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UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
------------------------
FORM 20-F
FOR ANNUAL AND TRANSITION REPORTS
PURSUANT TO SECTIONS 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
(MARK ONE)
/ / REGISTRATION STATEMENT PURSUANT TO SECTION 12(b) OR (g) OF THE SECURITIES
EXCHANGE ACT OF 1934 OR
/ X / ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934 For the fiscal year ended January 31, 2000
OR
/ / TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934 For the transition period from ______ to ________
---------------
Commission file number [0-30398]
CARBIZ.COM INC.
(EXACT NAME OF REGISTRANT AS SPECIFIED IN ITS CHARTER)
ONTARIO, CANADA 180 LESMILL ROAD,
(STATE OR OTHER JURISDICTION TORONTO, ONTARIO M3B 2T5 (CANADA)
OF INCORPORATION OR ORGANIZATION) (ADDRESS OF PRINCIPAL EXECUTIVE OFFICES)
Securities registered or to be registered pursuant to Section 12(b) of the Act:
(NAME OF EACH EXCHANGE
(TITLE OF EACH CLASS) ON WHICH REGISTERED)
None Not Applicable
Securities registered pursuant to Section 12(g) of the Act:
COMMON SHARES WITHOUT PAR VALUE
(Title of Class)
Securities for which there is a reporting obligation pursuant to Section 15(d)
of the Act:
NOT APPLICABLE
(Title of Class)
Indicate the number of outstanding shares of each of the issuer's classes of
capital or common stock as of the close of the period covered by the annual
report:
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<CAPTION>
DESIGNATION OUTSTANDING AS AT JANUARY 31, 2000 OUTSTANDING AS AT APRIL 30, 2000 (2)
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<S> <C> <C>
common shares(1) 19,436,707 shs. 21,287,358 shs.
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NOTES:
(1) Excludes 2,143,871 common shares subject to outstanding options as of the
date hereof.
(2) Prior to giving effect to the exercise of Special Warrants, Agents' Series
A Specials Warrants and Agents' Series B Special Warrants; 28,172,358
shares outstanding as at April 30, 2000 after giving effect to the exercise
of the Special Warrants, Agents' Series A Special Warrants and Agents'
Series B Special Warrants.
Indicate by check mark whether the registrant: (1) has filed all reports
required to be filed by Section 13 or 15(d) of the Securities Exchange Act of
1934 during the preceding 12 months (or for such shorter period that the
registrant was required to file such reports), and (2) has been subject to such
filing requirements for the past 90 days. Yes _____ No / X /.
Indicate by checkmark which financial statement item the registrant has elected
to follow: Item 17 X Item 18 _______.
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EXCHANGE RATE INFORMATION
Carbiz.com Inc. publishes its financial statements in Canadian dollars.
In this Annual Report, references to "$" or "dollars" are to Canadian dollars.
This Annual Report gives effect translations of certain Canadian dollar amounts
into United States dollars at specified rates. These translations should not be
construed as representations that the Canadian dollar amounts actually represent
such United States dollar amounts or could be converted into United States
dollars at the rate indicated. Unless otherwise stated, the translations of
Canadian dollars ("Cdn$") into United States dollars ("US$") have been made at
Cdn$1.4806 to US$1.00, the noon buying rate in New York City for cable transfers
in Canadian dollars as certified for customs purposes by the Federal Reserve
Bank of New York (the "Noon Buying Rate") on June 30, 2000. The Noon Buying Rate
on January 31, 2000 was Cdn $1.4456 per US $1.00.
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PART I
ITEM 1. DESCRIPTION OF BUSINESS
INTRODUCTION
Carbiz.com Inc. (hereinafter "Carbiz," the "Corporation," "we," "us,"
or "our") was incorporated pursuant to the provisions of the BUSINESS
CORPORATIONS ACT (Ontario) ("OBCA") under the name "Data Gathering Capital
Corp." on March 31, 1998. Carbiz's wholly-owned subsidiary, Data Gathering
Service Inc. ("DGS"), was incorporated on November 30, 1995 by articles of
incorporation under the OBCA. On July 14, 1998 Carbiz completed its initial
public offering in Canada by the issuance of 1,500,000 common shares and its
shares were listed for trading on the junior capital pool board of The Alberta
Stock Exchange (the "ASE") on July 23, 1998. On December 18, 1998 Carbiz
completed its "Major Transaction" pursuant to Alberta Securities Commission Rule
46-501 and Companion Policy 46-501(CP) ("Rule 46-501") by virtue of a reverse
takeover by Carbiz's sole subsidiary, DGS. Pursuant to that transaction, Carbiz
issued 10,635,005 common shares at a deemed price of $0.20 and 1,494,759
warrants to purchase common shares at an exercise price of $0.545 per share. DGS
now operates as a wholly owned subsidiary of Carbiz.
