or lease receivables upon the customer’s first missed payment. Initial steps may include contacting the customer via telephone, performing a field visit to the customer’s work or home, or activating the automobile’s onboard starter disrupt system. When the initial steps are not successful, the Company takes steps to repossess the automobile. Once the automobile is in the Company’s possession, the vehicle is liquidated and the associated receivable account is charged off at the expiration of the applicable State’s statutory notice period for repossessed accounts, which is usually from 0 to 30 days long. In situations where the Company has been unable to successfully repossess the automobile, the account is written off immediately. When a customer’s account becomes severely delinquent (usually 14 days for weekly pay accounts, 30 days for bi-weekly pay accounts and 60 days for monthly pay accounts), the Company suspends accrual of interest income. Notes and lease receivables for accounts held in repossession are fully reserved for in the allowance for credit losses.

CARBIZ INC. Notes to the Condensed Consolidated Financial Statements July 31, ~~2008~~2009 and ~~2007~~2008 (unaudited)

1.	DESCRIPTION OF BUSINESS AND SUMMARY OF ACCOUNTING POLICIES (continued)
	consulting business will improve its operating cash flows going forward. However, there can be no assurance that the Company will achieve profitable operations or that financing efforts will be successful.
	If the going concern assumptions were not appropriate to these condensed consolidated financial statements, then adjustments would be necessary in the carrying values of assets and liabilities, the reported net income and the balance sheet classifications used.
	In addition, the Amended Credit Agreement contains financial covenants which require, among other things, that the Company maintain specified interest coverage and loss to liquidation ratios, and meet certain specified minimum net income, loan loss and collection requirements. The Company and the lender have agreed to continue to negotiate regarding certain additional financial covenants relating to maintenance of specific leverage ratios and minimum tangible net worth requirements. It is anticipated the agreement on the covenants will be reached within a reasonable time. However, these discussions have been ongoing since December 2007. If an agreement on such additional covenants is not reached within a reasonable time, it may constitute a default under the Amended Credit Agreement, which could result in the lender demanding the repayment of approximately $37,427,000 currently due under the Amended Credit Facility.
	(c) Significant accounting policies
	These condensed 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:
	Accounts and notes receivable
	Accounts and notes receivable shown are net of bad debt provisions. The amount includes short term notes received through the sale of used automobiles. The notes are for terms ranging from 80 weeks to 48 months and some 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 and notes receivable balances. The Company determines the allowance based on known troubled accounts, historical experience, and other currently available evidence.
	The Company takes steps to repossess a vehicle when the customer becomes severely delinquent in his or her payments, and management determines that timely collection of future payments is not probable. Accounts are charged off after the expiration of a statutory notice period for repossessed accounts, or when management determines that the timely collection of future payments is not probable for accounts where the Company has been unable to repossess the automobile.
	For accounts where the automobile was repossessed, the fair value of the repossessed automobile is charged as a reduction of the gross finance receivable balance written-off. On average, accounts are approximately 90 days past due at the time of write-off. For previously written-off accounts that are subsequently recovered, the amount of such recovery is credited to the allowance for credit losses.
	The Company maintains an allowance for credit losses on an aggregate basis at a level it considers sufficient to cover estimated losses in the collection of its finance receivables. The allowance for credit losses is based primarily upon historical credit loss experience, with consideration given to recent credit loss trends and changes in loan characteristics (i.e., average amount financed and term), delinquency levels, collateral values, economic conditions and underwriting and collection practices. The allowance for credit losses is periodically reviewed by management with any changes reflected in current operations. Although it is at least reasonably possible that events or circumstances could occur in the future that are not presently foreseen which could cause actual credit losses to be materially different from the recorded allowance for credit losses, the Company believes that it has given appropriate consideration to all relevant factors and has made reasonable assumptions in determining the allowance for credit losses.

1.	BASIS OF PREPARATION AND SUMMARY OF ACCOUNTING POLICIES (continued)

5The Company maintains an allowance for credit losses on an aggregate basis for the notes and lease receivable portfolio. Management considers the allowance for credit losses to be sufficient to cover estimated losses in the collection of outstanding receivables. The allowance is based primarily upon historical credit loss experience with consideration given to recent credit loss trends, changes in loan characteristics (i.e., average amounts financed and terms of the notes), delinquency levels, collateral values, economic conditions, and underwriting and collection practices. The allowance for credit losses is periodically reviewed by management with any changes reflected in current operations. Although it is at least reasonably possible that events or circumstances could occur in the future that are not presently foreseen which could cause actual credit losses to be materially different from the recorded allowance, the Company believes that it has given appropriate consideration to all relevant factors and has made reasonable assumptions in determining the allowance.

~~CARBIZ~~For ~~INC.~~accounts ~~Notes~~where tothe automobile was repossessed, the ~~Condensed~~difference ~~Consolidated~~between ~~Financial~~the ~~Statements~~loan ~~July~~or ~~31,~~lease ~~2008~~balance and ~~2007~~the fair value of the repossessed automobile (~~unaudited~~based on the average wholesale selling price at auction) is charged to the allowance for credit losses. Generally, repossessed automobiles are sold at auction. On average, accounts are approximately 60-90 days past due at the time of write-off. For previously written-off accounts that are subsequently recovered, the amount of such recovery is credited to the allowance for credit losses.

1.The ~~DESCRIPTION~~Company OFexpenses ~~BUSINESS~~all ~~AND~~costs ~~SUMMARY~~incurred in OFconnection ~~ACCOUNTING~~with ~~POLICIES~~the ~~(continued)~~process of initiating, refinancing or restructuring notes or lease receivables to include all costs related to underwriting, securing collateral, closing transactions, processing loan documents, and determining credit worthiness.

A comparison of the following classifications of notes receivable related to auto sales at July 31, 2008 and 2007 is presented below:

Florida stores portfolio:	July 31,
		2008			2007
		Amount	Number		Amount	Number
Active accounts	$	609,777	182	$	585,323	186
Accounts held in repossession	$	35,078	10	$	21,415	6
Accounts written off during six months	$	116,986	37	$	73,635	27

Midwest stores portfolio		July 31, 2008
		Amount	Number
Active accounts	$	18,346,408	4454
Accounts held in repossession	$	602,180	137
Accounts written off during six months	$	3,912,754	991

Texas portfolio:		July 31, 2008
		Amount	Number
Active accounts	$	9,670,407	994
Accounts held in repossession	$	605,105	52
Accounts written off during six months	$	1,798,204	221

Inventory

Inventory consists of used vehicles and is ~~related to the CAC, AQ, and Texas Auto operations. Inventory is~~ stated at the lower of cost or net realizable value. Cost is determined on a specific item basis.

~~Deferred~~Net ~~finance~~Income ~~costs~~per share

~~Deferred~~Net ~~finance~~Income ~~costs~~per ~~include~~share ~~fees paid~~was incomputed ~~conjunction~~based on ~~with~~ the ~~issuance~~following ofbasic ~~convertible debentures~~ and ~~entering into~~diluted ~~term~~weighted ~~loans,~~average ~~lines~~common ~~of credit, and inventory floor plans and are amortized~~shares ~~over the term of the related financial instruments. Approximate future amortization of deferred finance costs is as follows as of July 31, 2008~~outstanding:

Periods ending July 31
			Three months ended July 31,					Six months ended July 31,
~~2009~~	$	~~460,151~~	2009			2008		2009		2008
2010		248,968
	Net income attributable to common stockholders	$	4,417,892		$	1,530,838	$	31,688,957	$	1,556,148
2011		233,333
	Basic:
2012		34,498
	Weighted average shares outstanding		102,520,603			65,809,853		100,454,161		65,520,687
Thereafter		-
	Net income per common share - basic	$	0.04		$	0.02	$	0.32	$	0.02
	$	976,950
	Diluted:
	Net income attributable to common stockholders	$	4,417,892		$	1,530,838	$	31,688,957	$	1,556,148
	Adjustments to Net Income		(4,191,458	)				766,707
	Adjusted net income	$	226,434		$	1,530,838	$	32,455,664	$	1,556,148
	Weighted average shares outstanding - basic		102,520,603			65,809,853		100,454,161		65,520,687
	Effect of dilutive securities		99,295,069			949,999		97,367,707		984,374
	Adjusted weighted average share		201,815,672			66,759,852		197,821,868		66,505,061
	Net Income per common share (diluted)	$	0.00		$	0.02	$	0.16	$	0.02

CARBIZ INC.

Notes to the Condensed Consolidated Financial Statements

July 31, 2009 and 2008

(unaudited)

1.	BASIS OF PREPARATION AND SUMMARY OF ACCOUNTING POLICIES (continued)

The effects of 6,237,891 stock options, 1,397,488 common stock warrants, 2,040,000 non-vested shares from an incentive stock grant and 41,250,089 shares indexed to the derivative liabilities outstanding have been excluded from dilutive securities for the six months ended July 31, 2009, as their effect would be anti-dilutive. In addition, 8,438,041 options and 31,923,604 warrants have been excluded from dilutive securities for the six months ended July 31, 2008.

Fair value of financial assets and liabilities

The Company measures the fair value of financial assets and liabilities based on guidance of Financial Accounting Standards No. 157, “Fair Value Measurements” (“FAS 157”) which defines fair value, establishes a framework for measuring fair value, and expands disclosures about fair value measurements. FAS 157 describes three levels of inputs that may be used to measure fair value as follows:

Level 1 - quoted prices in active markets for identical assets or liabilities;
Level 2 - quoted prices for similar assets and liabilities in active markets or inputs that are observable;
Level 3 - inputs that are unobservable (for example cash flow modeling inputs based on assumptions).

The following table summarizes the level of inputs used to measure certain financial instruments at fair value on a recurring basis as of July 31, 2009:

		Fair Value Measurements Using
		Level 1		Level 2		Level 3		Total

Derivative
liabilities at
July 31, 2009	$	--	$	--	$	7,807,054	$	7,807,054

The following represents a reconciliation of the changes in fair value of financial instruments measured at fair value on a recurring basis using significant unobservable inputs (Level 3) during the six months ended July 31, 2009:

Beginning balance: Derivative financial instruments	$	11,796,217
Total (gains) losses		(53,319	)
Purchases, sales, issuances and settlements, net)
		(4,042,482	)
Ending balance	$	7,807,054

Revenue recognition

The Company’s revenue is primarily derived from the sale and leasing of used vehicles, and the sale of consulting and collections services to dealers in the automobile industry:

	(1)	Used automobile sales:

		The Company recognizes revenue on the sale of automobiles upon execution of the sales contract, the customer taking possession of the automobile, and financing having been approved. Customers are required to meet certain underwriting guidelines in order to obtain financing of the automobile through the Company.

	(2)	Used automobile leases:

		The Company recognizes revenue on the lease of automobiles upon execution of the lease contract, the customer taking possession of the automobile, and lease financing having been approved. Customers

CARBIZ INC. Notes to the Condensed Consolidated Financial Statements July 31, ~~2008~~2009 and ~~2007~~2008 (unaudited)

1.	DESCRIPTION OF BUSINESS AND SUMMARY OF ACCOUNTING POLICIES (continued)
	Net income per share
	The following table reconciles the numerators and denominators of the basic and diluted income per share computations.

1.	BASIS OF PREPARATION AND SUMMARY OF ACCOUNTING POLICIES (continued)

		Three Months Ended July 31					Six Months Ended July 31
	are required to meet certain underwriting guidelines in order to obtain lease financing of the automobile through the Company. The Company accounts for leases as a “sales-type lease”.
		2008		2007			2008		2007
(3)	Consulting and collections services
Net income attributable to common stockholder-(numerator)	$	1,530,838	$	(2,712,098	)	$	1,556,148	$	(1,951,924	)
	The Company generates revenue from the sale of consulting and collections services. These fees include charges for training seminars, performance group seminars, consulting engagements and collection and skip tracing services to the automobile industry. Revenue is recognized when a signed contract has been executed, the services have been delivered, fees are fixed or determinable, collectability is reasonable assured 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.
Basic:
(4)	Consulting products
Weighted average shares outstanding (denominator)		65,809,853		64,224,404			65,520,687		64,224,404
	The Company also 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.
Net income per common share - basic	$	0.02	$	(0.04	)	$	0.02	$	(0.03	)
Diluted:
Weighted average shares outstanding - basic		65,809,853		64,224,404			65,520,687		64,224,404
Effect of dilutive securities		949,999		-			984,374		-
Adjusted wieghted average share (denominator)		66,759,852		64,224,404			66,505,061		64,224,404
Net income per common share (diluted)	$	0.02	$	(0.04	)	$	0.02	$	(0.03	)

~~The~~Lease effects of all stock options and warrants outstanding have been excluded from Common Stock equivalents because their effect would be anti-dilutive. At July 31, 2008, 8,438,041 options and 31,923,604 warrants were outstanding.transactions

~~Share-based~~To ~~compensation~~qualify for financing under the new DSC financing agreement (see note 3), the Company converted a number of existing finance note receivables to lease receivables in February 2009. The Company considered these transactions to be “direct financing leases” and accounted for the leases including the minimum lease payments and the unguaranteed residual value as the gross investment in the lease. The difference between this gross investment and the cost or carrying amount was recorded as unearned income. The unearned income and initial direct costs are being amortized to income over the lease term so as to produce a constant periodic rate of return on the net investment in the lease. The difference between the original finance note receivable and the new lease total of payments was recorded as a period expense and charged to income (see note 3). The sales tax and title fees costs related to this conversion were also taken as a period expense.

~~The~~Any ~~Company~~new ~~uses~~leases ~~the~~are ~~fair~~considered “sales-~~value~~type ~~method to~~leases” ~~determine compensation for all arrangements under which employees~~ and ~~others receive shares of stock or equity instruments. The fair value of each option award is estimated on~~ the ~~date~~minimum oflease ~~grant~~payments ~~using the Black-Scholes valuation model that uses assumptions for expected volatility, expected dividends, expected term,~~ and the ~~risk-free~~residual ~~interest~~value ~~rate. Expected volatilities are based on weighted average~~ of the ~~historical volatility of the Company’s stock measured on~~ aunderlying ~~once~~auto ~~monthly~~are ~~basis~~considered ~~over~~in the ~~expected~~fair ~~term of the options~~value. The ~~expected~~revenue ~~term~~recognition offor ~~options~~sales-type ~~granted~~leases isinvolves ~~derived~~recognizing ~~using~~both ~~the~~a ~~“simplified~~profit ~~method”which~~element ~~computes~~and ~~expected terms~~a ~~as the average of the sum of the vesting term plus the contract term. The~~financing ~~risk-free~~element ~~rate is based on the U.S. Treasury yield curve in effect~~ at the time of ~~grant for the period~~ of the ~~expected~~lease ~~term~~initiation.

NoTransfer ~~stock~~of ~~options~~Financial ~~were granted during the six months ended July 31, 2008.~~Assets

~~During~~From time to time during the six months ending ~~ended~~ July 31, ~~2008,~~ 2009 the Company ~~recognized~~has ~~share-based~~sold ~~compensation~~portions ~~expense~~ of ~~$36,179~~its ~~for~~previously generated ~~stock~~and ~~options~~recently ~~previously~~acquired ~~granted~~financed tonote ~~employees,~~receivable ~~$39,000~~portfolio. ~~for~~All ~~incentive~~portfolio ~~stock~~sales ~~granted~~during tothis ~~employees~~period ~~and~~have ~~$47,511~~met ofthe ~~expense~~requirements for ~~stock previously granted to consultants for services rendered under~~ a ~~contract~~sale ~~with~~and athe ~~term~~Company ~~which~~did ~~required~~not retain the ~~amortization~~right ofto ~~the~~service ~~total~~or ~~expense~~collect those loans.

OnUse ~~January 25, 2007, the Company awarded 3,400,000 common shares as restricted stock to certain directors, officers, and key employees~~ of the Company of which 680,000 shares have been vested as of July 31, 2008. During the six months ended July 31, 2008 the Company recognized share-based compensation expense of $64,600 as a result of this restricted stock grant.estimates

~~Total~~In ~~options~~preparing ~~outstanding~~the Company’s consolidated financial statements in accordance with GAAP, management is required to make estimates and ~~vested~~assumptions that affect the reported amount of assets, liabilities, and the disclosure of contingent liabilities at the dates of the ~~July~~consolidated ~~31,~~financial ~~2008~~statements ~~were~~and 3the reported amounts of revenues and expenses during the reporting periods. Actual results could differ from those estimates. Estimates are used when accounting for items and matters such as the allowance for credit losses,~~958~~ accrued liabilities,~~041~~ share-based payments, derivative liabilities and contingencies.

CARBIZ INC. Notes to the Condensed Consolidated Financial Statements July 31, ~~2008~~2009 and ~~2007~~2008 (unaudited)

1. ~~DESCRIPTION~~BASIS OF ~~BUSINESS~~PREPARATION AND SUMMARY OF ACCOUNTING POLICIES (continued) ~~Weighted average exercise price and weighted average life were as follows:~~

	Number of	Weighted	Weighted Average
	Options	Average Life (Yrs)	Exercise Price
1998 Plan *	2,838,041	0.8	$0.25
2007 Plan	1,120,000	3.5	$0.13
Total	3,958,041

Deferred finance costs

~~(*)~~Deferred ~~This~~finance ~~series~~costs ofinclude ~~options~~the ~~were~~fair ~~denominated~~value inof ~~Canadian~~warrants ~~dollars.~~issued ~~For~~to ~~purpose~~an ofexisting ~~this~~lender ~~schedule~~in conjunction with the ~~exercise~~issuance ~~prices~~of ~~have~~the ~~been~~Wells ~~converted~~Fargo ~~into~~Preferred UCredit line of credit.S. ~~dollars~~They ~~based~~will onbe amortized over the ~~foreign~~term ~~exchange~~of ~~rate~~the respective financing arrangement. Approximate future amortization of deferred finance costs is as atfollows as of July 31, ~~2008.~~2009:

The market value of the Company’s common stock at July 31, 2008 was $0.10; therefore the intrinsic value of all options outstanding and vested at July 31, 2008 was $0. In addition, non-vested options to purchase 4,480,000 shares were outstanding at July 31, 2008 with a weighted average exercise price of $0.13 per share and a weighted average life of 3.5 years. The Company will record $349,720 of additional compensation expense during the subsequent 42 months for non-vested options outstanding as of July 31, 2008.

Years ending July 31
2010	$	1,348,243
2011		730,298

	$	2,078,541

~~Recent~~Prepaid ~~accounting pronouncements~~interest

InPrepaid ~~March~~interest ~~2008,~~included the ~~FASB issued SFAS No.~~initial ~~161,~~interest ~~Disclosures~~recorded ~~about~~in ~~Derivative~~conjunction ~~Instruments~~with ~~and~~the ~~Hedging~~issuance ~~Activities (“SFAS~~of ~~161”).~~the ~~This~~Wells ~~statement~~Fargo ~~requires companies to provide enhanced~~Preferred ~~disclosures~~Credit ~~about~~line ~~(a)~~of ~~how~~credit and ~~why~~is ~~they~~amortized ~~use~~over ~~derivative~~the ~~instruments,~~term ~~(b)~~of ~~how derivative~~the ~~instruments~~respective ~~and~~financing arrangement. ~~related~~Such ~~hedged~~amount ~~items~~was ~~are~~determined ~~accounted~~by ~~for~~comparing ~~under Statement~~the ~~133~~cost ~~and~~of ~~its~~the ~~related~~acquired portfolio ~~interpretations,~~ and ~~(c)~~other ~~how~~assets ~~derivative instruments~~to ~~and~~the ~~related~~fair ~~hedged~~value ~~items~~of ~~affect~~such aassets ~~company’s financial position~~acquired, ~~financial~~ ~~performance,~~ and ~~cash flows. SFAS 161 is effective for financial~~the ~~statements~~difference ~~issued~~was ~~for~~recognized ~~fiscal~~as ~~years~~prepaid ~~and~~interest ~~interim~~(see ~~periods~~Note ~~beginning after November 15, 2008~~8). ~~The~~Approximate ~~Company will adopt the new disclosure requirements on or before~~future ~~the~~amortization ~~required~~of ~~effective~~prepaid ~~date~~interest ~~and~~is ~~thus~~as ~~will~~follows ~~provide~~as ~~additional~~of ~~disclosures~~July in31, ~~its consolidated financial statements when adopted.~~ 2009:

In April 2008, FASB Staff Position No. 142-3, Determination of the Useful Life of Intangible Assets (FSP 142-3) was issued. This standard amends the factors that should be considered in developing renewal or extension assumptions used to determine the useful life of a recognized intangible asset under FASB Statement No. 142, Goodwill and Other Intangible Assets. FSP 142-3 is effective for financial statements issued for fiscal years beginning after December 15, 2008, and interim periods within those fiscal years. Early adoption is prohibited. The Company does not expect the adoption of FSP 142-3 to have a material effect on its financial statements.