Carbiz changed its name from "Data Gathering Capital Corp." to
"Carbiz.com Inc." on September 1, 1999 by articles of amendment under the OBCA
and the trading symbol of Carbiz on the ASE was correspondingly changed from
"DGS" to "CZ". Carbiz's registered and head office is located at 180 Lesmill
Road, Toronto, Ontario, M3B 2T5.
BUSINESS OF THE CORPORATION
Carbiz is in the business of developing, marketing, distributing and
supporting software and Internet products for the automotive sales finance
industry. Carbiz also offers dealers credit insurance, extended warranty and
other after market car care products, which allows Carbiz to introduce dealers
to its software and Internet products. The principal products and services
provided by Carbiz are set out below:
SOFTWARE PRODUCTS
Carbiz provides software and Internet solutions to financial
institutions and the retail automotive industry resulting in cost savings and
efficiencies in the research, purchase and financing of car transactions. Its
flagship product, Full Spectrum 2000, is a software program that enables
automobile dealers to arrange "on-the-spot" financing for consumers by
connecting the dealers to credit bureaus and financial institutions via the
Internet.
The Full Spectrum 2000 program enables the dealer to input the buyer's
credit information and search all the major credit bureaus to analyze the
buyer's credit history and profile. It then compares the credit parameters of
each finance program offered by various lenders and determines which, if any,
are available based on the buyer's credit status and maximum monthly payment.
The program then matches the buyer's maximum monthly payment with every vehicle
in the dealer's inventory to allow the dealer to select appropriate vehicles for
the buyer. All of this is done on-line so that the dealer can arrange the
financing "on-the-spot" or within a very short time frame compared to
traditional financing applications.
The financing aspect of Full Spectrum 2000 can be utilized by
automotive dealers to access financing offers for buyers who qualify for either
"prime" or "sub prime" rates. This is especially effective for buyers
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who have difficulty meeting traditional lending requirements. The software
enables dealers to expand their customer base by arranging financing for the
full range of automotive customers.
INTERNET PRODUCTS
Carbiz has established a web site called "Carbiz.com" which offers
consumers a source for finding new and used vehicles as well as auto parts and
services through the Internet. Carbiz has been operating this web site since
1995. Recently Carbiz created a web-enabled version of Full Spectrum 2000 that
can be accessed and used directly over the Internet by dealers. This will enable
dealers to more efficiently utilize the Carbiz software products and thereby
provide potentially greater market penetration for Carbiz. The expansion of the
product to the Web is the first step in establishing a complete lending portal
to provide automotive financing options for consumers.
Carbiz also provides web-site development, maintenance and updating
services to automotive dealers on a fee for service basis. These web sites are
linked to Carbiz.com to allow dealerships to develop direct relationships with
potential customers. Carbiz offers additional add-on services to dealers to
further enhance these relationships, such as an e-mail program that sends
reminders to customers regarding vehicle maintenance appointments.
DEALER CREDIT INSURANCE
In addition to provision of its own products directly to automobile
dealers, Carbiz also acts as an insurance intermediary by providing various
types of credit insurance on behalf of Cigna Life Insurance Company of Canada to
such dealers. Credit insurance is marketed by Carbiz as a means of encouraging
dealers to acquire the software products of Carbiz and to access its web site by
providing monthly support for its software or web services at no cost to dealers
who purchase credit insurance coverage for life, disability and job loss in
relation to a car loan, and meet certain preset insurance sales targets.
OTHER AFTER MARKET AUTOMOTIVE PRODUCTS
Carbiz also sells other after market products, to automotive dealers,
such as extended warranty and automotive car care products. As with Dealer
Credit Insurance, Carbiz has found that offering these products to dealers
encourages dealers to acquire the company's software products. Product
Development
Carbiz has 18 computer programmers in Sarasota, Florida and in Toronto,
Ontario on staff that are dedicated to product development, upgrading and
support. This is an ongoing and integral part of Carbiz's business.
SALES AND MARKETING
The primary market for Carbiz's products and services is automobile
dealers in North America. Carbiz can offer complete information management
systems and related services or individual software and Internet products,
depending on the dealer's needs. Software products are licensed to the dealers
with Carbiz retaining ownership. Carbiz typically receives an up front payment
for the initial installation of its products and monthly fees for support
services. In addition, Carbiz also receives transaction or inquiry based
revenues from its Internet products as described below.