Years ending July 31
2010	$	1,035,291
2011		905,880

	$	1,941,171

InSubsequent May 2008, the FASB issued Statement of Financial Accounting Standards (“SFAS”) No. 162, The Hierarchy of Generally Accepted Accounting Principles. This standard is intended to improve financial reporting by identifying a consistent framework, or hierarchy, for selecting accounting principles to be used in preparing financial statements that are presented in conformity with generally accepted accounting principles in the United States for non-governmental entities. SFAS No. 162 is effective 60 days following approval by the U.S. Securities and Exchange Commission (“SEC”) of the Public Company Accounting Oversight Board’s amendments to AU Section 411, The Meaning of Present Fairly in Conformity with Generally Accepted Accounting Principles. The Company does not expect SFAS No. 162 to have a material impact on the preparation of the consolidated financial statements.events

InManagement ~~May~~has ~~2008,~~considered ~~the Financial Accounting~~all ~~Standards~~subsequent ~~Board~~events ~~(FASB)~~through ~~affirmed~~ the ~~consensus~~date of ~~FASB~~filing Staff Position APB 14-1 (FSP APB 14-1), “Accounting for Convertible Debt Instruments That May Be Settled in Cash upon Conversion (Including Partial Cash Settlement)”, which applies to all convertible debt instruments that have a “net settlement feature”, which means that such convertible debt instruments, by their terms, may be settled either wholly or partially in cash upon conversion. FSP APB 14-1 requires issuers of ~~convertible debt instruments that may be settled wholly or partially in cash upon conversion to separately account for~~ the ~~liability~~report ~~and~~with ~~equity components in a manner reflective of~~ the ~~issuers’nonconvertible debt borrowing rate~~SEC. ~~FSP APB 14-1 is effective for financial statements issued for fiscal years beginning after December 15, 2008 and~~

Effect of recent accounting pronouncements

In April 2009, the Financial Accounting Standards Board (FASB) issued FASB Staff Position (FSP) 107-1 and APB 28-1, Interim Disclosures about Fair Value of Financial Instruments (“FSP 107-1”). FSP 107-1 amends FASB Statement No. 107 to require disclosures about fair value of financial instruments for interim reporting periods of publicly traded companies in addition to the annual financial statements. FSP 107-1 also amends APB No. 28 to require those disclosures in summarized financial information at interim reporting periods. FSP 107-1 is effective for interim periods ending after June 15, 2009. Prior period presentation is not required for comparative purposes at initial adoption. Management is reviewing this pronouncement to determine its affect, if any, on the Company’s Consolidated Financial Statements.

In April 2009, the FASB issued FSP 115-2 and 124-2, Recognition and Presentation of Other-Than-Temporary Impairments (“FSP 115-2 and 124-2”). FSP 115-2 and 124-2 amends the other-than-temporary impairment guidance in U.S. GAAP for debt securities to make the guidance more operational and to improve the presentation and disclosure of other-than-temporary impairments on debt and equity securities in the financial statements. FSP 115-2 and 124-2 is effective for fiscal years and interim periods beginning after June 15, 2009. Management is reviewing this pronouncement to determine its affect, if any, on the Company’s Consolidated Financial Statements.

CARBIZ INC. Notes to the Condensed Consolidated Financial Statements July 31, ~~2008~~2009 and ~~2007~~2008 (unaudited)

1. DESCRIPTION OF BUSINESS AND SUMMARY OF ACCOUNTING POLICIES (continued)

1.	BASIS OF PREPARATION AND SUMMARY OF ACCOUNTING POLICIES (continued)

	In April 2009, the FASB issued FSP 157-4, Determining Fair Value When the Volume and Level of Activity for the Asset or Liability Have Significantly Decreased and Identifying Transactions That are Not Orderly (“FSP 157-4”). FSP 157-4 provides additional guidance for estimating fair value in accordance with FASB Statement No. 157 when the volume and level of activity for both financial and nonfinancial assets or liabilities have significantly decreased. FSP 157-4 is effective for fiscal years and interim periods beginning after July 1, 2009 and shall be applied prospectively. Early adoption for periods ending before March 15, 2009 is not permitted. Management is reviewing this pronouncement to determine its affect, if any, on the Company’s Consolidated Financial Statements.

	In May 2009, the FASB issued Statement No. 165, Subsequent Events, which provides guidance establishing standards for disclosure of events that occur after the balance sheet date but before financial statements are issued. The Statement is effective for fiscal years and interim periods ending after June 15, 2009, and shall be applied prospectively. The Company has included all disclosures required by this standard in these Condensed Consolidated Financial Statements.

	In June 2009, the FASB issued Statement No. 166, Accounting for Transfers of Financial Assets, which provides guidance to improve the relevance, representational faithfulness, and comparability of the information that a reporting entity provides in its financial statements about a transfer of financial assets; the effects of a transfer on its financial position, financial performance, and cash flows; and a transferor’s continuing involvement, if any, in transferred financial assets. The Statement is effective for fiscal years ending after November 15, 2009, and shall not be applied prospectively. Management is reviewing this pronouncement to determine its affect, if any, on the Company’s Consolidated Financial Statements.

	In June 2009, the FASB issued Statement No. 168, The FASB Accounting Standards Codification^,which will become the source of authoritative U.S. generally accepted accounting principles (GAAP) recognized by the FASB to be applied by nongovernmental entities. Rules and interpretive releases of the Securities and Exchange Commission (SEC) under authority of federal securities laws are also sources of authoritative GAAP for SEC registrants. On the effective date of this Statement, the Codification will supersede all then- existing non-SEC accounting and reporting standards. All other non-grandfathered non-SEC accounting literature not included in the Codification will become non-authoritative. This Statement is effective for financial statements issued for interim and annual periods ending after September 15, 2009.

2.	LIQUIDITY AND MANAGEMENT’S PLANS

	As of July 31, 2009, the Company had $818,625 in cash and cash equivalents. The Company has incurred significant net losses and negative cash flows from operations in each of the two years ended January 31, 2009, however, during the six months ended July 31, 2009, the Company recorded $31.7 million net income, which includes a $33.2 million gain on the extinguishment of debt. As of July 31, 2009, the Company had a stockholders’ deficit of $665,684 versus $34.7 million at January 31, 2009.

	In February 2009, the Company completed a restructuring of floor plan and receivables debt held by SWC Services LLC (SWC) with Dealer Services Corporation (DSC). The restructured debt agreement provides the Company with a maximum credit facility of $19.5 million for floor plan and lease financing. Although the Company had approximately $43.3 million of outstanding notes payable as of January 31, 2009, effective February 20, 2009, the Company was only obligated to repay $12.0 million of this amount due to the debt restructuring. The $12.0 million is payable in installments over the next 24 months and is included in the aforementioned new credit facility.

	On June 15, 2009, the Company obtained a revolving line of credit with Wells Fargo Preferred Capital for up to $20 million that will provide capital based upon the Company’s eligible financed notes receivable. The line of credit is a 2 year commitment and interest is payable monthly.

interim periods within those fiscal years. Early adoption is not permitted and retroactive application to all periods presented is required. The Company has not determined the impact on its financial statements of this accounting standard.

Fair value disclosure

In September 2006, the FASB issued Statement of Financial Accounting Standards No. 157, “Fair Value Measurements”(“Statement No. 157”) which defines fair value, establishes a framework for measuring fair value, and expands disclosures about fair value measurements. Statement No. 157 applies to other accounting pronouncements that require or permit fair value measurements and does not require any new fair value measurements.

In February 2008, the FASB issued FASB Staff Position 157-2, which provides for a one-year deferral of the provisions of Statement No. 157 for non-financial assets and liabilities that are recognized or disclosed at fair value in the consolidated financial statements on a non-recurring basis. The Company is currently evaluating the impact of adopting the provisions of Statement No. 157 for non-financial assets and liabilities that are recognized or disclosed on a non-recurring basis.

Effective February 1, 2008, the Company adopted the provisions of Statement No. 157 for financial assets and liabilities, as well as for any other assets and liabilities that are carried at fair value on a recurring basis. The adoption of the provisions of Statement No. 157 related to financial assets and liabilities and other assets and liabilities that are carried at fair value on a recurring basis did not materially impact the Company’s consolidated financial position and results of operations.

Statement No. 157 defines fair value as the exchange price that would be received for an asset or paid to transfer a liability (an exit price) in the principal or most advantageous market for the asset or liability in an orderly transaction between market participants on the measurement date. Statement No. 157 also establishes a fair value hierarchy, which requires an entity to maximize the use of observable inputs and minimize the use of unobservable inputs when measuring fair value. Statement No. 157 describes three levels of inputs that may be used to measure fair value:

Level 1 - quoted prices in active markets for identical assets or liabilities; Level 2 - quoted prices for similar assets and liabilities in active markets or inputs that are observable;Level 3 - inputs that are unobservable (for example cash flow modeling inputs based on assumptions).

The following table summarizes liabilities measured at fair value on a recurring basis at July 31, 2008, as required by Statement No. 157.

				Fair Value Measurements Using
		Level 1		Level 2		Level 3		Total
Liabilities
Derivative liabilities	$	--	$	--	$	4,628,207	$	4,628,207

CARBIZ INC. Notes to the Condensed Consolidated Financial Statements July 31, ~~2008~~2009 and ~~2007~~2008 (unaudited)

2. ~~ACCOUNTS~~LIQUIDITY ~~RECEIVABLE~~ AND ~~NOTES~~MANAGEMENT’S ~~RECEIVABLE~~PLANS (continued)

			July 31, 2008
Trade receivables from software & consulting		$	44,111
Less: Allowance for doubtful accounts			2,206
			41,905
Notes receivable from vehicle sales –Florida			644,855
Less: Allowance for doubtful accounts			128,226
			516,629
Notes receivable from vehicle sales –Midwest			18,948,588
Less: Allowance for doubtful accounts			3,759,935
			15,188,653
Notes receivable from vehicle sales –Texas Auto			10,275,512
Less: Allowance for doubtful accounts			2,099,631
			8,175,881
Long-term portion of notes receivable	Florida		180,820
	Midwest		5,316,029
	Texas Auto		2,861,558
	Total		8,358,407
Current portion of notes receivable	Florida		335,809
	Midwest		9,872,624
	Texas Auto		5,314,323
	Total	$	15,522,756

During the six months ending July 31, 2009, a board member warrant holder exercised 11,762,351 common stock warrants with proceeds to the company of $1,099,280.

~~The~~With ~~future~~the ~~maturities~~Company’s new financing agreements in place and our existing cash and cash equivalents are believed by management to be sufficient to finance planned operations, debt repayment obligations and capital expenditures through the second quarter of fiscal year 2012, but in order to proceed with the ~~long~~Company’s current expansion plan for operations in the Buy-~~term~~Here-Pay-Here and Lease-Here-Pay-Here industries, ~~portion~~additional ofcapital may be required. The Company’s ability to arrange such financing in the ~~notes~~future ~~receivable~~will ~~for~~depend in part upon the ~~subsequent~~prevailing ~~periods~~capital ~~ending~~market conditions ~~July~~as ~~31,~~well ~~2009~~as business performance. There can be no assurance that the ~~through~~Company ~~2012~~will ~~are~~be ~~$8,375,176~~successful in ~~fiscal~~these ~~year~~efforts ~~2010~~to arrange additional financing, $3if needed,~~224~~ on terms satisfactory to it or at all. Available resources may be consumed more rapidly than currently anticipated,~~169~~ resulting in ~~fiscal~~the ~~year~~need ~~2011,~~for ~~and~~additional ~~$1,062,865~~funding sooner than anticipated. The failure to obtain adequate financing could result in ~~fiscal~~a ~~year~~substantial ~~2012~~curtailment of the Company’s operations. Accordingly, the Company anticipates that it may be required to raise additional capital through a variety of sources, including:

~~During~~public ~~the~~equity ~~six~~markets; ~~month periods ended July~~private ~~31,~~equity ~~2008,~~financings; ~~and~~public ~~2007,~~or ~~the~~private ~~Company~~debt; ~~earned $3,309,130~~ and ~~$35,541,~~exercise ~~respectively,~~ of ~~financing~~ ~~income on the notes receivable. This amount has been included as~~existing ~~interest~~warrants ~~income~~and ~~within~~stock ~~Revenues in these condensed consolidated financial statements~~options.

~~Activity~~The inrecent worldwide financial and credit crisis has strained investor liquidity and contracted credit markets. If this environment continues or worsens, it may make the ~~allowance~~future ~~for~~cost ~~doubtful~~of raising ~~accounts~~funds ~~for~~through the ~~six~~debt ~~months~~or ~~ended~~equity ~~July~~markets ~~31,~~more ~~2008~~expensive or make those markets unavailable at a time when the Company requires additional financial investment. If the Company is asunable ~~follows:~~to attract additional funds it may adversely affect its ability to achieve its development and commercialization goals, which could have a material and adverse effect on its business, results of operations and financial condition.

		Software			Florida			Midwest			Texas			Total 2008			2007
Balance at Beginning of Year	$	8,543		$	117,161		$	4,103,125		$	3,526,902			7,755,731		$	83,775
Charged to Expenses		(3,612	)		26,507			1,591,593			116,553			1,731,041			4,153
Write-offs and Other		486			(23,813	)		(1,989,675	)		(876,669	)		(2,889,671	)		(28,505	)
Balance at April 30, 2008		5,417			119,855			3,705,043			2,766,786			6,597,101			59,423
Charged to Expenses		69,215			101,544			1,977,971			254,380			2,403,110			52,887
Write-offs and Other		(72,426	)		(93,173	)		(1,923,079	)		(921,535	)		(3,010,213	)		(41,805	)
Balance at end of period	$	2,206		$	128,226		$	3,759,935		$	2,099,631		$	5,989,998		$	70,505

3.	ACCOUNTS RECEIVABLE, NOTES RECEIVABLE AND NET INVESTMENT IN DIRECT FINANCING AND SALES-TYPE LEASES

The average net balance of outstanding note receivables and investment in direct financing and sales-type leases were approximately $28.7 million and $24 million during the six months ended July 31, 2009 and 2008, respectively. The Company earned approximately $3.4 million and $3.3 million of interest and lease income on note and lease receivables with an average yield of 20.10% and 21.00% during the six months ended July 31, 2009 and 2008, respectively. Those amounts have been included as interest and lease income within revenues in these Condensed Consolidated Financial Statements. The Company paid an average effective interest rate of 16.24% to finance the notes receivable and net investment in direct financing and sales-type lease balances during both the six months ended July, 31 2009 and 2008.

CARBIZ INC. Notes to the Condensed Consolidated Financial Statements July 31, ~~2008~~2009 and ~~2007~~2008 (unaudited)

3. ~~LONG~~ACCOUNTS RECEIVABLE, NOTES RECEIVABLE AND NET INVESTMENT IN DIRECT FINANCING AND SALES-~~TERM~~TYPE ~~DEBT~~LEASES (continued)

~~The~~Accounts, ~~future~~notes ~~maturities~~receivable ofand investment ~~the~~in ~~line~~direct ~~of credit~~financing and ~~floor~~sales-type ~~plan~~leases ~~are~~consist ~~estimated~~of ~~as follows~~the following:

Years ending July 31
			Active Account Balances as of July 31, 2009
2009	$	20,314,501
						Accounts			Accounts
2010		11,071,814
			Active			Held in			Delinquent
2011		4,268,498
			Accounts			Repossession			>90 Days			Total
2012		1,412,525
	Accounts receivable	$	243,727						61,730		$	305,457
Total long term debt	$	37,067,338
	Less: Allowance for credit losses		(2,945	)					(20,730	)		(23,675	)
		$	240,782		$	-		$	41,000		$	281,782
	Notes receivable	$	21,358,580		$	816,380		$	611,451		$	22,786,411
	Investment in direct financing
	and sales-type leases		13,866,261			460,930						14,327,191
	Less: Allowance for credit losses		(6,774,012	)		(1,277,310	)		(611,451	)		(8,662,773	)
		$	28,450,829		$	-		$	-		$	28,450,829
	Notes receivable, net :
	Current	$	8,042,225								$	8,042,225
	Non-current		8,929,567									8,929,567
	Investment in direct financing
	and sales-type leases, net
	Current		6,481,824									6,481,824
	Non-current		4,997,213									4,997,213
		$	28,450,829		$	-		$	-		$	28,450,829

These estimated maturities are based upon the Company’s projected repayment schedules which are affected by the expected collection periods of existing notes receivable rather than the contracted latest repayment date stipulated in the agreement.

	Number of Accounts as of July 31, 2009
Accounts Receivable	50		10	60
Notes	3321	94	114	3529
Leases	2329	74	0	2403

4.Notes ~~CONVERTIBLE~~receivable ~~DEBENTURE~~and net investment in direct financing and sales-type leases have an average remaining portfolio life of 29 and 21 months, respectively.

AsThe components of ~~July~~the ~~31,~~net ~~2008~~investment ~~the~~in direct ~~Company~~financing ~~had~~and ~~outstanding Convertible~~sales-type ~~Debentures~~leases at July 31, 2009 are as follows:

a) $2,253,131 face value convertible debenture due February 28, 2009	$	1,288,065
Total future minimum lease payments		15,099,757
b) $953,488 face value convertible debenture due August 31, 2008		105,265
Unguaranteed residual value		3,312,058
c) $1,500,000 face value convertible debenture due September 26, 2009		290,075
Unearned income		(4,084,624	)
d) $800,000 face value convertible debenture due December 1, 2011		49,283
Gross net investment in direct financing and sales-type leases		14,327,191
		1,732,688
Loss allowance for credit losses		(2,848,154	)
Less current portion		(1,572,981	)
		11,479,037
Long-term portion	$	159,707

The ~~unamortized~~average ~~discount~~remaining oflife ~~$3,773,931~~for the ~~will~~lease beportfolio ~~amortized~~is ~~utilizing~~21 months, and the ~~effective~~future ~~interest~~expected ~~method~~maturities ~~through~~are approximately $6.5 million during this year and $5.0 million the ~~respective~~following ~~maturity dates~~year.

5. LIQUIDATED DAMAGES

The Trafalgar financings include registration rights agreements which, under certain circumstances, include provisions that require the Company to pay liquidated damages, in the event effective registrations are not in place on a timely basis for the underlying shares in the Trafalgar transactions. The Company originally filed a Registration Statement on Form SB-2 on April 17, 2007. Such registration was updated and amended several times until it was finally approved and declared effective on March 24, 2008 as an amended SB-2 on Form F-3. On November 21, 2007, the Company was invoiced by Trafalgar for a total of $165,184 of liquidated damages. The Company was further invoiced an additional $54,192 on February 13, 2008. Both amounts ($219,376) were recorded as interest expense during the year ended January 31, 2008. Since the registration rights agreements call for liquidated damages up to 15%, a remaining contingent liability of $155,624 remains under the $2,500,000 Trafalgar financing. In addition, the $1,000,000 September 10, 2007 and $1,500,000 September 26, 2007 Trafalgar financings have similar registration rights provisions (limited to 15%) with contingent amounts of $150,000 and $225,000. The Form F-3 filing declared effective on March 24, 2008, included the maximum number for shares underlying both the convertible debentures and warrants held by Trafalgar as allowed under SEC Rule 415. No additional invoices for liquidated damages have been received and the Company believes that no additional expense will be incurred as the registration statement requirements for filing have been fulfilled.