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Carbiz sells through its own direct sales organization. Direct sales
are initiated from sales centers operated by Carbiz. Sales centers are currently
operating in the following locations: Toronto, Ontario; Calgary and Edmonton,
Alberta; Regina and Saskatoon, Saskatchewan; Dartmouth, Nova Scotia; Moncton,
New Brunswick; St. John's, Newfoundland; Sarasota, Florida; Chesapeake,
Virginia; Santa Anna, California; and Kansas City, Missouri. Direct sales are
supported by comprehensive marketing programs such as advertising, trade shows,
and self-funded training seminars.
In addition, Carbiz intends to support sales and advertising in various
media directed at creating awareness for its products and services among dealers
and to build awareness with consumers.
Direct sales in Canada are also supported through strategic alliances
with financial institutions such as Toronto-Dominion Bank and Trans Canada
Credit Corp. ("Trans Canada"). Trans Canada is a subsidiary of Wells Fargo Bank
of San Francisco. Trans Canada is one of the largest providers of vehicle
financing in the sub-prime marketplace, with 16 sales offices across Canada.
Carbiz entered into an agreement with Trans Canada in May of 1999 pursuant to
which Trans Canada will actively assist Carbiz in marketing Full Spectrum 2000
to Trans Canada's dealer client base across Canada. Carbiz receives a fee from
all the lending institutions in its network for each credit application and loan
made through such systems. The current contract with Trans Canada is scheduled
to expire in December 2000.
Carbiz has also entered into an agreement with Equifax Inc. to obtain
consumer credit reports over the Internet to support the quality of applications
for loans submitted to lending institutions. Carbiz receives revenue for every
credit bureau electronically delivered through Full Spectrum 2000 to a
requesting auto dealer.
CUSTOMER SERVICE AND SUPPORT
Software licenses issued to dealers are typically accompanied by a
maintenance agreement whereby Carbiz agrees to provide ongoing service and
support to the dealer in connection with the use of the software for a monthly
fee. Support can also include services such as training and implementation
planning.
Carbiz currently has 18 people on staff who are dedicated to providing
customer service and support. Carbiz plans on expanding its capabilities in this
area as its sales grow to ensure that it can meet the needs of its customers.
MARKET
The primary market for the products and services offered by Carbiz is
the automotive retail industry in North America. Automotive sales in North
America have grown dramatically over the past several years both in terms of
number of transactions and dollar volumes. Carbiz believes that this growth has
been enhanced by the increased availability of new types of consumer credit such
as leasing and "sub-prime" lending to high credit-risk buyers. According to data
provided by the National Automobile Dealers Association (the "NADA") and
DesRosiers Automotive Consultants, it is estimated that automotive retailing
generated approximately $862 billion in sales in North America in 1998, making
it the largest sector of the retail market. Such data also suggests that there
are approximately 26,000 franchised automotive dealers in North America, all of
whom are considered to be potential customers of Carbiz. Management of Carbiz
believes that there are also numerous non-franchised dealers in North America,
which are not reflected in the data provided by the NADA and DesRosiers
Automotive Consultants.
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EXPANSION AND DEVELOPMENT
Carbiz's Management believes that in order to maintain and enhance its
competitive position and business opportunities, Carbiz will need to expand the
distribution of its products and services. Management believes that such
expansion may be attained in one of two ways: (i) through increased sales of
products and services within markets currently serviced by Carbiz; and (ii)
through expansion into markets which are not currently serviced by Carbiz.
Management believes that the products of Carbiz have characteristics
which may potentially provide for increased sales of such products within
secondary markets currently under-serviced by it. First, Full Spectrum 2000
provides an electronic interface for lenders to facilitate the lending process
for both Prime and Sub-Prime Lenders. Second, Full Spectrum 2000 also has a
component called the Sub-Prime module. The term "Sub-Prime" refers to the rate
of interest that is charged to customers who are considered to be high risk as a
result of a poor credit history. The Sub-Prime module simplifies and expedites
the time required for automobile secondary financing to be processed and
approved for such customers. Management believes that this new software places
Carbiz in a position to potentially distribute products to the sub-prime market,
which is a market which Carbiz has not fully exploited as at the date hereof. In
order to expand into this market, management anticipates that significant steps
and expenditures will have to be undertaken. Specifically, potential customers
(i.e. automobile dealers) will need to be educated and trained with respect to
the use and potential use of this product. This may be accomplished by several
means, including advertising of the product and attempting to increase retail
automotive customer awareness of the product through lead generating tools. In
conjunction with such a program, management anticipates that Carbiz in areas
such as training and marketing will require significant expenditures. Seminars
directed at dealers on topics such as how to deal with sub-prime customers and
maximizing the use of Carbiz's software may also be presented, and Carbiz may
stage a cross-country sales presentation that would include attendance at
automobile tradeshows and conventions. Management believes that in order to
succeed with any such expansion, a highly trained and educated sales and
training staff will be necessary, with extensive knowledge of the automotive
industry and sub-prime financing. Additional expenses are also expected to be
incurred on administration staff to observe and review results, and programmers
to manage increased demands made on each product, both in terms of product
support and new product development. A similar plan is likely to be employed in
the United and similar types of costs are expected to be incurred by Carbiz.
In attempting to expand operations and to provide products and services
into new markets, management of Carbiz intends to target distributors in the
after market line of products (which includes products such as rust proofing,
car care creams, credit insurance and extended warranties) which appear to have
stable and strong relationships with dealers within the territories in which
they are located. Management views companies who satisfy the following criteria
as potential targets for acquisition: (i) stability and strength of a potential
target's automotive dealer base (management views companies with annual revenues
greater than $250,000 as having a stable and strong dealer base); (ii) a related
revenue stream that provides for vertical market integration with the core
Carbiz product line; and (iii) financial stability evidenced by cash flow, a
good asset base and a consistent and recurring revenue stream.
Management of Carbiz anticipates that demands on Carbiz's
infrastructure would increase significantly upon successful completion of
expansion plans and activities. The costs associated with such an infrastructure
expansion include expenses relating to increased sales staff, additional
programmers, capital and equipment expenditures and marketing. These costs
include provision for additional sales staff trained in Internet sales and
dealership software which will need to be hired (in addition to further training
of current staff), costs of
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additional computer and communications equipment necessary for Internet access
(as Carbiz's web site receives increased demands, additional equipment will be
necessary to manage server demands) and automotive dealership training seminars
regarding Carbiz's software and management of sub-prime car purchasers.
COMPETITION
The largest providers of computer system products and services to the
automotive retail industry are currently ADP Dealer Services Ltd. and Reynolds
and Reynolds Ltd., both of which are U.S. based integrated software solutions
providers. These companies primarily provide Unix or mainframe based accounting,
service and parts software products. Carbiz offers efficient stand-alone systems
to dealers that provide comparatively inexpensive PC based solutions that focus
on management systems, financing (including alternative financing), and Internet
solutions designed specifically for the automotive market. Carbiz provides
dealers with a full range of solutions products to allow dealers to effectively
and efficiently operate their dealerships. Carbiz sells all products or services
as a full service suite or independently as required. Carbiz has virtually no
competitors who offer the complete one stop service to automotive dealerships.
It does compete with single service providers on each of its products, such as,
Finance and Insurance, Web service providers and sub-prime software companies.
INVESTOR RELATIONS
On January 14, 1999, Carbiz engaged an investment advisor based in
Toronto, Ontario, to provide investor relations services to Carbiz. In
accordance with the investor relations agreement, the primary function of the
advisor is to introduce the merits of investing in Carbiz to a domestic and
international network of investors and organize informational meetings with
members of the investment community on behalf of Carbiz. In consideration of
these services, the advisor receives a monthly fee in the amount of $3,250. In
addition, the advisor has been granted options to purchase an aggregate of
50,000 common shares of Carbiz, at an exercise price of $0.20 per share, 150,000
common shares at an exercise price of $0.85 per share and 50,000 common shares
at an exercise price of $2.65 per share.
RECENT DEVELOPMENTS
ACQUISITION OF AUTOSURE AND MPI
On August 1, 1999 pursuant to a share purchase agreement dated July 30,
1999 by and between Carbiz and Autosure, MPI and the owners of all of the issued
and outstanding shares of Autosure and MPI, Carbiz acquired all of the issued
and outstanding shares of Autosure and MPI for a purchase price of $1,150,000,
which purchase price was paid by the issuance of a certain number of series B
special warrants at a deemed price of $1.15 per special warrant and a certified
cheque in the amount of $650,000. Carbiz received receipts dated October 16,
1999 from the ASC, OSC, BCSC and NSSC for a prospectus qualifying for
distribution the series B special warrants which were then exercised into
1,000,000 Common Shares.