CARBIZ INC. Notes to the Condensed Consolidated Financial Statements July 31, ~~2008~~2009 and ~~2007~~2008 (unaudited)

6.	COMMON STOCK
	(a) Conversion of convertible debentures
	During the six months ended July 31, 2008, the Company issued 597,868 shares of common stock at conversion prices ranging from $0.136 to $0.1488 in a series of Trafalgar Convertible Debenture conversions. As a result of these transactions, the unamortized discount and deferred financing costs of an aggregate of approximately $128,000 were charged to Additional Paid-in Capital.
	(b) Unregistered shares for investment banking services
	On April 7, 2008, the Company entered into a non-exclusive investment banking arrangement for a six month period. The Company paid an initial non-refundable $5,000 retainer and will pay an additional monthly retainer of $2,500 for 6 months which began on May 15, 2008. In addition, the Company issued 250,000 unregistered common shares on May 15, 2008 which were valued at $0.15 per share and will be expensed over the six month term of the contract.
	(c) Unregistered shares for executive officer compensation
	On February 1, 2008, the Company issued 150,000 unregistered common shares for discretionary
	management compensation. Compensation expense of $39,000, based on the market value of $0.26, was recorded during the six months ended July 31, 2008.
	(d) Issued and outstanding common shares
	Issued and outstanding common shares as of January 31, 2008 as previously reported (67,590,681 shares) has been corrected to properly exclude the grant of 2,720,000 share of unvested incentive stock. This correction has no effect on previously reported net income (loss) or net income (loss) per share as the Company properly excluded these shares and associated expense in the January 31, 2008 consolidated financial statements.
7.	DERIVATIVE LIABILITIES
	Fair values of derivative liabilities at July 31, 2008 were as follows:

3.	ACCOUNTS RECEIVABLE, NOTES RECEIVABLE AND NET INVESTMENT IN DIRECT FINANCING AND SALES-TYPE LEASES (continued)

		Compound
		Embedded		Warrant		Total
		Derivatives		Derivatives		Derivatives
$2,253,131 face value convertible debenture due February 28,2009	$	1,225,306	$	214,750	$	1,440,056
$953,488 face value convertible debenture due August 31, 2008		203,048		136,600		339,648
$1,500,000 face value convertible debenture due September 26, 2009		886,882		153,950		1,040,832
$800,000 face value convertible debenture due December 1, 2010		730,771		-		730,771
2004 warrants expiring October 6, 2009				359,123		359,123
2004 warrants expiring October 10, 2010				646,444		646,444
2004 warrants expiring April 6, 2011				18,378		18,378
2006 warrants expiring September 5, 2008				1,720		1,720
2004 warrants expiring October 6, 2011				51,235		51,235
	$	3,046,007	$	1,582,200	$	4,628,207

Allowance for credit loss activity is as follows for the six months ended July 31, 2009

		Used Car			Consulting and
		Sales and Leases			Collections
January 31, 2009	$	6,250,031		$	1,093
Provision for credit losses		1,589,046			-
Write-offs of gross notes receivable		(812,989	)		-
Fair value of repossessed vehicles		327,131			-
Recoveries of notes receivable		3,744			-
April 30, 2009		7,356,963			1,093
Provision for credit losses		1,763,898			22,582
Write-offs of notes and lease receivables		(963,993	)
Fair value of repossessed vehicles		201,358
Recoveries of notes receivable		280,872
July 31, 2009	$	8,639,098		$	23,675

4.	CREDIT FACILITIES

Dealer Services Corporation

On January 16, 2009, the Company entered into an Asset Purchase Agreement with Dealer Services Corporation (“DSC”) and the Chapter 7 Trustee of SWC Services LLC (“SWC Trustee”). Pursuant to the agreement, DSC agreed to purchase all of the rights and interest of SWC under the Company’s loan agreement with SWC for $12 million.

In connection therewith, DSC agreed to forgive all of the outstanding balance due by the Company under the SWC Loan Agreement in excess of $12,000,000. On February 20, 2009, the Asset Purchase Agreement was consummated when the Company had a total balance of approximately $43.3 million outstanding under the SWC credit facilities. DSC forgave approximately $31.3 million dollars worth of that debt and executed a $14 million new credit facility (“New Loan Agreement”), $12 million of which represented the then remaining balance due under the SWC Loan Agreement.

Pursuant to that New Loan Agreement, the Company had to convert a number of outstanding notes receivable due by the Company from consumers into closed-end leases. The Company delivered to DSC a set of conversion documents, consisting of a signed closed-end lease and a bill of sale for each vehicle.

The Company incurred costs of approximately $4.6 million in connection with the conversion of these notes receivable, which included customer incentives, sales tax payments, and license and title fees.

All of the financial covenants contained in the prior loan agreement have been deleted from the New Loan Agreement and replaced by an obligation for the Company to maintain a minimum of $3,500,000 of accounts receivable. As was the case under the previous loan agreement, the obligation of the Company and its operating subsidiaries to pay all amounts due under the New Loan Agreement is secured by a pledge to DSC of all of the assets of the Company and its operating subsidiaries, The Company also paid DSC a loan origination fee of $120,000 and a commitment fee of $250,000 in addition to issuing DSC warrants to purchase 9,718,289 shares of the Company’s common stock at a purchase price of $.03 per share. The warrants will expire on February 28, 2014.

CARBIZ INC. Notes to the Condensed Consolidated Financial Statements July 31, ~~2008~~2009 and ~~2007~~2008 (unaudited)

74. ~~DERIVATIVE~~CREDIT ~~LIABILITIES~~FACILITIES (continued)

~~This~~The ~~derivative~~Company ~~liability~~has isagreed ~~adjusted quarterly~~to ~~based~~enter oninto a registration ~~value~~rights ~~model~~agreement ~~discussed~~on inor ~~Note~~before 1December ~~herein~~31, ~~and~~2010, ~~any~~pursuant ~~changes~~to inwhich ~~fair~~the ~~value~~Company ~~are~~will ~~recorded~~be asrequired ~~gain~~to ~~(loss)~~register onfor ~~derivative~~resale ~~liabilities~~by inDSC the shares to be ~~condensed~~issued ~~consolidated~~to ~~statements~~DSC ofunder ~~operations.~~the warrants, and to use its commercially reasonable efforts to obtain all necessary consents to enter into such agreement.

~~The~~Pursuant ~~following~~to ~~table~~the ~~summarizes~~warrants issued to DSC in connection with the New Loan Agreement, the issuance of warrants to Ross ~~number~~Quigley on February 20, 2009 would have required the Company to increase the 9,718,289 shares issuable under the existing DSC Warrant to 10,222,604 shares and reduce the exercise price for all of ~~common~~the shares ~~indexed~~issuable from $0.03 per share to $0.02852 per share. However, DSC agreed that in lieu of these modifications, the ~~derivative~~Company ~~financial~~issued ~~instruments~~an asadditional warrant to DSC to purchase up to an additional 750,000 shares of the Company’s common stock with an exercise ~~July~~price 31of $0.08. The warrants will expire on February 20, ~~2008:~~2014.

	Warrant	Conversion
	Derivatives	Features
$2,253,131 outstanding balance of convertible debenture due February 28, 2009	2,500,000	31,708,458
$953,488 outstanding balance of convertible debenture due August 31, 2008	2,000,000	11,217,510
$1,500,000 face value convertible debenture due September 26, 2009	2,000,000	17,647,059
$800,000 face value convertible debenture due December 1, 2010	n/a	9,411,765
2004 warrants expiring October 6, 2009	9,212,400
2004 warrants expiring October 10, 2010	11,055,264
2004 warrants expiring April 6, 2011	314,276
2006 warrants expiring September 5, 2008	3,965,464
2004 warrants expiring October 6, 2011	876,200
	31,923,604	69,984,792

In connection with entering into the Asset Purchase Agreement and the New Loan Agreement, Trafalgar Capital Specialized Investment Fund, Luxembourg, the holder of the Company’s convertible debentures (see note 5), consented to the execution and delivery of the New Loan Agreement, which consent was required by a subordination and inter-creditor agreement with Trafalgar.

~~For~~On ~~information~~February 25, 2009, the Company, its operating subsidiaries and ~~significant~~DSC further amended and restated the New Loan ~~assumptions~~Agreement ~~embodied~~to provide for the inclusion of five new Carbiz subsidiaries in ~~our~~the credit ~~valuations~~facility. ~~(including~~Four ~~range~~of ~~for~~these ~~certain~~subsidiaries ~~assumptions)~~have been formed to carry out the ~~See~~business ~~Note~~of 12the Company in Indiana and one has been formed to carry out the business ~~January~~of 31the Company in Nebraska. Under this amendment and the promissory notes executed by the operating subsidiaries thereunder, ~~2008~~the ~~Form~~amount 10of ~~KSB~~available credit was expanded from $14 million to $19.5 million.

8.As ~~CASH~~with ~~FLOW~~the ~~INFORMATION~~New Loan Agreement, Trafalgar also consented to this amendment since such consent was similarly required by the Trafalgar subordination and inter-creditor agreement.

~~(a)~~Since ~~Supplemental~~all ~~Information~~of the aforementioned events relate directly to the debt forgiveness, all of the costs associated therewith have been recognized as an adjustment of the gain on debt extinguishment, as follows:

		Six months ended
DSC Debt Forgiveness	$	31,374,909
		July 31, 2008			July 31, 2007
Write off of SWC Deferred Financing Costs		(603,943	)
Cash paid during the period for Interest	$	2,381,468		$	113,915
DSC Origination and Commitment Fee		(370,000	)
Fair Value of DSC Warrants		(1,385,815	)
Lease Conversion Costs		(4,596,053	)
Gain on Debt forgiveness		24,419,098
Trafalgar Loan Modification (See Note 5)		8,780,189
Gain on Extinguishment of Debt	$	33,199,287

~~(b)~~The ~~Supplemental~~DSC ~~non-cash~~debt ~~information~~has an effective interest rate of approximately 21.94%, and principal and interest are payable monthly. Amounts due to DSC are collateralized by all of the Company’s assets and the Chairman of the Board’s stock in the Company.

During the six months ended July 31, 2007, the Company issued $2,500,000 of Convertible Debentures in which $400,997 of proceeds were allocated and capitalized as deferred financing costs. See Note 7(a) to January 31, 2008 Form 10-KSB. During this same period, the Company also negotiated the settlement of a $466,337 trade payable which resulted in a gain on debt forgiveness of $391,337.

During the six months ended July 31, 2008, the Company issued 597,868 shares of common stock in connection with conversions of $103,492 of face value of convertible debentures. See Note 6 herein.

9. SALE OF SOFTWARE OPERATIONS

On July 2, 2008, the Company sold certain of its assets related to the software line of products to Constellation Homebuilder Systems Inc., a Delaware corporation, and Constellation Homebuilder Systems, Corp., a corporation incorporated under the laws of the Province of Ontario (together, “Constellation”) for a selling price of $2,509,000 and the assumption by Constellation of certain liabilities. A gain of $2,514,229 has been recognized in the accompanying Condensed Consolidated Statement of Operations.

CARBIZ INC. Notes to the Condensed Consolidated Financial Statements July 31, ~~2008~~2009 and ~~2007~~2008 (unaudited)

9.	SALE OF SOFTWARE OPERATIONS (continued)
	The assets sold to Constellation included $22,240 of net receivables and depreciated assets with a cost of $146,882 and a book value of $18,023. Constellation assumed $54,492 of liabilities consisting of prepaid software support and uninstalled software. All rights to the source code of all software products previously sold by the Company were conveyed to Constellation under the agreement, including the customer base and all ongoing revenue derived from the software as of July 1, 2008.
	The Company retained all the consulting portion of its business and intends to continue to operate and expand that segment of its operations.
10.	SEGMENT INFORMATION
	The Company operates and manages its business in two segments, which are its used car sales and financing segment (“Carbiz Auto Credit”or “CAC”), including its new acquisitions “Carbiz Auto Credit AQ”or “AQ” and “Texas Auto Credit”or “Texas Auto”, and its previous joint venture (“JV1”), and various consulting services offered to independent car dealerships (“Consulting and Software”).
	In prior years, JV1 has been displayed as a separate segment of operations. The Company purchased the 50% percent portion of JV1 it did not own on January 24, 2008, and as a result, the Company now consolidates the JV1 results with the other CAC results. All of the Company’s revenue is generated in the United States and all of the Company’s assets are located in the U.S.
	Consulting and Software consists of new sales and monthly revenues for software products through June 2008 and other related revenue from credit bureau fees, supply sales and forms programming, and new sales and recurring monthly revenues of consulting products. On July 2, 2008, the Company sold the assets and operations related to its dealer software (See Note 9). The results in the Consulting and Software segment for the three months and six months ended July 31 2008 include all revenue and expenses related to the software operations through June 30, 2008. The comparison to the same periods in the prior year will therefore include only two months and five months of software sales and expenses in the 2008 period while the prior year periods include software revenue and expenses for three and six month results, respectively.

4.	CREDIT FACILITIES (continued)

Wells Fargo Preferred Capital

On June 15, 2009, all of the Company's subsidiaries that are borrowers under the Fourth Amended and Restated Loan and Security Agreement with DSC, dated February 25, 2009 (the "DSC Loan Agreement"), entered into an amendment to the DSC Loan Agreement with DSC, which permits the Company's subsidiaries to enter into the Well Fargo Loan Agreement (the "WF Loan Agreement") and grant Wells Fargo Preferred Capital ("Wells Fargo") a security interest in their personal property.

All of the Company's direct and indirect subsidiaries entered into the WF Loan Agreement dated June 15, 2009 with Wells Fargo Preferred Capital, Inc. Under the WF Loan Agreement, Wells Fargo committed to loan the Company up to (i) $15,000,000 through and including December 31, 2009, (ii) $17,000,000 commencing January 1, 2010 through and including March 31, 2010 and (iii) $20,000,000 thereafter. The purpose of the credit facility is to finance receivables generated by the Company from the sales of used vehicles. The Company may borrow up to 55% of the outstanding amount due under eligible receivables, as defined in the WF Loan Agreement, other than receivables acquired from Star Financial Services (“Star” see Note 8). With respect to the receivables acquired from Star Financial Services in June 2009, they may borrow up to 95% of the amount outstanding under such receivables through the 60th day following the date of the WF Loan Agreement and 90% thereafter.

In order to obtain the consent of DSC to the WF Loan Agreement, DSC requested that the Company issue to DSC warrants to purchase an additional 30,781,800 shares of Company common stock at a purchase price of $0.08 per share at any time until June 15, 2014. The Company's board of directors approved such issuance, finding that the WF Loan Agreement was necessary for the future growth of the Company.

In connection with entering into the WF Loan Agreement, Wells Fargo entered into an Inter-creditor Agreement with DSC and a Subordination and Inter-creditor Agreement with Trafalgar Capital Specialized Investment Fund, Luxembourg and the Star note holders.

The WF Loan Agreement is subject to certain borrowing limitations, and includes certain financial and restrictive covenants, including but not limited to covenants requiring the maintenance of minimum Earnings Before Interest, Tax, Depreciation and Amortization (EBITDA) and debt to equity ratios. The credit facility will expire on June 30, 2011.

Loans will bear interest at an annual rate equal to the three-month London Interbank Offered Rate plus 3.35%, (3.95% at July 31, 2009) and an unused line fee of 0.25% per annum is charged on the unused portion of the credit facility on a monthly basis. The Company must pay Wells Fargo an administrative fee of $1,000 per month.

Amounts due to Wells Fargo under the WF Loan Agreement are secured by a security interest in all of the personal property of the Company, and guaranteed by the Company under a Guaranty Agreement.

The Company’s initial draw under the WF Loan Agreement was $10,303,665, $8,153,665 of which was used to pay the indebtedness of Star to Wells Fargo.

CARBIZ INC. Notes to the Condensed Consolidated Financial Statements July 31, ~~2008~~2009 and ~~2007~~2008 (unaudited)

104. ~~SEGMENT~~CREDIT ~~INFORMATION~~FACILITIES (continued)

		Carbiz Auto			Consulting and
		Credit			Software			Total
Three months ended July 31					2008
Sales	$	8,371,006		$	412,942		$	8,783,948
Cost of Sales		5,100,731			274,951			5,375,682
Gross Profit		3,270,275			137,991			3,408,266
Operating Expenses (1)		3,563,743			928,510			4,492,253
Income (Loss) From Segments		(293,468	)		(790,519	)		(1,083,987	)
Depreciation & Amortization								(32,766	)
Total Operating Loss								(1,116,753	)
Total Assets	$	26,674,462		$	4,656,518		$	31,330,980
Three months ended July 31					2007
Sales	$	361,717		$	581,674		$	943,391
Cost of Sales		275,189			243,652			518,841
Gross Profit		86,528			338,022			424,550
Operating Expenses (1)		137,675			1,414,216			1,551,891
Income (Loss) From Segments		(51,147	)		(1,076,194	)		(1,127,341	)
Depreciation & Amortization								(12,092	)
Total Operating Loss								(1,139,433	)
Total Assets	$	(157,315	)	$	1,993,000		$	1,835,685
Six months ended July 31					2008
Sales	$	16,718,961		$	988,259		$	17,707,220
Cost of Sales		9,520,092			655,283			10,175,375
Gross Profit		7,198,869			332,976			7,531,845
Operating Expenses (1)		6,783,383			1,888,164			8,671,547
Income (Loss) From Segments		415,486			(1,555,188	)		(1,139,702	)
Depreciation & Amortization								(79,678	)
Total Operating Loss								(1,219,380	)
Total Assets	$	26,674,462		$	4,656,518		$	31,330,980
Six months ended July 31					2007
Sales	$	632,323		$	1,191,653		$	1,823,976
Cost of Sales		472,991			461,803			934,794
Gross Profit		159,332			729,850			889,182
Operating Expenses (1)		205,847			1,998,310			2,204,157
Income (Loss) From Segments		(46,515	)		(1,268,460	)		(1,314,975	)
Depreciation & Amortization								(38,641	)
Gain on Debt Forgiveness								391,337
Total Operating Loss							$	(962,279	)
Total Assets	$	(157,315	)	$	1,993,000		$	1,835,685
(1) Excluding depreciation and amortization

The balance outstanding under the DSC and Wells Fargo loan facilities at July 31, 2009 are comprised of the following:

		Current		Long-Term
		Liabilities		Liabilities
WF Line of credit	$	-	$	11,616,397
DSC line of credit		5,355,684		4,217,366
DSC inventory floor plan		5,830,135		-
Short term notes		452,227		-
Other debt		756,771		-
Total	$	12,394,817	$	15,833,763

5.	CONVERTIBLE DEBENTURES

	Convertible debentures consist of the following as of July 31, 2009:

Convertible debentures, at face value
Maturing through September 2010	$	5,829,013
Maturing December 1, 2010		35,037
		5,864,050
Less: unamortized discount		(5,294,466	)
	$	569,584

Current	$	96,935
Long-term		472,649
	$	569,584

The Convertible Debentures were originally sold to Trafalgar Capital Specialized Investment Fund, Luxembourg (“Trafalgar”) during the fiscal year ended January 31, 2008 and modified and extended a number of times during fiscal year ended January 31, 2009. See Note 7 to the Financial Statements in the January 31, 2009 Form 10-K.

More recently, a further modification effective on February 20, 2009 (“February 2009 modification”) was made allowing the Company to modify the terms of the Company’s other debt arrangements including the revolving line-of-credit, term and floor plan notes payable, which were also effective February 20, 2009 (See Note 4). In the February 2009 modification, Trafalgar revised the payment terms related to certain of the convertible debentures. Debenture principal and interest payments were and are due as follows: $250,000 in March 2009; $50,000 per month April 2009 through December 2009; $100,000 per month January 2010 through August 2010; and the remaining balance of approximately $5,100,000 will be due in September 2010, but only as long as the Company holds consumer notes that are not in default from its Buy-Here Pay-Here business which have an aggregate balance of at least $10 million and only if cash on hand exceeds its payables by at least $1 million. A further modification was made by Trafalgar which allowed the Company to further modify the terms of its loan agreements with DSC. See Note 4.

The Company accounted for the modifications to the debentures based on the provisions of EITF 96-19, “Debtors Accounting for Modification or Exchange of Debt Instruments” which establishes the criteria to determine if substantial modifications of the terms of the debt instruments have occurred. The revisions to the terms of certain of the outstanding debentures were considered substantial, as defined, and therefore, for accounting purposes the debentures have been accounted for as debt extinguishments and the revised debentures recorded at fair value on the date of execution of the February 2009 Modification. The Company recorded a gain on modification of debt of $8,780,189, as a result of these transactions.

CARBIZ INC. Notes to the Condensed Consolidated Financial Statements July 31, ~~2008~~2009 and ~~2007~~2008 (unaudited)

11.	SUBSEQUENT EVENTS
5.	CONVERTIBLE DEBENTURES (continued)
	On August 16, 2008, the Company completed a supplemental acquisition in Houston of a small portfolio of used automobile and light truck loans with an outstanding balance due of approximately $568,400 from AGM, LLC. The Company had previously been servicing the portfolio for the lender. The consideration of $400,000 was funded by an additional line of credit provided to the Company by SWC Services LLC (“SWC”), the Company’s senior lender.
	During the six months ended July 31, 2009, the Company issued 11,073,419 and 1,599,494 shares of common stock in connection with the exercise of warrants and the conversions of convertible debentures, respectively, for which $888,310 and $199,419 of related derivative liability was credited to equity.
	On September 4, 2008, 1,189,882 common share warrants issued as part of the previously reported September 5, 2006 sale of unregistered securities were exercised at the exercise price of $0.15 per share. The balance of the common share warrants (2,775,582) expired unexercised on September 5, 2008.
6.	DERIVATIVE LIABILITIES
	On September 11, 2008, $447,000 of the $800,000 Face Value Convertible Debenture due December 1, 2010 plus $48,404 of accrued interest was converted to 5,828,285 common shares at a conversion price of $0.085 per share.
	Fair values of derivative liabilities at July 31, 2009 were as follows:
12.	COMMITMENTS AND CONTINGENCIES.
	See Note 5 for Registration Rights liquidated damages.
	As outlined in Note 6 (b), the Company entered into a non-exclusive investment banking arrangement for a six month period. In addition to the specific fees outlined in Note 6(b), the agreement also provides for contingent fees typical in the investment banking industry for any equity raised as a direct result of the services of the service provider. The contingent fees include warrants to purchase common shares of the Company and cash compensation equal to a percentage of the gross proceeds.

			Number of
			Indexed
			Common
		Balance	Shares
Compound Embedded Derivatives associated with:
Convertible debentures, $5,000,000
original face value; $5,829,013
face value plus accrued
interest as of July 31, 2009;
Due September 2010	$	4,597,069	94,001,297

Convertible debentures, $800,000 original
face value; $35,037 face
value plus accrued interest as of
July 31, 2009; due December 2010		30,178	600,361
Warrant Liabilities Expiring:
October 2009		38,123	8,417,777
October 2010		43,236	776,468
April 2011		17,501	314,294
October 2011		40,658	876,200
February 2014		808,759	10,468,289
June 2014		2,231,530	30,781,800
	$	7,807,054	146,236,486

The Company estimated the fair value of the compound derivative on the inception dates, and subsequently, using the Monte Carlo Simulation valuation technique, because that technique embodies all of the assumptions (including credit risk, interest risk, stock price volatility and conversion behavior estimates) that are necessary to fair value complex compound derivative instruments.

CARBIZ INC.

Notes to the Condensed Consolidated Financial Statements

July 31, 2009 and 2008

(unaudited)

6.	DERIVATIVE LIABILITIES (continued)

	Information and significant assumptions embodied in the Company’s valuations (including ranges for certain assumptions during the subject periods that instruments were outstanding) as of July 31, 2009 are illustrated in the following tables:

		Compound
		Embedded Derivative
	$5,829,013 face value secured convertible debentures due September, 2010:
	Conversion price	$0.064
	Volatility	102.68% – 316.40%
	Equivalent term (years)	0.085 – 1.092
	Credit-risk adjusted yield	12.66% – 14.23%
	Interest-risk adjusted rate	12.00% – 16.20%
	Dividends	--

	$35,037 face value secured convertible debentures due December, 2010:
	Conversion price	$0.064
	Volatility	119.42% – 316.40%
	Equivalent term (years)	0.161 – 1.119
	Credit-risk adjusted yield	12.66% – 14.23%
	Interest-risk adjusted rate	11.00% – 13.20%
	Dividends	--

Derivative liabilities are adjusted quarterly to their estimated fair values and any changes in fair value are recorded as gain (loss) on derivative liabilities in the condensed consolidated statements of operations.

Gain (loss) on derivative liabilities consists of the following:

		Three Months Ended				Six Months Ended
		July 31,				July 31,
		2009		2008		2009			2008
Compound embedded derivatives	$	4,191,458	$	460,961	$	(754,789	)	$	734,243
Warrant derivatives		518,323		1,549,515		701,470			3,310,591
	$	4,709,781	$	2,010,476	$	(53,319	)	$	4,044,834

7.	STOCKHOLDERS’ EQUITY

	Stock options and incentive stock grants

	Stock option activity for the six months ended July 31, 2009 is as follows:

	Number		Weighted Average
	Of Options		Exercise Price (*)
Outstanding, February 1, 2009	7,421,891		$ 0.15
Options granted during the period	-		-
Options cancelled during the period	(1,184,000	)	0.28
Options exercised during the period	-		-
Outstanding, July 31, 2009	6,237,891		$ 0.15

At July 31, 2009, the outstanding stock options had no aggregate intrinsic value.

CARBIZ INC.

Notes to the Condensed Consolidated Financial Statements

July 31, 2009 and 2008

(unaudited)

7.	STOCKHOLDERS’ EQUITY (continued)

Stock options outstanding and exercisable as of July 31, 2009 are as follows:

	July 31, 2009
	Options Outstanding		Options Exercisable
Exercise		Weighted		Weighted
Price	Number	Average Life (Yrs)	Number	Average Life (Yrs)
0.13	5,600,000	2.46	2,240,000	2.46
0.21	637,891	0.33	637,891	0.33
	6,237,891	2.24	2,877,891	1.99

(*) The 1998 series of options were denominated in Canadian dollars. For purpose of this schedule the exercise prices have been converted into U.S. dollars based on the foreign exchange rate as at the end of the period.

During the six months ended July 31, 2009 and 2008, the Company recognized share-based compensation expense of $50,400 and $36,179, respectively for stock options granted to employees, and $64,600 and $39,000, respectively, for incentive stock granted to employees and directors and $0, and $47,511, respectively of expense for stock previously granted to consultants for services rendered under a contract with a term which required the amortization of the total expense.

A summary of the Company’s non-vested stock options as of July 31, 2009, and changes during the six months then ended, is summarized as follows:

		Shares
Non-vested at February 1, 2009		3,360,000
Granted		-
Vested		-
Forfeited/Cancelled		-
Non-vested at July 31, 2009		3,360,000

At July 31, 2009, the options had a weighted average grant date fair value of $0.09 and no intrinsic value.

As of July 31, 2009, there was approximately $248,920 of unrecognized compensation cost related to non-vested stock options granted. These costs will be expensed over the next two years and six months.

On January 25, 2007, the Company awarded 3,400,000 common shares as restricted stock to certain directors, officers, and key employees of the Company of which 1,360,000 shares have been vested as of July 31, 2009.

Warrants classified as equity

The Company has granted warrants to purchase shares of common stock. Warrants outstanding and exercisable at July 31, 2009 are as follows:

		Weighted Average
	Number	Remaining	Weighted Average
Exercise Prices	Outstanding	Contractual Life (Years)	Exercise Price
$0.01	144,334	1.16	$ 0.01
$0.08	10,000,000	2.56	$ 0.08
$0.10	144,334	1.16	$ 0.10
$0.15	194,334	1.16	$ 0.15
$0.15	1,000,000	1.58	$ 0.15
$0.20	194,334	1.16	$ 0.20
	11,667,336	2.39	$ 0.09

See Note 6 for summary of warrants classified as liabilities.

CARBIZ INC.

Notes to the Condensed Consolidated Financial Statements

July 31, 2009 and 2008

(unaudited)

7.	STOCKHOLDERS’ EQUITY (continued)

Conversion of Trafalgar convertible debentures

During the six months ended July 31, 2009, the Company issued 980,392 shares of common stock at a conversion price of $0.08 in a Trafalgar Convertible Debenture conversion.

Conversion of October 1, 2007 related party convertible debentures

On February 19, 2009, a holder of certain of the Company’s October 1, 2007 convertible debentures converted $50,000 of principal and $8,196 of accrued interest due under the debentures into 619,102 shares of common stock of the Company. The conversion price was $0.094. The holder is the spouse of a member of the board of directors.

Exercise of related party warrants

On February 16, 2009, 11,073,419 shares of common stock were issued upon exercise of outstanding warrants. The Company received proceeds of $996,578 based on the CDN$0.12 warrant exercise price.

On February 16, 2009, the Company issued 289,332 shares of common stock upon exercise of outstanding warrants. The Company received proceeds of $33,273 at exercise prices of $0.01 (72,333 shares), $0.10 (72,333 shares), $0.15 (72,333 shares) and $0.20 (72,333 shares).

The warrant holder is a member of the board of directors of the Company.

Unregistered shares issued to officers and directors for directors fees

On March 24, 2009, the board of directors authorized the fees payable to directors for their services during the fiscal year ended January 31, 2009 to be paid in shares of common stock. Accordingly, on March 24, 2009 the Company issued 1,687,500 unregistered common shares valued at $0.08 per share aggregating $135,000 in payment of this liability, recorded at January 31, 2009.

Unregistered shares issued under cross marketing agreement

On March 24, 2009 the Company issued 125,562 unregistered common shares valued at $0.08 per share aggregating $10,125 to Dealer Services Corporation as partial consideration for execution of a cross marketing agreement under which the Company will derive revenue from marketing and training services to be provided for a lease-here pay-here funding program.

Additional warrants issued to DSC

On June 15, 2009, the Company issued to DSC warrants to purchase 30,781,800 shares of the company’s stock at a purchase price of $0.08 per share. The warrants will expire on June 15, 2014. The Company has agreed to enter into registration rights agreements similar to the warrants previously issued to DSC. See Note 4. The fair value of these warrants on date of issuance was $2,247,071 which was charged to deferred financing costs at that time and is being amortized over the remaining term of the DSC credit facility. The previously issued warrants were charged as an adjustment of the gain on debt extinguishment. See Note 4. These warrants were also considered to be derivative liabilities and are adjusted quarterly to their estimated fair values. See Note 6.

CARBIZ INC.

Notes to the Condensed Consolidated Financial Statements

July 31, 2009 and 2008

(unaudited)

8.	STAR FINANCIAL PORTFOLIO ACQUISITION

On June 15, 2009, the Company completed its acquisition of the certain assets of Star Financial Services (“Star”), which included a portfolio of approximately 1500 used automobile and light truck loans. The consideration paid by the Company to Star consisted of approximately $8,154,000 in cash and the assumption of Star’s related party debt of approximately $757,000. In conjunction and simultaneously with the Star acquisition, the Company also entered into an agreement with Wells Fargo Preferred Capital, Inc (“WFPC”) for a secured revolving line of credit (see Note 4). The line of credit was used to fund the purchase of Star’s assets and to pay for the transactions costs of $637,500, which were expensed in the current period and on the face of the Statement of Operations under Loan portfolio purchase transaction costs.

The total purchase price has been allocated to assets acquired based on management’s best estimate of fair value, and are as follows:

		Fair Values at
		June 15, 2009
Cash	$	231,666
Notes receivable, net		6,598,187
Prepaid Interest		2,070,582
Other assets		10,000
Total assets	$	8,910,436

WFPC line of credit	$	8,153,665
Star related party debt		756,771
Total liabilities	$	8,910,436

The estimated value of Notes Receivable was based upon their expected collections net of reserves for uncollectible accounts and unearned interest. The gross notes receivable acquired was $9,554,446, the unearned interest was $663,192 and the allowance for credit losses was $2,293,067. These notes bear interest at rates approximating market rates for loans with similar credit characteristics and are similar in nature to the Company’s existing loans. The Company uses the same credit loss methodology as it uses for its own finance receivables in determining the required credit loss allowance.

The difference between the fair value of the acquired assets and the purchase price has been recorded as prepaid interest in light of the significantly below market interest rate on the WFPC loan, which was used to finance the acquisition of the loan portfolio (see Note 4). Wells Fargo had been the asset based lender to Star Financial Services and were instrumental in effecting the asset purchase transaction.

CARBIZ INC.

Notes to the Condensed Consolidated Financial Statements

July 31, 2009 and 2008

(unaudited)

9.	SEGMENT INFORMATION

The Company operates and manages its business in two segments, which are its used car sales and leasing segment (“CarBiz Auto Credit”) and consulting and collections services offered to independent car dealerships (“Consulting and Collections”). For the previous period, the Consulting and Collections segment was named Software and Other Products.

Three months ended July 31,				2009
		Carbiz		Consulting and
		Auto Credit		Collections			Total
Sales	$	12,679,768	$	139,612		$	12,819,380
		6,901,427		386,850			7,288,277
Gross Profit		5,778,341		(247,238	)		5,531,103
Operating Expenses (1)		4,001,712		82,428			4,084,140
Income (Loss) From Segments		1,776,629		(329,666	)		1,446,963
Depreciation & Amortization							(41,115	)
Total Operating Income							1,405,848
Total Assets	$	39,652,053	$	282,081		$	39,934,134

					2008
		Carbiz			Software and
		Auto Credit			Other Products			Total
Sales	$	8,371,006		$	412,942		$	8,783,948
Cost of Sales		5,100,731			274,951			5,375,682
Gross Profit		3,270,275			137,991			3,408,266
Operating Expenses (1)		3,563,743			928,510			4,492,253
Income (Loss) From Segments		(293,468	)		(790,519	)		(1,083,987	)
Depreciation & Amortization								(32,766	)
Total Operating Loss								(1,116,753	)
Total Assets	$	26,674,462		$	4,656,518		$	31,330,980

(1) Excluding depreciation and amortization

Six months ended July 31,				2009
		Carbiz		Consulting and
		Auto Credit		Collections			Total
Sales	$	21,009,745	$	325,012		$	21,334,757
Cost of Sales		11,531,911		624,145			12,156,056
Gross Profit		9,477,834		(299,133	)		9,178,701
Operating Expenses (1)		7,650,450		248,413			7,898,863
Income (Loss) From Segments		1,827,384		(547,546	)		1,279,838
Depreciation & Amortization							(77,280	)
Total Operating Income							1,202,558
Total Assets	$	39,652,053	$	282,081		$	39,934,134

				2008
		Carbiz		Software and
		Auto Credit		Other Products			Total
Sales	$	16,718,961	$	988,259		$	17,707,220
Cost of Sales		9,520,092		655,283			10,175,375
Gross Profit		7,198,869		332,976			7,531,845
Operating Expenses (1)		6,783,383		1,888,164			8,671,547
Income (Loss) From Segments		415,486		(1,555,188	)		(1,139,702	)
Depreciation & Amortization							(79,678	)
Total Operating Loss							(1,219,380	)
Total Assets	$	26,674,462	$	4,656,518		$	31,330,980

(1) Excluding depreciation and amortization

CARBIZ INC.

Notes to the Condensed Consolidated Financial Statements

July 31, 2009 and 2008

(unaudited)

10.

INCOME TAXES

As of July 31, 2009, the Company had net operating loss carry-forwards (NOLs) of approximately $26.7 million (expiring from 2010 through 2030) and $13.7 million (expiring 2010 through 2017) in the United States and Canada, respectively. The use of the United States NOLs may be limited in any given year as a result of previous changes in ownership. The Company recorded a gain on the extinguishment of debt of approximately $33.2 million during the three months ended April 30, 2009. The $24.4 million of U.S. gain on debt extinguishment has been excluded from income for income tax purposes based on Internal Revenue Code Section 108. As of February 1, 2011, the Company will be required to reduce certain U.S. tax attributes which will include the reduction of available NOLs. The Company expects available U.S. NOLs to be reduced by approximately $24.4 million. The $8.8 million of Canadian gain on debt extinguishment is not includable in Canadian income and has been treated as a permanent item.

As a result of the above, no income taxes are expected to result from fiscal 2010 operations.

Item 2. 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. Such forward-looking statements include our intent to open additional credit centers in the future; our expectations regarding the future revenues for, and the market acceptance of, our consulting service, and our expectations regarding future expense levels related to our credit center business and interest expenses. The following discussion should also be read in conjunction with the Company’s interim ~~condensed~~Condensed ~~consolidated~~Consolidated ~~financial statements~~Financial Statements as of July 31, 2009 ~~2008~~ and the ~~audited consolidated~~ January 31, ~~2008 statements~~2009 ~~reported~~audited Consolidated Financial Statements included in our January 31, ~~2008~~2009 Form 10-~~KSB~~K.

Overview

~~Our~~The ~~revenue~~financial services industry is facing unprecedented challenges in the face of the current national and global economic crisis. The overall U.S. economy is experiencing significantly reduced business activity as a result of, among other factors, disruptions in the financial markets during the past year. Carbiz has been ~~derived~~further ~~from~~challenged ~~two~~by the credit crisis due to ~~sources~~our primary lender, SWC Services LLC (SWC), filing bankruptcy in October 2008, which ~~include:~~decreased our access to operating cash flow during the period from October 2008 through February 2009. Accordingly, these financing constraints negatively impacted our planned expansion and funding budgets during the first part of our 2010 fiscal year. In response to SWC’s bankruptcy filing, on January 16, 2009, Carbiz Inc. and its operating subsidiaries entered into amended financing arrangements among Dealer Services Corporation (DSC), the trustee for SWC and certain guarantors to the SWC Loan Agreement. The agreement provided for the transfer of SWC’s interests in the Loan Documents to DSC with the terms subject to the Trustee’s receipt of a final order of the United States Bankruptcy Court for the Northern District of Illinois. The agreement also provided that DSC would forgive approximately $31.3 million of a total of approximately $43.3 million outstanding debt previously due to SWC and to additionally provide future inventory floor plan financing of up to $7.5 million and used car lease funding up to $14 million.

•

Direct auto sales and related financing (Carbiz Auto Credit centers) through our self provided on-site specialty finance business at 26 company owned locations; and

•

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. The software division was sold on July 2, 2008 and as of July 1, 2008, our ongoing revenue stream will consist of new sales and monthly revenue from consulting products, training products, Buy Here-Pay Here performance groups, seminars, other one time dealer assistance, and supply sales.

On June 15, 2009, we entered into a loan and security agreement with Wells Fargo Preferred Capital, Inc. Wells Fargo committed to initially loan Carbiz up to $15 million to finance receivables generated by Carbiz from the sale of used vehicles and provides for a 55% advance rate on those receivables. The loan has a stated interest rate of the 3 month LIBOR plus 3.35% . The line of credit will increase to $17 million on January 1, 2010, and to $20 million on March 31, 2010 and will terminate on June 30, 2011. These new credit facilities will help expand our portfolio and provide us access to cash.

~~Historically,~~We weanticipate ~~have~~increased ~~been~~revenues ~~a software~~and ~~company~~operating ~~that~~earnings ~~has~~due ~~also offered business model consulting services~~ to, the ~~North~~increased ~~American~~cash ~~automobile~~flow ~~industry.~~available Infor ~~May 2004~~operations, but we ~~decided~~will continue to ~~enter the~~seek ~~direct~~additional ~~automobile~~funding ~~sales~~as ~~market~~necessary ~~utilizing~~in ~~our~~order ~~own~~to ~~software~~sustain and ~~business~~grow ~~model consulting products by opening~~ our ~~first “credit center”in Palmetto, Florida, which is a used car dealership that offers financing on-site to customers with poor credit~~operations.

~~Over~~As a result of the ~~past~~current ~~nine~~economic ~~months~~conditions, wemany ~~have~~financial ~~experienced~~institutions ~~significant~~and ~~changes~~other inlenders ~~every~~have ~~area~~tightened ofunderwriting ~~our~~standards ~~operations.~~due Into ~~October 2007~~the weoverall ~~began~~deterioration ain ~~process~~credit ofquality. ~~significant~~Therefore, ~~change~~management ~~through~~believes that more consumers are currently moving to the ~~acquisition~~sub-prime oflending amarket ~~large~~to obtain ~~Midwestern~~financing. ~~chain~~We ofhave ~~automobile~~attracted ~~dealerships~~new ~~and~~customers awith ~~portfolio~~higher ofcredit ~~associated~~ratings and the ~~consumer~~ability ~~loans~~to purchase higher priced automobiles. ~~Subsequently,~~Beginning in ~~December~~February 2009, we commenced ~~purchased~~our anleasing ~~additional~~program ~~portfolio~~which focuses on higher priced automobiles with average prices of ~~consumer~~approximately ~~loans~~$11,000. ~~and~~This ~~opened~~program will further expand our financing ~~first~~possibilities and we will continue with this strategy in an effort to reach more customers and service those customers who now seek Buy Here-Pay Here (“~~Supercenter~~BHPH”in) ~~Houston,~~financing ~~Texas~~and our newly introduced leasing program – Lease Here–Pay Here (“LHPH”). InWe ~~July~~will continue to pursue supplemental revenues by serving those ~~2008~~customers wewho ~~sold~~are ~~our~~no ~~software~~longer ~~operations~~able to purchase automobiles and ~~retained~~meet the financial requirements of traditional lenders due to the economy and in order to further grow our business ~~model~~for ~~consulting services~~the future.

WeCredit ~~currently~~loss ~~operate~~estimates afor ~~chain~~notes ofand lease receivables were 26higher ~~used~~than ~~car~~our ~~stores~~historic ~~that~~figures ~~sell~~as ~~used~~a ~~cars~~result ~~and~~of ~~trucks~~the increased charge-offs and delinquency ~~originate~~due ~~loans~~to ~~for consumers~~rising ~~with~~unemployment ~~poor~~rates ~~credit~~and the deteriorating U.S. Weeconomic environment. ~~hold~~Our ~~the~~historic ~~consumer~~loss ~~notes~~rates ~~generated~~have bybeen ~~the~~around ~~loans~~20%, ~~as assets~~but ~~and~~because ~~pledge~~of ~~them~~the economic asdownturn, ~~collateral~~we tobegan ~~secure~~using ~~our~~a ~~obligations~~slightly ~~under~~higher rate for our ~~senior~~provision in ~~debt~~January, ~~facility~~2009.

In terms of our existing consulting business, our substantial customer base of consulting clients continues to grow organically and provides both a stable revenue base of monthly support and continuing opportunities for providing additional consulting services to those dealers. During the six months ended July 31, 2008, we introduced several new consulting products including seminar and training products that are approved by and marketed in conjunction with state dealer associations and other dealer groups, and Performance Groups, a new form of dealer 20 Group (moderated groups of similar but geographically separated dealers who exchange financial and operational information) structured specifically for the Buy Here-Pay Here dealer market. Initial acceptance of the Performance Group product has been outstanding, with over 60 dealer locations enrolled in groups, with over $60,000,000 total loan portfolio balances.23

Critical Accounting Policies

Revenue Recognition

~~Our~~The Company’s revenue is primarily derived from the sale and leasing ~~financing~~ of used vehicles toand ~~consumers~~consulting and ~~the~~collection ~~sale of consulting~~ services to dealers in the automobile industry. 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 range from 80 weeks to 48 months, based on the principal outstanding at the time. Interest:

	(1)	Used automobile sales:

		The Company recognizes revenue on the sale of automobiles upon execution of the sales contract, the customer taking possession of the automobile, and financing having been approved. Customers are required to meet certain underwriting guidelines in order to obtain financing of the automobile through the Company.

	(2)	Used automobile leases:

		The Company recognizes revenue on the lease of automobiles upon execution of the lease contract, the customer taking possession of the automobile, and lease financing having been approved. Customers are required to meet certain underwriting guidelines in order to obtain lease financing of the automobile through the Company. The Company accounts for all leases as a “sales-type lease”.

	(3)	Consulting and collection services:

		The Company generates revenue from consulting and collections services. These fees include charges for training seminars, performance group seminars, consulting engagements and collection services to the automobile industry. Revenue is recognized when a signed contract has been executed, the services have been delivered, fees are fixed or determinable, collectability is reasonable assured 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.

	(4)	Products:

		The Company also 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.

~~accrued~~Lease ~~is suspended on non-performing loans after the loan reaches pending charge off, which is generally done when the loan is delinquent for 60 days.~~transactions

~~For~~To ~~all~~qualify ~~non-software~~for ~~or non-software~~financing ~~related~~under ~~revenue~~the new DSC financing agreement, the weCompany ~~recognize~~converted ~~revenue~~a innumber ~~accordance~~of ~~with~~existing ~~Securities~~finance note receivables to lease ~~and~~receivables, ~~Exchange~~in ~~Commission~~February ~~Staff~~2009. ~~Accounting~~The ~~Bulletin~~Company ~~104,~~considered these transactions to be “~~Revenue~~direct ~~Recognition,~~financing leases” and accounted for the leases including the minimum ~~which~~lease ~~was~~payments ~~preceded~~and bythe ~~Staff~~unguaranteed ~~Accounting~~residual ~~Bulletin~~value ~~101,~~as ~~“Revenue~~the ~~Recognition~~gross investment in ~~Financial~~the ~~Statements~~lease.” ~~Consulting~~The ~~services~~difference ~~revenue~~between isthis ~~recognized~~gross ~~when~~investment aand ~~signed~~the cost or carrying ~~contract~~amount ~~has~~was ~~been~~recorded ~~executed,~~as ~~the~~unearned ~~services~~income. ~~have~~The ~~been~~unearned ~~delivered,~~income and ~~obligations~~initial direct ~~have~~costs ~~been~~will ~~fulfilled~~be amortized to income over the lease term so as to produce a constant periodic rate of return on the net investment in the lease.

~~Prior~~Any tonew ~~the~~leases ~~sale~~are ofconsidered ~~our software operations, we recognized revenue in accordance with Statement of Position 97-2,~~ “~~Software~~sales-type ~~Revenue Recognition,~~leases”~~issued~~ byand the ~~American Institute of Certified~~ ~~Public~~minimum ~~Accountants~~lease inpayments ~~October~~and ~~1997~~the asresidual ~~amended~~value byof ~~Statement~~the ofunderlying ~~Position~~auto ~~98-9~~are ~~issued~~considered in ~~December~~the ~~1998~~fair ~~for~~value. ~~all~~The ~~software~~revenue orrecognition ~~software~~for ~~related~~sales-type ~~revenue. Our~~leases ~~revenue~~involves ~~from~~recognizing ~~licenses~~both isa ~~recognized~~profit ~~upon~~element ~~the~~and ~~execution of~~ a ~~license~~financing ~~agreement, when~~element over the ~~licensed product has been delivered, fees are fixed or determinable,~~term ~~collection~~of isthe ~~probable and when all significant obligations have been fulfilled.~~ lease

~~Use~~Transfer of ~~Estimates~~Financial Assets

InFrom ~~preparing~~time ~~our~~to ~~financial statements~~time induring ~~accordance~~the ~~with~~six ~~generally~~months ~~accepted~~ending ~~accounting~~July ~~principles~~31, ~~our~~2009, ~~management~~the isCompany ~~required~~has tosold ~~make~~portions ~~estimates~~of ~~and~~its ~~assumptions~~previously ~~that~~generated ~~affect~~auto ~~the~~receivable note ~~reported~~portfolio ~~amount of assets, liabilities,~~ and ~~reported~~portions ~~amounts~~ of ~~revenues~~its ~~and expenses~~portfolio ~~during~~acquired in the ~~reporting~~Star ~~period~~Financial Services transaction. ~~Actual~~All ~~results~~portfolio ~~could~~sales ~~differ~~during ~~from~~this ~~those estimates.~~period ~~Estimates~~met ~~are~~the ~~used~~requirements ~~when accounting~~ for ~~items~~a sale, and ~~matters such as~~ the ~~allowance~~ ~~for~~Company ~~doubtful~~did ~~accounts,~~not ~~deferred~~retain ~~revenue,~~the ~~derivative~~right ~~financial instruments~~to ~~and~~service ~~other~~the ~~share based payments~~loans.

Use of estimates

In preparing the Company’s consolidated 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 dates of the consolidated financial statements and the reported amounts of revenues and expenses during the reporting periods. Actual results could differ from those estimates. Estimates are used when accounting for items and matters such as the allowance for credit losses, accrued liabilities, share-based payments, derivative liabilities and contingencies.

Deferred finance costs

Deferred finance costs include the fair value of warrants issued to an existing lender in conjunction with the issuance of the Wells Fargo Preferred Credit line of credit. They will be amortized over the term of the respective financing arrangement. Approximate future amortization of deferred finance costs is as follows as of July 31, 2009:

Periods ending July 31
2010	$	1,348,243
2011		730,298
	$	2,078,541

Prepaid interest

Prepaid interest included the initial interest recorded in conjunction with the issuance of the Wells Fargo Preferred Credit line of credit and is amortized over the term of the respective financing arrangement. Such amount was determined by comparing the cost of the acquired portfolio and other assets to the fair value of such assets acquired, and the difference was recognized as prepaid interest. Approximate future amortization of prepaid interest is as follows as of July 31, 2009:

Periods ending July 31
2010	$	1,035,291
2011		905,880
	$	1,941,171

Share-Based Compensation

~~All~~The ~~share~~Company uses the fair-~~based~~value ~~payments~~method ~~(stock~~to determine ~~options~~compensation for all arrangements under which employees and ~~stock~~others ~~grants)~~receive shares ~~are~~of ~~recognized~~stock ~~based~~or ~~upon~~equity ~~their~~instruments. The fair value atof each option award is estimated on the date of grant inusing ~~accordance~~the ~~with~~Black-Scholes ~~Financial~~valuation ~~Accounting~~model ~~Standard~~that ~~123R~~uses assumptions ~~“Share~~for ~~Based~~expected volatility, expected dividends, expected term, and the ~~Payments~~risk-free interest rate. Expected volatilities are based on the historical volatility of the Company’s common stock over the expected term of the options. The expected term of options granted to employees is derived using the “simplified method” which computes expected terms as the average of the sum of the vesting term plus the contract term. The risk-free interest rate is based on the U.S. Treasury yield rates in effect at the time of grant for the period of the expected term.

Derivative ~~Liabilities~~instruments

WeThe ~~account~~Company ~~for~~generally ~~warrants~~does ~~and~~not ~~other~~use derivative financial ~~embedded~~instruments ~~features~~to ~~issued~~hedge inexposures ~~connection~~to ~~with~~cash-flow, ~~financing~~market ~~arrangements~~or inforeign-currency ~~accordance~~risks. ~~with~~However, ~~Emerging~~the ~~Issues~~Company ~~Task~~has ~~Force~~entered ~~(“EITF”)~~into ~~Issue~~certain ~~No.~~other ~~00-19,~~financial ~~“Accounting~~instruments ~~for~~and ~~Derivative~~contracts, ~~Financial~~such ~~Instruments,~~as ~~Indexed~~debt ~~to,~~financing arrangements and ~~Potentially~~freestanding ~~Settled~~warrants ~~in, a~~with ~~Company’s~~features ~~Own~~that ~~Stock”(EITF~~are ~~00-19).~~either ~~Pursuant~~not toafforded ~~EITF~~equity ~~00-19~~classification, anembody ~~evaluation~~risks ofnot ~~specifically~~clearly ~~identified~~and ~~conditions~~closely isrelated ~~made~~ to ~~determine~~host ~~whether~~contracts, ~~the~~or ~~fair~~may ~~value of warrants and embedded features is required to~~ be ~~classified~~net-cash assettled aby ~~derivative~~the ~~liability~~counterparty. ~~The~~These ~~fair~~instruments ~~value~~are ofrequired ~~such~~to ~~instruments~~be ~~classified~~carried as derivative liabilities, isat ~~adjusted for changes in~~ fair value ~~at each reporting period~~, ~~and the corresponding non-cash gain or loss is recorded~~ in ~~current~~the ~~period~~Company’s ~~earnings~~consolidated financials.

~~Allowance~~The ~~for~~Company estimates fair values of derivative financial instruments using the Black-Scholes-Merton or the Monte Carlo Simulation valuation technique, because that technique embodies all of the assumptions (including credit ~~losses~~risk, interest risk, stock price volatility and conversion behavior estimates) that are necessary to fair value complex compound derivative instruments. Estimating fair values of derivative financial instruments requires the development of significant and subjective estimates that may, and are likely to, change over the duration of the instrument with related changes in internal and external market factors. In addition, option-based techniques are highly volatile and sensitive to changes in the Company’s trading market price which has high-historical volatility.

The Company maintains an allowance for credit losses on an aggregate basis at a level it considers sufficient to cover estimated losses in the collection of its finance receivables. The allowance for credit losses is based primarily upon historical credit loss experience, with consideration given to recent credit loss trends and changes in loan characteristics (i.e., average amount financed and term), delinquency levels, collateral values, economic conditions and underwriting and collection practices. The allowance for credit losses is periodically reviewed by management with any changes reflected in current operations. Although it is at least reasonably possible that events or circumstances could occur in the future that are not presently foreseeable which could cause actual credit losses to be materially different from the recorded allowance for credit losses, the Company believes that it has given appropriate consideration to all relevant factors and has made reasonable assumptions in determining the allowance for credit losses.25

18Since derivative financial instruments are initially and subsequently carried at fair values, the Company’s income will reflect the volatility in these estimate and assumption changes.

Allowance for credit losses and concentration of credit risk

The allowance reflects the Company’s best estimate of probable losses inherent in the accounts, notes and lease receivables. The Company determines the allowances based on known troubled accounts, historical experience, underlying collateral, credit quality of customers and other industry and Company economic considerations.

The Company initiates steps to pursue collection of payments for notes or lease receivables upon the customer’s first missed payment. Initial steps may include contacting the customer via telephone, performing a field visit to the customer’s work or home, or activating the automobile’s onboard starter disrupt system. When the initial steps are not successful the Company takes steps to repossess the automobile. Once the automobile is in the Company’s possession, the vehicle is liquidated and the associated receivable account is charged off at the expiration of the applicable State’s statutory notice period for repossessed accounts, which is usually from 0 to 30 days long. In situations where the Company has been unable to successfully repossess the automobile, the account is written off immediately. When a customer’s account becomes severely delinquent (usually 14 days for weekly pay accounts, 30 days for bi-weekly pay accounts and 60 days for monthly pay accounts), the Company suspends accrual of interest income. Notes and lease receivables for accounts held in repossession are fully reserved for in the allowance for credit losses.

The Company maintains an allowance for credit losses on an aggregate basis for the notes and lease receivable portfolio. Management considers the allowance for credit losses to be sufficient to cover estimated losses in the collection of outstanding receivables. The allowance is based primarily upon historical credit loss experience with consideration given to recent credit loss trends, changes in loan characteristics (i.e., average amounts financed and terms of the notes), delinquency levels, collateral values, economic conditions, and underwriting and collection practices. The allowance for credit losses is periodically reviewed by management with any changes reflected in current operations. Although it is at least reasonably possible that events or circumstances could occur in the future that are not presently foreseen which could cause actual credit losses to be materially different from the recorded allowance, the Company believes that it has given appropriate consideration to all relevant factors and has made reasonable assumptions in determining the allowance.

For accounts where the automobile was repossessed, the difference between the loan or lease balance and the fair value of the repossessed automobile (based on the average wholesale selling price at auction) is charged to the allowance for credit losses. Generally, repossessed automobiles are sold at auction. On average, accounts are approximately 90 days past due at the time of write-off. For previously written-off accounts that are subsequently recovered, the amount of such recovery is credited to the allowance for credit losses.

The Company expenses all costs incurred in connection with the process of initiating, refinancing or restructuring notes or lease receivables to include all costs related to underwriting, securing collateral, closing transactions, processing loan documents, and determining credit worthiness.

Three Month Financial Information

The following summary of selected financial information for the three ~~months~~month period ended July 31, ~~2008~~2009 and ~~2007~~2008 is derived from, and should be read in conjunction with, and is qualified in its entirety by reference to, our Condensed ~~interim~~Consolidated ~~financial~~Financial ~~statements~~Statements, including the notes thereto, as of and for periods ended July 31, ~~2008~~2009 and ~~2007~~2008.

Three months ended July 31, ~~2008~~2009 compared to the three months ended July 31, ~~2007~~2008

				% of					% of
		July 2008		Revenue			July 2007		Revenue
		July 2009		Revenue			July 2008		Revenue
Revenue	$	812,~~783~~819,~~948~~380		100.0		$	~~943~~8,~~391~~783,948		100.0
Cost of sales	$	57,~~375~~288,~~682~~277		6156.29			~~518~~5,~~841~~375,682		5561.02
Gross profit	$	35,~~408~~531,~~266~~103		3843.82			~~424~~3,~~550~~408,266		4538.08
Gain on debt forgiveness	$	-		-			-		-
Operating expenses		4,125,255		32.2			4,525,019		51.5
Operating expenses	$	4,525,019		51.5			1,563,983		165.8
Operating income (loss)		1,405,548		10.1			(1,116,753	)	(12.7	)
Operating income (loss)	$	(1,116,753	)	(12.7	)		(1,139,433	)	(120.8	)
Interest expense		(1,060,237	)	8.3			(1,877,114	)	21.4
Interest expense	$	(1,877,114	)	21.4			(149,430	)	15.8
Gain (loss) on derivative instruments		4,709,781		36.7			2,010,476		22.9
Gain (loss) on derivative instruments	$	2,010,476		22.9			(1,430,363	)	(151.6	)
Gain on sale of software division		-					2,514,229		28.6
Gain on sale of software division	$	2,514,229		28.6			-		-
Transaction Costs		(637,500	)	5.0			-
Minority interest income (loss)	$	-		-			7,128		0.8
NET INCOME	$	4,417,892		34.5		$	1,530,838		17.4
NET INCOME (LOSS)	$	1,530,838		17.4			(2,712,098	)	(287.5	)
Income (loss) per common share
Income (loss) per common share	$	0.02					(0.04	)
Basic	$	0.04				$	0.02
Diluted	$	0.00				$	0.02

Revenue

In the three months ended July 31, ~~2008~~2009, our revenues increased by approximately $~~7,840,557~~4 million compared to the same period ended July 31, ~~2007~~2008. This increase was primarily due to ~~our~~increased ~~acquisition~~used ofcar asales ~~number~~and ~~of buy-here-pay-here credit centers~~leases. ~~Our~~With ~~Carbiz~~a new ~~Auto~~floor ~~Credit~~plan ~~locations~~funding ~~that were~~ in ~~operation~~ ~~during~~place, the ~~second~~Company ~~quarter~~was ofable ~~2007~~to ~~had~~stock ~~total~~and ~~sales~~replenish ~~during~~ the ~~three~~ ~~months-ended~~stores ~~July~~with ~~31,~~a ~~2008~~variety of ~~$6,909,797~~inventory ~~compared~~which led to ~~the~~increased ~~previous periods~~ sales ~~of $341,760~~. ~~Our~~The ~~new Midwest locations acquired October 1, 2007 provided~~Company’s ~~$6,821,400~~purchase of ~~sales~~Star ~~and~~Financial’s ~~our~~portfolio ~~Houston location provided $1,288,244 of sales. Our software~~ and ~~consulting~~the ~~products~~growth ~~had sales~~ of ~~$412,942~~its ~~during~~own ~~the~~portfolio combined ~~three~~to ~~months ended~~increase ~~July~~interest ~~31,~~and ~~2008~~lease asincome ~~compared~~by toapproximately $~~581~~450,~~574~~000 ~~during~~ from the same period ended July 31, ~~2007 as a result of the software operations sale on July 2,~~ 2008.

~~In the three months ended July 31, 2008, we sold 946 cars compared to 1,036 cars during the three months ended April 30, 2008, a decrease of 10% from the previous three months.~~ Total revenue from car sales and leases during the three months ended July 31, ~~2008~~2009 was $610,~~909~~775,~~797~~ 661 compared to $6,~~500~~909,~~034~~797 during the three months ended ~~April~~July 3031, 2008, an increase of 656%. This was a result of ~~an increase in the average selling price per car,~~better ~~which~~inventory ~~was~~at ~~$6,910 and $5,739 during~~ the ~~three~~stores ~~months ended July 31, 2008~~ and ~~April~~ ~~30,~~an ~~2008,~~overall ~~respectively,~~increase anin ~~increase~~the ofaverage ~~$1,171~~selling ~~per~~price per car.

~~Interest~~Total ~~income~~revenue ~~for~~from consulting and collection services during the three months ended July 31, ~~2008~~2009 ~~increased~~was by $1139,~~441,252~~612 compared to ~~the~~$412,942, ~~previous~~a ~~year’s~~decrease ~~three~~of ~~month period~~$273,330, ~~primarily~~during ~~due to~~ the ~~acquisitions~~three ~~of buy-here-pay-here~~months ~~credit~~ended ~~centers~~July ~~and~~31, ~~the related portfolios~~2008. ~~Interest~~The ~~income~~decrease ~~from~~relates ~~our~~to ~~three original Carbiz Auto Credit locations during~~ the ~~three months ended~~ July ~~31,~~ 2008 ~~was~~sale ~~$22,184.~~of ~~Our~~the ~~Midwest~~software ~~locations~~division. ~~acquired~~The ~~October~~three 1,month ~~2007~~period ~~provided~~this ~~$915,692~~year ofincludes ~~interest~~no ~~income~~software ~~and~~revenue ~~our~~as ~~Houston~~compared ~~location~~to ~~provided~~three ~~$523,333~~month’s revenue in ofthe ~~interest~~same ~~income~~period last year.

Interest and lease income for the three months ended July 31, 2009 increased by $442,898 compared to the previous year’s three month period. This increase is due to the increased portfolio size from self generated sales and the acquired Star portfolio.

Consulting and collections services

Through June 30, 2008, this segment of our business consisted of new sales and monthly revenue for software products and new sales and other related products including revenue from credit bureau fees, supply sales, and forms programming, and new sales and monthly revenue for consulting products. The software operation of this segment was sold on July 2, 2008. As of July 2, 2008, our ongoing revenue stream has consisted of new sales and monthly revenue from consulting products, training products, Buy Here-Pay Here performance groups, seminars, other one time dealer assistance, and supply sales. In the beginning of fiscal year 2010, the Company opened a collection facility at the corporate headquarters to provide collection services to both our own stores and independent car dealerships.

Cost of Sales

Our cost of sales expense increased by $41,~~856~~912,~~841~~595 for the three months ended July 31, ~~2008~~2009, compared to the previous year’s three month period. Used ~~Carbiz~~car ~~Auto~~costs ~~Credit operations cost of sales~~ increased by $41,~~825~~800,~~542~~696, due to ~~our~~increased ~~Midwest~~sales and ~~Houston locations. We~~increased ~~anticipate that our~~ cost of ~~sales~~our ~~expense will continue to increase as we experience full fiscal year operations from the newly acquired credit centers~~vehicles. Our ~~software~~Consulting and ~~consulting~~collections ~~products~~ cost of sales ~~expense~~ increased by $31111,~~299~~ 899 during the three months ended July 31, ~~2008~~2009 ~~despite the sale of the software operations sold on July 2, 2008, primarily~~ due to ~~increased~~the ~~personnel~~increase ~~expense~~in ~~and~~collections ~~transaction~~department ~~based costs for products introduced during the current fiscal year~~staff.

Expenses

For the three months ended July 31, ~~2008~~2009, our personnel expenses increased by $~~365~~99,~~599~~120 compared to the previous year’s three month period. This was due to ~~the~~an ~~additional~~increase in corporate staff positions. Selling expenses decreased for the three months ended July 31, 2009 by $68,045 due to ~~support~~cost savings measures and a reduction in advertising spending. Professional fees increased by $75,493, due to the ~~acquired~~use ~~Midwest~~of outside professionals to assist with internal control testing for management and complex tax computations Other operating expenses increased by $110,298 during the three month period ended July 31, 2009, mostly due to cost of living increases in rent and utilities and the expansion of our corporate office.

and Texas locations. Selling expenses increased for the three months ended July 31, 2008 by $86,053 due to additional advertising to support the Midwest and Texas locations. Professional fees decreased by $89,808 as a result of higher than normal professional fees in the prior year period due to the fees incurred in various lender agreements during that period. Other operating expenses increased by $214,321 during the three month period ended July 31, 2008, due to the general office, rent expense and other expenses incurred by the acquired Midwest and Texas locations.

The additional Midwest and Texas locations have required a moderate investment in fixed assets and as a result, depreciation expense increased for the period from $12,092 to $32,766 or $20,674.

Bad Debt Expense

For the three months ended July 31, 2008 the total amount of loans charged off to bad debt was $3,010,213 compared to $2,889,671 for the three months ended April 30, 2008, which primarily related to our CarBiz Auto Credit loan portfolio. Additional non-performing portions of the portfolios acquired in the Midwest and Texas in 2007 were charged off during the period, and while we expect that the remaining acquired loans may not perform to the level of new loans written with our underwriting standards.

At July 31, 2008 approximately one half of our total Midwest portfolio consists of loans that have been originated since the acquisition. During for the three months ended July 31, 2008, $1,393,592 of the acquired portfolio was charged off compared to $1,736,893 for the three months ended April 30, 2008 and $605,103 of the portfolio originated by us was charged off compared to $276,595 during the three months ended April 30, 2008. The Texas portfolio at July 31, 2008 is approximately 95% acquired loans since new loans are originated only from one location. During the three months ended July 31, 2008, $913,070 of the acquired loans was charged off compared to $876,669 during the three months ended April 30, 2008.

Interest Expense

Our interest expense and other expenses ~~increased~~decreased by $1816,~~727,684~~ 877 for the three months ended July 31, ~~2008~~2009, compared to the previous year’s three month period, asdue ato ~~result~~the oflower ~~the~~amount ~~issuance~~ of ~~the~~outstanding ~~four~~debt ~~convertible debentures during the prior fiscal year~~ and the ~~various~~lower interest ~~credit~~rate ~~facilities~~on tothat ~~support our Midwest and Texas operations~~debt. The ~~convertible debenture~~outstanding ~~financings~~debt ~~incurred~~was ~~interest~~approximately ~~expense~~$37.1 ~~The~~million ~~current~~in ~~line of credit~~the ~~balance~~prior ~~reflects~~year ~~the~~as ~~total~~compared ~~borrowed~~to ~~against~~$28.2 ~~the~~million ~~acquired~~in ~~loan portfolios and newly generated sales at~~ the ~~Midwest~~current ~~and Texas locations~~year. WeInterest ~~anticipate our~~expense ~~interest~~associated ~~expense~~with ~~will~~convertible ~~increase~~debenture ~~over~~financings ~~this~~is ~~and~~recognized ~~subsequent~~based ~~years~~on ~~while~~ the ~~convertible~~effective ~~debentures~~interest ~~remain~~method, ~~outstanding~~ and asinterest weexpense ~~draw~~is ~~down~~therefore onexpected ~~our lending~~to ~~facilities~~increase due to ~~finance~~increased ~~additional~~carrying ~~inventory and customer loans~~values.

Gain/Loss on Derivative Instruments

For the three months ended July 31, ~~2008~~2009, we incurred a non-cash gain of $24,~~010~~709,~~476~~781 as a result of the fair value adjustment of outstanding derivative instruments which is based primarily on fluctuations in our stock price.. During the three months ended July 31, ~~2007~~ 2008, we incurred a non-cash ~~loss~~gain of $12,~~430~~010,~~363 including day one derivative losses on new financings~~476. We expect gains and losses on derivative instruments in the future while the convertible debentures, the host instrument of the derivative liabilities, and related warrants remain outstanding.

~~Gain~~Provision onfor ~~Sale~~credit ~~of Software Division~~losses

~~For~~As ~~the~~of ~~three months ended~~ July 31, ~~2008~~2009, wethe ~~recorded~~total aCarbiz ~~gain~~Auto ofCredit ~~$2,514,229~~loan portfolio onwas ~~the~~approximately ~~sale~~$16.9 ofmillion ~~our~~and ~~software~~the ~~line~~net ofinvestment in lease ~~products~~receivables onwas ~~July~~approximately 2,$11.5 ~~2008~~million. The ~~purchase~~allowance ~~price~~for ~~was~~doubtful ~~$2,509,000~~accounts at ~~and~~ the ~~assumption of~~same ~~certain~~date ~~liabilities~~was byapproximately ~~the purchaser~~$5.8 ~~All~~million ~~rights~~for to the ~~source~~vehicle ~~code~~loan ~~of all~~portfolio, ~~software~~and ~~products~~$2.8 ~~previously~~million ~~sold~~for by the ~~Company~~net ~~were~~investment ~~conveyed~~in ~~to the purchaser under the agreement~~leases, ~~including~~a ~~the~~total ~~customer~~of ~~base~~$8.6 ~~and~~million. ~~all ongoing revenue derived~~The ~~from~~provision ~~the~~for ~~software~~credit aslosses ofdecreased ~~July~~by 1$758,625, ~~2008.~~mostly ~~The~~attributable ~~Company~~to ~~retained all of the consulting~~large ~~portion~~blocks of ~~its~~consumer ~~business~~notes ~~and~~written ~~intends~~off toin ~~continue~~the toprior ~~operate~~year. ~~and~~Those ~~expand~~notes ~~that~~were from ~~segment~~the ofacquired ~~its~~Calcars ~~operations~~portfolio.

~~Software Sales, Support and Consulting~~28

revenue from consulting products, training products, Buy Here-Pay Here performance groups, seminars, other one time dealer assistance, and supply sales.

Total software and consulting sales during the three months ended July 31, 2008 decreased from the prior year’s three month period by $168,732. The three month period this year included only two months of software revenue as compared to three month’s revenue in the same period last year.

Bad Debt Provision

As of July 31, 2008, the total Carbiz Auto Credit loan portfolio was $29,868,954. The allowance for doubtful accounts at the same date was $5,989,998.

After the acquisition of the Midwest and Houston portfolios, we determined that since our historical portfolio of approximately $600,000 in our Florida stores is now a very small percentage of the total portfolio, it is appropriate to apply a percentage to the entire portfolio rather than use a different method on that portion of the portfolio.

It is not reasonable to expect that the acquired portfolio will perform as well as if we had originated every loan. Therefore, we have determined that a percentage above our own historical level, but better than the industry average, is appropriate for the reserve calculation going forward. In addition, because of the large number of accounts and physical locations, we also determined that identifying all pending repossessions at the reporting date was unrealistic. Those factors led to the application of a 20% reserve calculation on the total balance of the Florida and Midwest originated and the Midwest acquired portfolio. A factor of 21% was applied to calculate the reserve for the Houston portfolio. These percentages are in line with industry averages, but will be re-evaluated with more experience in collection results.

All acquired loans were made at a maximum interest rate of 29.9% APR. Newly originated loans are made at a maximum interest rate of 19.95% with no loans made without complete documentation and verification of employment and references. While our underwriting procedures do not take credit score into account, a credit bureau report is obtained for each customer. While the range of scores varies widely, the average credit score of our customers is approximately 500. Typically, loans are made for approximately 100% of the sale price of the car, with down payment amounts sufficient to offset the costs incurred for license and title fees and sales taxes paid.

Six Month Financial Information

The following summary of selected financial information for the six months ended July 31, ~~2008~~2009 and ~~2007~~2008 is derived from, and should be read in conjunction with, and is qualified in its entirety by reference to, our interim financial statements, including the notes thereto, for periods ended July 31, 2009 ~~2008~~ and ~~2007~~2008.

Six months ended July 31, ~~2008~~2009 compared to the six ~~months~~ months ended July 31, ~~2007~~ 2008

				% of					% of
		July 2008		Revenue			July 2007		Revenue
		July 2009		Revenue			July 2008		Revenue
Revenue	$	1721,~~707~~334,~~220~~757		100.0		$	117,~~823~~707,~~976~~220		100.0
Cost of sales	$	1012,~~175~~156,~~375~~056		57.50		$	~~934~~10,~~794~~175,375		5157.25
Gross profit	$	79,~~531~~178,~~845~~701		4243.50		$	~~889~~7,~~182~~531,845		4842.85
Gain on debt forgiveness	$	0		0		$	391,337		21.5
Operating expenses	$	7,976,143		37.4		$	8,715,225		49.3
Operating expenses	$	8,715,225		49.3		$	2,242,798		123.0
Operating income (loss)	$	1,202,558		5.6		$	(1,219,380	)	(6.9	)
Operating income (loss)	$	(1,219,380	)	(6.9	)	$	(962,279	)	(52.8	)
Interest expense	$	(2,022,069	)	9.5		$	(3,783,535	)	21.4
Interest expense	$	(3,783,535	)	21.4		$	(238,937	)	13.1
Gain (loss) on derivative instruments	$	(53,319	)	0.3		$	4,044,824		22.8
Gain (loss) on derivative instruments	$	4,044,824		22.8		$	(751,742	)	(41.2	)
Gain on sale of software division	$	-				$	2,514,229		14.2
Gain on sale of software division	$	2,514,229		14.2		$	0		0
Transaction Costs	$	(637,500	)	3.0		$	-
Minority interest income (loss)	$	0		0.0		$	1,034		0.1
Gain on debt extinguishment	$	33,199,287		125.6		$	-
NET INCOME (LOSS)	$	131,~~556~~688,~~148~~957		8148.75		$	(1,~~951~~556,~~924~~148	)	~~(107~~8.07	)
Income (loss) per common share	$	~~0.02~~				$	~~(0.03~~	)
Basic	$	0.04				$	0.02
Diluted	$	0.00				$	0.02

Revenue

In the six months ended July 31 2009, ~~2008,~~ our revenues increased by approximately $~~15,883,244~~3.6 million as compared to ~~our~~the ~~six-month~~same period ended July 31, ~~2007~~2008. This increase was primarily due to ~~our~~increased ~~acquisition~~used ofcar sales and leases. With a new ~~number~~floor ofplan funding in place, the Company was able to stock and replenish the ~~buy-here-pay-here~~stores ~~credit~~with ~~centers.~~a ~~Our~~variety ~~Carbiz~~of ~~Auto~~inventory ~~Credit~~which ~~locations~~led ~~that~~to ~~were~~increased insales. The Company’s ~~operating~~purchase ~~during~~of Star Financial’s portfolio and the ~~six~~growth ~~months~~of ~~ended~~its ~~July~~own 31portfolio combined to increase interest and lease income by approximately $450,000 ~~2007~~from the ~~had~~same ~~total~~period ~~sales~~ended ~~during~~July 31, 2008.

21Total revenue from car sales and leases during the six months ended July 31, 2009 was $17,633,862 compared to $13,409,831 during the six months ended July 31, 2008, an increase of 31%. This was a result of better inventory at the stores and an overall increase in the average selling price per car.

Total revenue from consulting and collection services during the six months ended July 31, ~~2008~~2009 ofwas $~~503~~325,~~500~~012 compared to ~~the previous period’s sales of~~ $~~596~~988,~~782.~~259, ~~Our~~during ~~new~~the six ~~Midwest~~months ~~locations~~ended ~~acquired~~July ~~October 1~~31, ~~2007~~2008, ~~provided~~a ~~$11,815,964~~decrease of ~~sales and our Houston location provided~~ $1663,~~090,367~~247 . ~~Our~~The ~~software~~decrease ~~and~~relates ~~consulting~~to the ~~products~~July ~~had~~2008 ~~sales~~sale of ~~$988,259 for~~ the ~~six~~ ~~months~~software ~~ended~~division. ~~July~~The ~~31,~~six ~~2008~~month ~~compared to $1,191,653 for the same~~ period ~~ended~~this year ~~July~~included ~~31,~~no ~~2007~~software revenue as acompared ~~result~~to ofsix ~~the~~month’s ~~sale~~revenue ofin the ~~software~~same period ~~operations~~last ~~on July 2, 2008~~year.

Interest and lease income for the six months ended July 31, 2009 ~~2008~~ increased by $366,~~273,589~~753 compared to the previous year’s six month period,. ~~primarily~~This slight ~~due~~increase tois the ~~acquisitions~~result of ~~buy-here-pay-here credit~~a ~~centers~~higher ~~and~~portfolio ~~the~~balance ~~related portfolios. Interest income~~ from ~~our~~period ~~three original Carbiz Auto Credit locations during the six months ended July 31, 2008 was $53,451 compared~~ to ~~the previous year’s six month~~ period ~~of $35,541~~. ~~Our Midwest locations acquired October 1, 2007 provided $1,933,911 of interest income and our Houston location provided $1,321,768 of interest income.~~

Cost of Sales

Our cost of sales expense increased by $91,~~240~~980,~~581~~681 for the six months ended July 31, ~~2008~~2009, compared to the ~~same~~ ~~period~~previous ~~ended~~year’s ~~July~~six ~~31,~~month ~~2007~~period. Used ~~Carbiz~~car ~~Auto~~costs ~~Credit operations cost of sales~~ increased by $92,~~047~~011,~~101~~819 due to ~~the~~increased ~~addition~~sales ~~of our Midwest~~ and ~~Houston locations.~~increased ~~We anticipate that our~~ cost of ~~sales~~our ~~expense will continue to increase as we experience full fiscal year operations from the newly acquired credit centers~~vehicles. Our ~~software~~Consulting and ~~consulting~~collections ~~products~~ cost of sales ~~expense increased~~decreased by $~~193~~31,~~480~~138 during the six months ended July 31, ~~2008~~2009 ~~despite~~due to the sale of ~~the~~ the software operations onin July 22008, ~~2008~~and the subsequent reduction of staff and overhead.

Expenses

For the six months ended July 31, ~~2008~~ 2009, our personnel expenses increased by $~~763~~18,~~006~~837 compared to the previous year’s ~~six~~three month period. This was due to ~~the~~an ~~additional~~increase in corporate staff ~~to support newly acquired Midwest and Texas locations~~positions. Selling expenses ~~increased~~decreased for the six months ended July 31, ~~2008~~2009 by $~~207~~104,~~010~~371 due to ~~additional~~cost ~~advertising~~savings measures toand ~~support~~a ~~the~~reduction ~~Midwest~~in ~~and~~advertising ~~Texas locations~~spending. Professional fees ~~increased~~decreased by $~~135~~110,~~255~~615, ~~due~~because toin ~~increased audit and legal costs related to~~ the ~~increase~~prior ~~in company size~~year, ~~maintenance~~the ofCompany ~~lines~~needed ofadditional ~~credit~~legal and ~~floor plans, and registration~~ ofaccounting ~~shares~~assistance ~~in support of various debenture financings. Other operating expenses increased by $1,262,892 during the six month period ended July 31, 2008,~~ due to the ~~general~~Midwest ~~office, rent expense~~ and ~~other~~Houston ~~expenses~~portfolio ~~incurred by the acquired~~acquisitions. ~~Midwest~~Other ~~and~~operating ~~Texas~~expenses ~~locations.~~

~~Bad Debt Expense~~29

~~For~~increased by $179,692 during the six ~~months~~month period ended July 31, ~~2008~~ ~~the total amount of loans charged off to bad debt was $5~~2009,~~899,884,~~ ~~which primarily~~mostly ~~relates~~due to ~~our~~cost ~~CarBiz Auto Credit loan portfolio. Non-performing portions~~ of ~~the~~living ~~portfolios~~increases ~~acquired~~ in ~~the~~rent ~~Midwest~~ and ~~Texas~~utilities ~~in 2007 were charged off during the period,~~ and ~~while we expect that~~ the ~~remaining acquired~~ ~~loans~~expansion ~~may not perform to the level~~ of ~~new loans written with~~ our ~~underwriting standards.~~corporate ~~At July 31, 2008 approximately one half of our total Midwest portfolio consists of loans that have been originated since the acquisition~~office. ~~During~~ that period, $3,130,485 of the acquired portfolio was charged off and $881,698 of the portfolio originated by us was charged off. The Texas portfolio at July 31, 2008 is approximately 95% acquired loans since new loans are originated only from one location. During the period $1,789,739 of the acquired loans was charged off and $8,465 of the portfolio originated by us was charged off.

The total amounts charged off during period resulted in total bad debt expense of $4,134,151 and an ending balance in our bad debt reserve of $5,989,998 (See Note 3).

Interest Expense

Our interest expense ~~increased~~and other expenses decreased by $31,~~544~~761,~~598~~ 466 for the ~~six~~three months ended July 31, ~~2008~~2009, compared to the ~~same~~previous year’s three month period, due to the lower amount of outstanding debt and the lower interest ~~ended~~rate ~~July~~on ~~31,~~that ~~2007,~~debt. The outstanding debt was approximately $37.1 million in the prior year as acompared ~~result~~to of$28.2 million in the current year. Interest expense associated with convertible ~~debentures~~debenture ~~and~~financings ~~the~~is ~~line~~recognized ofbased on the ~~credit.~~effective Weinterest ~~anticipate~~method, ~~our~~and interest expense ~~will~~is therefore expected to increase ~~over~~due ~~this~~to ~~and subsequent~~increased ~~years~~carrying ~~related~~values. toThe current line of credit balance reflects the ~~Trafalgar~~total ~~Debentures~~borrowed ~~and~~against asthe weacquired ~~draw~~loan ~~down~~portfolios onand ~~our~~newly ~~credit~~generated ~~facility~~sales ~~with~~at ~~SWC.~~the Midwest and Texas locations.

Gain/Loss on Derivative Instruments

For the six months ended July 31, ~~2008~~ 2009, we incurred a non-cash loss ~~gain~~ of $453,~~044,834~~319 as a result of the fair value adjustment of outstanding derivative instruments which ~~are~~is based primarily on ~~the~~ fluctuations in our stock price. ~~For~~During the ~~same~~six ~~period~~months ended July 31, ~~2007,~~2008 we incurred a non-cash ~~loss~~gain of $~~(751~~4,~~742)~~044,834. ~~including~~We ~~day~~expect ~~one~~gains and losses on derivative instruments in the future while the convertible debentures, the host instrument of the derivative liabilities, and related warrants remain outstanding.

22Gain on debt forgiveness

~~losses~~During the six months ended July 31, 2009, we had a $33.2 million gain on ~~new~~extinguishment ~~financings~~of debt. We$24.4 ~~expect~~million ~~gains~~of ~~and~~the ~~losses~~extinguishment ongain ~~derivative~~came ~~instruments~~from inthe DSC debt forgiveness of $31.4, less the ~~future~~cost ~~while~~of converting our financed receivables to leases of approximately $4.6 million, the ~~convertible~~fair ~~debentures~~value ~~and~~of ~~related~~the DSC warrants ~~remain~~issued, ~~outstanding~~of approximately $1.4 million, the write off of deferred financing costs of approximately $600,000 and the additional DSC origin and commitment fees of $370,000. The remaining $8.8 million gain on debt extinguishment was derived from a modification of the Trafalgar debenture agreement. There was no such gain in the six months ended July 31, 2008.

~~Software~~Consulting ~~Sales, Support~~ and ~~Consulting~~collections services

Through June 30, 2008, this segment of our business consisted of new sales and ~~recurring~~ monthly revenue for software products and new sales and other related products including revenue from credit bureau fees, supply sales, and forms programming, and new sales and monthly revenue for consulting products. The software operation of this segment was sold on July 2, 2008. As of July 12, 2008, our ongoing revenue stream ~~will consist~~has consisted of new sales and monthly revenue from consulting products, training products, ~~BHPH~~Buy ~~performance~~Here-Pay Here performance groups, seminars, other one time dealer assistance, and supply sales. In the beginning of fiscal year 2010, the Company opened a collection facility at the corporate headquarters to provide collection services to both our own stores and independent car dealerships.

~~Total~~Provision ~~software~~for ~~and~~credit consulting sales during the six months ended July 31, 2008 decreased from the prior year’s six month period by $203,394. The six month period this year included only five months of software revenue as compared to the six months revenue in the same period last year.losses

~~Our~~As ~~consulting~~of ~~services~~July ~~help~~31, to2009, the total Carbiz Auto Credit loan ~~interpret~~portfolio ~~dealer~~was ~~performance~~approximately ~~data~~$16.9 million and ~~provide~~the ~~advice,~~net asinvestment ~~well~~in aslease receivables ~~industry~~was approximately $11.5 million. The allowance for doubtful accounts ~~benchmarks,~~at tothe ~~help~~same ~~dealers~~date ~~improve~~was ~~results~~approximately $5.8 ~~Our~~million ~~consulting~~for ~~focuses~~the onvehicle loan portfolio, ~~implementing~~and $2.8 million for the net investment in leases, a ~~data~~total ~~tracking~~of ~~product~~$8.6 ~~that~~million. ~~automates~~The provision ~~some~~for ~~data~~credit ~~analysis~~losses decreased by $758,625, ~~creates~~mostly attributable to large ablocks ~~recurring~~of ~~revenue~~consumer ~~stream~~notes ~~and~~written ~~facilitates~~off ~~additional~~in ~~consulting~~the ~~services~~prior year. Those notes were from the acquired Calcars portfolio.

~~Bad Debt Provision~~30

AsSignificant ofFinancing ~~July 31, 2008, the total Carbiz Auto Credit loan portfolio was $29,868,954. The allowance for doubtful accounts at the same date was $5,989,998.~~Arrangements

~~After~~Trafalgar ~~the~~Secured ~~acquisition~~Subordinated ~~of the~~Debenture Midwest and Houston portfolios, we determined that since our historical portfolio of approximately $600,000 in our Florida stores is now a very small percentage of the total portfolio, it is appropriate to apply a percentage to the entire portfolio rather than use a different method on that portion of the portfolio.Financings

ItJanuary is2009 not reasonable to expect that the acquired portfolio will perform as well as if we had originated every loan. Therefore, we have determined that a percentage above our own historical level, but better than the industry average, is appropriate for the reserve calculation going forward. In addition, because of the large number of accounts and ~~physical~~subsequent locations, we also determined that identifying all pending repossessions at the reporting date was unrealistic. Those factors led to the application of a 19% reserve calculation on the total balance of the Florida and Midwest originated and the Midwest acquired portfolio. A factor of 21% was applied to calculate the reserve for the Houston portfolio. These percentages are in line with industry averages, but will be re-evaluated with more experience in collection results.modifications

~~All~~In ~~acquired~~January ~~loans~~2009, the Company executed another debenture modification agreement with Trafalgar which terms were ~~made~~effective aton aFebruary 20, ~~maximum~~2009 ~~interest~~(the ~~rate~~“February of2009 29modification”).9% ~~APR.~~The ~~Newly~~February ~~originated~~2009 ~~loans~~modification ~~are~~was made pursuant atto athe ~~maximum interest~~Company ~~rate~~modifying the terms of ~~19.95%~~the ~~with~~Company’s noother ~~loans~~debt arrangements ~~made~~including ~~without~~the ~~complete~~revolving ~~documentation~~line-of-credit, term and floor plan notes ~~verification~~payable, ofwhich ~~employment~~were ~~and~~also ~~references~~effective February 20, 2009. ~~While~~Pursuant ~~our~~to ~~underwriting~~the ~~procedures~~February 2009 domodification, Trafalgar revised the payment terms related to certain of the ~~not~~convertible ~~take~~debentures. ~~credit~~Debenture ~~score~~principal ~~into~~and ~~account~~interest payments are due as follows: $250,000 ain ~~credit~~March ~~bureau~~2009; ~~report~~$50,000 isper ~~obtained~~month ~~for~~April ~~each~~2009 through December ~~customer.~~2009; ~~While~~$100,000 per month January 2010 through August 2010; and the ~~range~~remaining balance of ~~scores~~approximately ~~varies~~$5,100,000, ~~widely~~in September 2010, ~~the~~so ~~average~~long ~~credit~~as ~~score~~the ofCompany ~~our~~holds ~~customers~~consumer isnotes ~~approximately~~that ~~500.~~are ~~Typically,~~not ~~loans~~in ~~are~~default ~~made~~from ~~for~~its ~~approximately~~BHPH business which have ~~100%~~an aggregate balance of ~~the~~at ~~sale~~least ~~price~~$10 ofmillion ~~the~~and ~~car,~~only ~~with~~if ~~down~~cash ~~payment~~on ~~amounts~~hand ~~sufficient~~exceeds its topayables by at least $1 million. A further modification was made by ~~offset~~Trafalgar which allowed the ~~costs~~Company ~~incurred~~to ~~for~~further ~~license~~modify ~~and~~the ~~title~~terms ~~fees~~of ~~and~~the ~~sales~~its ~~taxes~~loan agreements ~~paid~~with DSC.

~~Our~~Additional ~~depreciation~~Unsecured ~~and~~Subordinated ~~amortization~~Debenture expense for the six months ended July 31, 2008 was $79,678 as compared to $38,641 for the six month period ended July 31, 2007. This increase is a result of capital additions related to our newly acquired Midwest and Houston locations and the April, 2008 relocation of our corporate offices in Florida.Financing

On April 27, 2009, the Company issued 980,392 shares to Trafalgar at a conversion price of $0.08 for a partial conversion of the Senior Convertible Debenture. On February 19, 2009, a holder of certain of the Company’s October 1, 2007 convertible debentures converted $50,000 principal and $8,196 of accrued interest due under the debentures into 619,102 shares of common stock of the Company. The conversion price was $0.094. The holder is the spouse of a member of the board of directors. On February 16, 2009, 11,073,419 shares of common stock were issued upon exercise, by a Company director, of outstanding warrants issued as part of the previously reported October 6, 2004 sale of convertible debentures. The Company received proceeds of $996,578 based on the CDN$ 0.12 warrant exercise price. On February 16, 2009, the Company issued 289,332 shares of common stock upon exercise of outstanding warrants issued as part of the October 1, 2007 convertible debenture financing. The Company received proceeds of $33,273 at exercise prices of $0.01 (72,333 shares), $0.10 (72,333 shares), $0.15 (72,333 shares), and $0.20 (72,333 shares). The warrant holder was a member of the board of directors.

Senior Credit Facilities

Dealer Services Corporation

On January 16, 2009, we entered into an Asset Purchase Agreement with Dealer Services Corporation (“DSC”) and the bankruptcy Trustee of SWC Services LLC (“Trustee”), pursuant to which DSC agreed to purchase and the Trustee agreed to transfer and assign to DSC all of the rights and interest of SWC under the Loan Agreement and the other documents entered into by us and the various guarantors in connection with the SWC Loan Agreement (collectively, the “Loan Documents”).

The Asset Purchase Agreement provided that, in consideration for the transfer to DSC of SWC’s rights in the Loan Documents, DSC would pay to the Trustee the sum of $12,000,000. The final order was effective on February 20, 2009, and $12,000,000 was paid to the Trustee, and upon receipt of such amount the Trustee transferred to DSC its liens and encumbrances in and to our automobile inventory.

The Asset Purchase Agreement also provided that the Loan Agreement would be amended, effective as of February 20, 2009, pursuant to the terms of the Third Amended and Restated Loan and Security Agreement by and between us, DSC and the other parties thereto (the “New Loan Agreement”). The New Loan Agreement substantially revised the terms of the Loan Agreement, and provided that DSC would forgive all of the outstanding balance due under the SWC Loan Agreement in excess of $12,000,000. At February 20, 2009, there was a total balance of approximately $43.3 million borrowed under the SWC credit facilities. The forgiveness of such amount resulted in us recognizing income in the our fiscal year 2010 for both financial reporting and federal income tax purposes in the amount of the difference between the amount owed as of the closing date and $12,000,000, less the amount of any costs incurred. We incurred normal transaction costs including commitment fees and legal costs related to the restructuring of current notes receivable as required under the New Loan Agreement. For tax purposes it is anticipated that we will apply IRC Section 108 to the gain associated with the forgiveness of SWC debt in fiscal year 2010. We believe that we have net operating loss carry forwards (NOLs) available that will be adequate to absorb any remaining taxable

income. However, as a consequence of using IRC Section 108, these NOLs will most likely be reduced to zero in the year following the transaction. There may also be other adjustments that we must make that would have the effect of deferring any potential income tax liabilities. We believe that beyond the reduction of the NOLs that these other adjustments will not have a material impact on our consolidated financial position.

As DSC primarily provides financing to automobile dealers who lease automotive vehicles to consumers, the New Loan Agreement provided that we had to convert a number of outstanding notes receivable due from consumers who have purchased vehicles from us into closed-end leases or pay a substantial penalty to DSC. Under the New Loan Agreement, we delivered to DSC a set of conversion documents, consisting of a signed closed-end lease and a bill of sale for each vehicle, with respect to vehicles with an aggregate Floor Plan Value (as defined below) of approximately $9,000,000. We incurred costs of approximately $4.6 million in connection with the conversion of these notes receivable, including incentives to borrowers under the notes receivables. The New Loan Agreement provides us with floor plan financing, and generally provides that all advances borrowed to purchase vehicles must be repaid ratably over a two-year period, or upon the sale of the associated vehicle. For loans which are converted to closed-end leases, the two years will commence on the date of conversion. The total credit limit under the New Loan Agreement, as amended, is $19,500,000, which includes the $12,000,000 paid to the Trustee under the Asset Purchase Agreement. As amounts are repaid to DSC, we will be able to re-borrow funds to purchase additional vehicles; provided however, that all advances under the New Loan Agreement are at the sole discretion of DSC. The interest rate for all advances under the floor plan facility, including the amount paid to the Trustee for our inventory of vehicles and all vehicles subject to the conversion documents, will be variable, based upon published rates of DSC. The effective rate as of July 31, 2009 was approximately 21.94% and our outstanding balance at July 31, 2009 is $15,636,084.

All of the financial covenants contained in the prior Loan Agreement have been deleted from the New Loan Agreement and replaced by an obligation for us to maintain a minimum of $3,500,000 of accounts receivable. As was the case under the previous Loan Agreement, the obligation to pay all amounts due under the New Loan Agreement is secured by a pledge to DSC of all of our assets. Also, Carl Ritter, our Chief Executive Officer, has pledged his shares of our Company’s common stock (3,944,112 shares) to DSC as additional collateral.

In connection with entering into the New Loan Agreement, we paid DSC a loan origination fee of $120,000 and a commitment fee of $250,000. In addition, on February 20, 2009, we issued to DSC warrants to purchase 9,718,289 shares of the Company’s common stock at a purchase price of $.03 per share, which was the share price in late December/early January when the Company and DSC began negotiating the terms of the New Loan Agreement. The warrants will expire on February 28, 2014. We have agreed to enter into a registration rights agreement on or before December 31, 2010, pursuant to which we will be required to register for resale by DSC the shares to be issued to DSC under the warrant, and to use our commercially reasonable efforts to obtain all necessary consents to enter into such agreement.

In connection with entering into the Asset Purchase Agreement and the New Loan Agreement, we, DSC and Trafalgar Capital Specialized Investment Fund, Luxembourg (“Trafalgar”), entered into a Fifth Amendment To and Reaffirmation Of Subordination and Inter-creditor Agreement, dated January 14, 2009, amending the Subordination and Inter-creditor Agreement between Trafalgar and DSC, as SWC’s assignee of that agreement. Under the Fifth Amendment, Trafalgar consented to the execution and delivery of the New Loan Agreement.

In connection with the closing of the Asset Purchase Agreement and the New Loan Agreement, the Company requested that Ross Quigley, a director and significant shareholder of the Company, exercise certain warrants previously issued to him to purchase 11,073,419 shares of Company common stock at CDN$.12 per share, 72,333 shares at US$.20 per share, 72,333 shares at US$.15 per share, 72,333 shares at US$.10 per share and 72,333 shares at US$.01 per share, in order to provide additional equity financing to the Company. As a condition to such purchase, Mr. Quigley requested that the Company issue to him an additional warrant to purchase up to 10 million shares of Company common stock at any time prior to February 20, 2014 for US$.08 per share (the “New Quigley Warrant”) and, upon approval of the transaction by the Board of Directors, the Company agreed to issued such warrant to Mr. Quigley. On February 20, 2009, Mr. Quigley delivered $750,000 of the $1,029,861 to exercise the warrants to the Company. The remaining balance of $279,861 was paid on March 13, and the Company issued 11,362,751 shares of common stock to Mr. Quigley.

Under the warrant issued to DSC in connection with the New Loan Agreement (the “Existing DSC Warrant”), the issuance of the New Quigley Warrant would have required the Company to increase the 9,718,289 shares issuable under the Existing DSC Warrant to 10,222,604 shares and reduce the exercise price for all of the shares issuable

under the Existing DSC Warrant from $0.03 per share to $0.02852 per share. However, DSC agreed that in lieu of the Company increasing the number of shares issuable under the Existing DSC Warrant and reducing the exercise price for all of the shares issuable under the Existing DSC Warrant, the Company could issue to DSC a new warrant to purchase up to 750,000 shares of Company common stock at any time prior to February 20, 2014 for $.08 per share (the “New DSC Warrant”). The Company has issued such warrant to DSC.

On February 25, 2009, the Company, its operating subsidiaries and DSC further amended and restated the New Loan Agreement pursuant to the terms of the Fourth Amended and Restated Loan and Security Agreement (the “Fourth Loan Agreement”).

The Fourth Loan Agreement provides for the inclusion of five new Carbiz subsidiaries in the credit facility. Four of these subsidiaries have been formed to carry out the business of the Company in Indiana, and one has been formed to carry out the business of the Company in Nebraska. Under the Fourth Loan Agreement and the promissory notes executed by the operating subsidiaries thereunder, the amount of available credit was expanded from $14 million to $19.5 million.

In connection with entering into the Fourth Loan Agreement, the Company, DSC and Trafalgar entered into a Sixth Amendment To and Reaffirmation Of Subordination and Inter-creditor Agreement, dated February 23, 2009, amending the Subordination and Inter-creditor Agreement between Trafalgar and DSC. Under the Sixth Amendment, Trafalgar consented to the execution and delivery of the Fourth Loan Agreement and the performance of the terms thereof.

Wells Fargo

On June 15, 2009, all of the Company's direct and indirect subsidiaries (the "Borrowers") entered into the WF Loan Agreement dated June 15, 2009 with Wells Fargo Preferred Capital, Inc. Under the WF Loan Agreement, Wells Fargo committed to loan the Borrowers up to (i) $15,000,000 through and including December 31, 2009, (ii) $17,000,000 commencing January 1, 2010 through and including March 31, 2010 and (iii) $20,000,000 thereafter. The purpose of the credit facility is to finance receivables generated by the Company from the sales of used vehicles. The Borrowers may borrow up to 55% of the outstanding amount due under eligible receivables, as defined in the WF Loan Agreement, other than receivables acquired from Star Financial Services in June 2009. With respect to the receivables acquired from Star, they may borrow up to 95% of the amount outstanding under such receivables through the 60th day following the date of the WF Loan Agreement and 90% thereafter.

The WF Loan Agreement is subject to certain borrowing limitations, and includes certain financial and restrictive covenants, including but not limited to covenants requiring the maintenance of minimum EBITDA and debt to equity ratios. The credit facility will terminate on June 30, 2011.

Loans will bear interest at an annual rate equal to the three-month London Interbank Offered Rate plus 3.35% An unused line fee of 0.25% per annum is charged on the unused portion of the credit facility on a monthly basis, and the Company must pay Wells Fargo an administrative fee of $1,000 per month.

Amounts due to Wells Fargo under the WF Loan Agreement are secured by a security interest in all of the personal property of the Borrowers, and guaranteed by the Company under a Guaranty Agreement.

The Borrowers initial draw under the WF Loan Agreement was $10,303,665, $8,153,665 of which was used to pay the indebtedness of Star to WF.

The total Wells Fargo debt outstanding at July 31, 2009 was $11,616,397.

Liquidity and Capital Resources

As of ~~January~~July 31, ~~2008~~2009 and ~~July~~ January 31, ~~2008~~2009, we had $1818,~~141,271~~325 and $~~374~~674,~~894~~624, respectively, in cash and cash equivalents. During the six month period ended July 31, ~~2008~~2009, we ~~increased~~decreased our accounts payable and accrued liabilities by $~~264~~685,~~462~~681, which totaled $3,~~343~~841,~~022~~ 360 at July 31, ~~2008~~2009. ~~During the six months ended July 31, 2008, we made capital lease payments totaling $4,108.~~

During the six months ended July 31, ~~2008~~2009, we issued approximately ~~597~~980,~~868~~392 shares of common stock at a conversion ~~prices~~price ~~ranging from~~of $0.~~1105~~0765 ~~to $0.1488~~ in a ~~series~~Trafalgar of convertible debenture ~~conversions~~conversion. ~~We continue~~Approximately to$19,000 ~~discuss~~of ~~various options available to~~ the ~~convertible debt holder and~~ ~~the~~payment ~~Company for debt service and conversions.~~

2333

~~The~~was ~~Senior~~charged ~~Loan~~to ~~Facility (“Amended~~interest ~~Credit~~expense, ~~Agreement”)~~and isthe ~~divided~~remaining ~~into~~amount ~~two~~went to ~~parts,~~several ~~one~~of tothe ~~finance~~financial ~~the Company~~instrument’s ~~Texas~~derivative ~~business~~components. ~~(the~~Accordingly, ~~“Texas~~no future ~~facilities”),~~cash ~~and~~will ~~one~~be required to ~~finance~~pay ~~the Company’s~~off ~~remaining~~this ~~business~~portion (of the ~~“Non-Texas facilities”)~~debentures.

~~The~~In ~~Non-Texas~~January ~~facilities~~2009, ~~have~~the aCompany executed another debenture ~~maximum~~modification ~~commitment~~agreement ofwith ~~$30~~Trafalgar ~~million~~which terms are effective on February 20, 2009 ~~including~~(“February a2009 ~~$23~~modification”). ~~million~~The ~~revolving~~February ~~receivable~~2009 modification was made ~~loan~~pursuant ~~facility,~~to athe $2Company ~~million~~modifying the terms of the Company’s other debt arrangements including the revolving line-of-credit, term and floor plan ~~loan~~notes payable, ~~facility~~which were also effective February 20, ~~and~~2009 a(See ~~term~~Note ~~loan~~5). Pursuant to inthe February 2009 modification, Trafalgar revised the ~~amount~~payment terms related to certain of ~~$21.925~~the ~~million~~convertible debentures. ~~The~~Debenture ~~revolving~~principal ~~receivable~~and ~~loan~~interest ~~facility~~payments are ~~and~~due as follows: $250,000 in March 2009; $50,000 per month April 2009 through ~~revolving~~December ~~floor~~2009; ~~plan~~$100,000 ~~loan~~per ~~facility~~month ~~will~~January ~~expire~~2010 onthrough ~~October~~August 2010; and the remaining balance of approximately $5.1, ~~2011~~million in September 2010, ~~and~~so long as the ~~term~~Company holds consumer notes that are not in default from its BHPH business ~~loan~~which ~~has~~have aan ~~maturity~~aggregate ~~date~~balance of ~~April~~at least $10 million and only if cash on hand that exceeds its payables by at least $1, ~~2011~~million.

~~The~~In ~~Texas~~February ~~facilities~~2009, ~~have~~we completed a restructuring of our floor plan and receivables financing with DSC as discussed in Senior Credit facilities above. Our restructured debt agreement provides us with a maximum ~~commitment~~credit facility of $347.~~975~~5 million ~~initially,~~for ~~including~~floor aplan and receivables financing. Although we had approximately $1543.3 million of outstanding notes payable as of the date of ~~revolving~~restructuring, ~~receivable~~effective ~~loan~~February ~~facility~~20, a2009, $2the ~~million~~Company ~~revolving~~is ~~floor~~only ~~plan~~obligated ~~loan~~to ~~facility,~~repay ~~and~~$12 amillion ~~term~~of ~~loan~~this inamount due to the ~~amount~~restructuring ofwith SWC and DSC. The $1712.~~975~~0 million is payable in installments over the next 24 months based upon the underlying auto lease agreements.

AtOn ~~July~~June 3115, ~~2008~~2009, ~~we had total outstanding borrowings under~~ the ~~Amended~~Company ~~Credit~~obtained ~~Agreement~~a ofrevolving ~~$37,067,338.~~line ~~The amount~~ of ~~borrowings under the Amended Credit Agreement may fluctuate~~ ~~materially,~~credit ~~depending~~with onWells ~~various~~Fargo ~~factors,~~Preferred ~~including~~Capital ~~the~~for ~~size~~up ~~of our Eligible Receivables, the time of year, our need~~ to ~~acquire~~$20 ~~inventory,~~million ~~changes~~that ~~to our~~will ~~plans~~finance ~~and~~up ~~initiatives, changes~~ to ~~our~~55% ~~capital~~of ~~expenditure plans and~~ the ~~occurrence~~ ofCompany’s ~~other~~eligible ~~events~~financed ornotes ~~transactions~~receivable. ~~that may require funding through the~~The ~~Amended~~revolving ~~Credit~~line ~~Agreement.~~of ~~When~~credit ~~the~~is ~~software division was sold on July 2, 2008, we used~~ a $2~~,000,000~~ ofyear ~~the~~commitment ~~proceeds to reduce the term loan~~ and ~~revolving~~interest ~~loan facility.~~is ~~A payment of $154,211 was made to Trafalgar and applied to the~~payable ~~outstanding balance~~monthly.

AsWe ofhave incurred significant net losses and negative cash flows from operations, although the gain on debt restructuring during the six months ending July 31, ~~2008~~2009 offset this trend and decreased our stockholders’ deficit. At July 31, ~~payments~~2009, ~~due~~we had a stockholders’ deficit of $665,000 versus $34.7 bymillion usat ~~over~~January ~~the~~31, ~~next~~2009. ~~five~~The ~~fiscal~~continued ~~years~~worldwide ~~for~~financial ~~operating~~and credit crisis has strained investor liquidity and ~~capital~~contracted ~~leases~~credit markets. If this environment continues or worsens, ~~and~~it may make the future cost of raising funds ~~long-term~~through the debt or equity markets more expensive or make those markets unavailable at a time when we require additional financial investment. If we are unable to attract additional funds it may adversely affect our ability to achieve our development and commercialization goals, which could have a material and adverse effect on our business, results of operations and financial condition. As a result of our previous lack of financial liquidity and negative stockholders’ equity, there is substantial doubt about our ability to continue as ~~follows:~~a “going concern”.

		Less Than		One to Three		Three to		Greater than
		One Year		Years		Five Years		Five Years		Total
Operating Leases	$	1,280,565	$	1,079,210	$	231,184	$	533,750	$	3,124,709
Capital Leases		4,232		2,696		-		-		6,928
Long-Term Debt		26,012,879		10,738,617		315,842		-		37,067,338
Convertible Debentures		4,135,613		1,371,006		-		-		5,506,619
Interest		261,907		191,432		-		-		453,339
	$	31,695,196	$	13,382,961	$	547,026	$	533,750	$	46,158,933

During the six months ending July 31, 2009 a board member warrant holder exercised 11,762,351 common stock warrants with proceeds of $1,029,851.

~~Based~~With onthe ~~twelve~~Company’s ~~month~~new ~~results ended~~financing ~~July~~agreements ~~31,~~in ~~2008~~place and anour existing ~~assumption~~cash ofand ~~meeting~~cash ~~business~~equivalents ~~projections~~are ~~for~~believed ~~the remainder~~by ofmanagement ~~the~~to ~~fiscal~~be ~~year,~~sufficient to ~~our~~finance ~~current~~planned ~~cash~~operations, ~~flow~~debt ~~from~~repayment ~~operations~~obligations and ~~our cash~~capital onexpenditures ~~hand~~through ~~are~~the ~~expected~~second toquarter beof ~~sufficient~~fiscal toyear ~~fund~~2012, ~~our~~but ~~operations~~in ~~until~~order ~~July 2009.~~to ~~Actual~~proceed ~~results~~with ~~that~~the ~~vary~~Company’s ~~from~~current ~~projections~~expansion ~~may~~plan ~~require~~for operations in the Buy-Here-Pay-Here ~~need~~and ~~for~~Lease-Here-Pay-Here industries, additional ~~cash~~ ~~during~~capital ~~that~~may ~~period~~be required. ~~Our~~The Company’s ability to arrange such financing in the future ~~will~~ will depend in part upon the prevailing capital market conditions as well as ~~our~~ business performance. There can be no assurance that wethe Company will be successful in ~~our~~these efforts to arrange additional financing, if needed, on terms satisfactory to usto it or at all. Available resources may be consumed more rapidly than currently anticipated, resulting in the need for additional funding sooner than anticipated. The failure to obtain adequate financing could result in a substantial curtailment of ~~our~~the Company’s operations. IfAccordingly, ~~additional~~the ~~financing is raised by~~Company ~~the~~anticipates ~~issuance~~that ofit ~~securities,~~may ~~control~~be ofrequired ~~Carbiz~~to ~~may~~raise ~~change~~additional ~~and/or~~capital ~~our~~through ~~shareholders~~a ~~may~~variety ~~suffer~~of ~~significant~~sources, ~~dilution.~~ including:

~~The~~public ~~Amended~~equity ~~Credit~~markets; ~~Agreement~~private ~~contains~~equity ~~financial~~financings; ~~covenants~~public ~~which~~or ~~require,~~private ~~among~~debt; ~~other things, that we maintain specified interest coverage~~ and ~~loss~~exercise toof ~~liquidation ratios, and meet certain~~existing ~~specified~~warrants ~~minimum net income, loan loss~~ and ~~collection~~stock ~~requirements~~options. We and the lender have agreed to continue to negotiate regarding certain additional financial covenants relating to maintenance of specific leverage ratios and minimum tangible net worth requirements. It is anticipated the agreement on the covenants will be reached within a reasonable time. However, these discussions have been ongoing since December 2007. If an agreement on such additional covenants is not reached within a reasonable time, it may constitute a default under the Amended Credit Agreement, which could result in the lender demanding the repayment of approximately $37,067,338 currently due under the Amended Credit Facility.

The recent worldwide financial and credit crisis has strained investor liquidity and contracted credit markets. If this environment continues or worsens, it may make the future cost of raising funds through the debt or equity markets more expensive or make those markets unavailable at a time when the Company requires additional financial

investment. If the Company is unable to attract additional funds it may adversely affect its ability to achieve its development and commercialization goals, which could have a material and adverse effect on its business, results of operations and financial condition.

As of July 31, 2009, payments due by us over the next five fiscal years for operating and capital leases, and long-term debt are approximately as follows:

		Less Than		One to Three		Three to Five		Greater than
		One Year		Years		Years		Five Years		Total
Operating Leases	$	1,330,440	$	1,462,671	$	871,586	$	1,309,086	$	4,973,783
Long-Term Debt		12,394,817		15,833,763						28,228,580
Convertible Debentures		96.935		472,649						569,584
	$	13,822,192	$	17,769,083	$	871,586	$	1,309,086	$	33,771,947

Off-Balance Sheet Arrangements

As of July 31, ~~2008~~2009, we do not have any off-balance sheet arrangements.

24Item 3. Quantitative and Qualitative Disclosures about Market Risk

~~Item~~Not ~~4. Controls and Procedures~~required

~~Disclosure Controls~~35

~~Under~~Item the supervision and with the participation of our management, including our Chief Executive Officer and Chief Financial Officer, we evaluated the effectiveness of the design and operation of our disclosure controls and procedures (as defined in Rule 13a-15(e) of the Securities Exchange Act of 1934, as amended (the “Exchange Act”)) as of the end of the period covered by this report (the “Evaluation Date”)4T. ~~Based~~Controls ~~upon that evaluation, the Chief Executive Officer~~ and Chief Financial officer concluded that, as of the Evaluation Date, our disclosure controls and procedures were operating effectively to ensure that information required to be disclosed by us in reports that we file or submit under the Exchange Act, is recorded, summarized and reported within the time periods specified in the rules and forms of the Securities and Exchange Commission, and accumulated and communicated to management, including the Chief Executive Officer and Chief Financial officer, to allow timely decisions regarding required disclosures.Procedures

~~Internal~~Disclosure ~~Control Over Financial Reporting~~Controls

~~Our~~Under ~~management~~the issupervision ~~responsible~~and ~~for~~with the participation of our ~~establishing~~management, ~~and~~including ~~maintaining~~our ~~adequate~~Chief ~~internal~~Executive ~~control~~Officer ~~over~~and ~~financial~~Chief ~~reporting~~Financial Officer, towe ~~provide~~evaluated ~~reasonable~~the ~~assurance~~effectiveness ~~regarding~~of the ~~reliability~~design and operation of ~~financial~~our ~~reporting~~disclosure controls and procedures (as defined in Rule 13a-15(e) of the ~~preparation~~Securities Exchange Act of ~~financial~~1934, ~~statements~~as ~~for~~amended ~~external~~(the ~~purposes~~“Exchange inAct”)) ~~accordance~~as of the last day of the period ~~with~~covered ~~generally~~by ~~accepted~~this ~~accounting~~report ~~principles~~(the “Evaluation Date”). NoBased ~~changes~~upon inthat ~~our~~evaluation, ~~internal~~the ~~control~~Chief ~~over~~Executive ~~financial~~Officer ~~reporting~~and ~~occurred~~Chief inFinancial ~~our~~officer ~~existing~~concluded ~~operations~~that, ~~during~~as of the Evaluation Date, our disclosure controls and procedures were operating ~~most~~effectively ~~recent~~to ~~fiscal~~ensure ~~quarter~~that information required to be disclosed by us in reports that ~~have~~we ~~materially~~file ~~affected~~or submit under the Exchange Act, oris ~~are~~recorded, ~~reasonably~~summarized and ~~likely~~reported within the time periods specified in the rules and forms of the Securities and Exchange Commission, and accumulated and communicated to management, ~~materially~~including ~~affect~~the Chief Executive Officer and Chief Financial Officer, to ~~our~~allow ~~internal~~timely ~~control~~decisions ~~over~~regarding ~~financial~~required ~~reporting~~disclosures. Disclosure controls and procedures include without limitations, controls and procedures designed to ensure that information required to be disclosed by an issuer in the reports that it files or submits under the exchange Act is accumulated and communicated to the issuer’s management, included the Certifying Officers, to allow timely decisions regarding required disclosures.

~~Notwithstanding~~Internal ~~the~~Control ~~foregoing, because~~Over of the inherent limitations in all control systems, no evaluation of controls can provide absolute assurance that our disclosure controls and procedures will detect or uncover every situation involving the failure of persons within our company and our subsidiaries to disclose material information otherwise required to be set forth in our periodic reports. Our disclosure controls and procedures are designed to provide reasonable assurance of achieving their objective of ensuring that information required to be disclosed in the reports that we file or submit under the Exchange Act is communicated to management, including the Chief Executive Officer and Chief Financial ~~Officer, to allow timely decisions regarding required disclosure.~~Reporting

~~PART~~Our IImanagement ~~–OTHER~~is ~~INFORMATION~~responsible for establishing and maintaining adequate internal control over financial reporting to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with accounting principles generally accepted in the United States. There were no changes in our internal control over financial reporting during our most recent quarter that have materially affected, or are reasonably likely to materially affect, our internal control over financial reporting.

Limitations on the Effectiveness of Internal Controls

Readers are cautioned that our management does not expect that our disclosure controls and procedures or our internal control over financial reporting will necessarily prevent all fraud and material error. An internal control system, no matter how well conceived and operated, can provide only reasonable, not absolute, assurance that the objectives of the control system are met. Because of the inherent limitations in all control systems, no evaluation of controls can provide absolute assurance that all control issues and instances of fraud, if any, within the Company have been detected. The design of any system of controls also is based in part upon certain assumptions about the likelihood of future events, and there can be no assurance that any control design will succeed in achieving its stated goals under all potential future conditions. Over time, controls may become inadequate because of changes in conditions, or the degree of compliance with the policies or procedures may deteriorate.

PART II – OTHER INFORMATION

Item 1. Legal Proceedings

~~None~~We are not aware of any material legal proceedings against us nor are we currently a party to any material legal proceedings.

Item 2. Unregistered Sales of Equity Securities and Use of Proceeds

~~Trafalgar conversions~~None.

During the three months ended July 31, 2008, the Company issued 100,000 shares at a conversion price of $0.136 in a Trafalgar Convertible Debenture conversion.

Unregistered shares for investment banking services

During the three months ended July 31, 2008, the Company issued 250,000 unregistered common shares which were valued at $0.15 per share under an investment banking contract.

Item 3. Defaults Upon Senior Securities

None.

Item 4. Submission of Matters to a Vote of Security Holders

Our Annual Meeting of Shareholders was held at the Ritz-Carlton at 1111 Ritz-Carlton Dr., Sarasota, Florida on June 19, ~~2008~~2009 at 4:00 p.m. Our shareholders voted on two items, with results as indicated:

(1)

The election of ten directors to serve until the next annual meeting of shareholders:

~~Director~~	~~No. of Shares~~Director	No. of Shares	No. of Shares	No. of Shares
	~~Voted For~~	Voted ~~Against~~For	~~Withheld~~Voted Against	Withheld
~~Carl Ritter~~	~~19,950,728~~Carl Ritter	-77,986,612	139,~~500~~363	0
~~Ross Quigley~~	~~19,950,728~~Ross Quigley	-77,986,612	139,~~500~~363	0
~~Richard Lye~~	~~19,950,728~~Richard Lye	-77,986,612	139,~~500~~363	0
~~Theodore Popel~~	~~19,950,728~~Theodore Popel	-77,986,612	139,~~500~~363	0
~~Stanton Heintz~~	~~19,950,728~~Stanton Heintz	-77,986,612	139,~~500~~363	0
~~Christopher Bradbury~~	~~19,950,728~~Christopher Bradbury	-77,986,612	139,~~500~~363	0
~~Wallace Weylie~~	~~19,950,728~~Wallace Weylie	-77,986,612	139,~~500~~363	0
~~Vernon Haverstock~~	~~19,950,728~~Vernon Haverstock	-77,986,612	139,~~500~~363	0
~~Gene Tomsic~~	~~19,950,728~~Gene Tomsic	-77,986,612	139,~~500~~363	0
~~Brandon Quigley~~	~~19,950,728~~Brandon Quigley	-77,986,612	139,~~500~~363	0

(2)

The appointment of Cherry, Bekaert & Holland, L.L.P., Certified Public Accountants as Auditor of the Corporation until the next annual General Meeting.

No. of Shares	No. of Shares		No. of
Voted For	Voted Against	No. of Abstentions	Broker Non-Votes
19,952,228	-	-	-
78,025,975	-	-	-

Item 5. Other Information

None.

Item 6. Exhibits

The following exhibits are filed (or incorporated by reference herein) as part of this Form 10-Q:

	Exhibit Number	Description
	31.1	Certification of Chief Executive Officer pursuant to Rule 13a-14(a)
	31.2	Certification of Chief Financial Officer pursuant to Rule 13a-14(a)
	32.1	Certification of Chief Executive Officer pursuant to 18 U.S.C. Section 1350
	32.2	Certification of Chief Financial Officer pursuant to 18 U.S.C. Section 1350

2637

SIGNATURES

In accordance with the requirements of the Exchange Act, the registrant has caused this report to be signed on its behalf by the undersigned, thereunto duly authorized.

	CARBIZ INC.
Date: September 12, 2008	/s/ Carl Ritter
Date: September 10, 2009	/s/ Carl Ritter
	Carl Ritter
	Chief Executive Officer
	(principal executive officer)

2738

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