Autosure and its affiliate MPI are in the business of selling group
creditor insurance through automobile dealerships in Atlantic Canada. Autosure
began operations in 1994 in the Province of Nova Scotia. The products provided
by Autosure are offered pursuant to a distribution agreement between Autosure
and Autosure Financial Corp. These products consist of car cleaners, car care
creams, rustproofing, other related chemical treatments for vehicles, North
American Life group creditor insurance and extended warranties. In February
1996, the major shareholder of Autosure established MPI, with the objective of
providing dealers with a broader product line than available through Autosure
under its exclusive distribution agreement with Autosure Financial
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Corp. MPI markets products other than those sold by Autosure Financial Corp. and
distributes credit insurance for various insurance companies. The two companies
combined have a customer base in Atlantic Canada of approximately 140 automotive
dealers and offer products and services such as credit insurance, extended
warranties and after-market products such as rustproofing and car care creams.
The primary product distributed by these companies is credit insurance
brokerage, which comprises approximately 70% of the revenues of the companies on
a consolidated basis. Carbiz has integrated Carbiz's software and Internet
products to the products and services offered by Autosure and MPI. The
integration has resulted in increased sales in the dealer market in Atlantic
Canada.
ACQUISITION OF ABBEY CANADA INC.
On April 4, 2000 pursuant to a share purchase agreement by and between
Carbiz and Abbey Canada and Tom Simpson, Carbiz acquired all of the issued and
outstanding shares of Abbey Canada for a purchase price of $180,000 paid in the
form of $60,000 in cash and 40,000 common shares of Carbiz at a price of $3.00
per share. Abbey Canada operates from the offices of Carbiz in Toronto, Ontario
and specializes in the distribution of credit insurance and warranty products
through automobile dealerships located in Ontario.
ACQUISITION OF ADVANCED DEALER SERVICES, INC.
On March 29, 2000, pursuant to a share purchase agreement between
Carbiz, ADS, and the shareholders of ADS, Carbiz acquired all of the issued and
outstanding shares of ADS for a purchase price of U.S. $1,957,820. The purchase
price was satisfied by (i) the assumption and repayment by Carbiz of a long term
loan owed to a U.S. chartered bank in the amount of U.S. $480,000; (ii) the
assumption and repayment by Carbiz of ADS trade debt of approximately U.S.
$210,000, payable at the option of Carbiz in shares or over a two-year term;
(iii) the repayment of ADS shareholder loans in the approximate amount of U.S.
$325,000 by the issuance of 86,103 common shares of Carbiz at the price of $5.50
per share; (iv) a payout of ADS shareholders loans in the sum of U.S. $75,000;
and (v) the payment of U.S. $745,800 by the issuance by Carbiz of 197,165 common
shares at an ascribed closing price of $5.50 (Cdn.) per share. The common shares
of Carbiz received by ADS shareholders were escrowed on a time release basis,
with 1/3 of the shares being released on the first, second and third
anniversaries of the closing. ADS is a supplier of automotive after-market
products located in Sarasota, Florida, providing software products which
facilitate lending in the "buy-here-pay-here" financing market. This market is
another tier of consumer lending at the dealership level and represents a large
market in the United States.
STRATEGIC ALLIANCE WITH TD BANK
Carbiz entered into an agreement with TD Bank dated March 30, 2000 to
form a strategic alliance to expand TD Bank's automotive dealer consumer loan
business through the utilization of Carbiz's Full Spectrum 2000 product. Through
Carbiz.com's Full Spectrum 2000 software, auto dealers can obtain "on-the-spot"
financing for consumers by connecting the dealers to credit bureaus and lenders
via the Internet. Under the alliance, TD Bank plans to utilize Full Spectrum
2000 in its relationship and its dealer network across Canada.
Pursuant to the agreement, TD Bank acquired 333,333 common shares at an
ascribed price of $1.67 per share and 750,000 warrants to acquire common shares
at an exercise price of $2.00 per share and having an expiry date of September
29, 2000.
ACQUISITION OF TAXMAX SERVICE GROUP, INC.
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On May 19, 2000 pursuant to a share purchase agreement between Carbiz,
TaxMax and Stanton C. Heintz, Carbiz acquired all of the issued and outstanding
shares of TaxMax for a purchase price of U.S. $439,000 which purchase price was
satisfied by the payment of $227,000 cash, the assumption of a U.S. $12,000
small business loan and the issuance of 222,296 common shares of Carbiz at an
ascribed price of $1.35 (Cdn.) per share.
TaxMax is in the business of electronic tax form preparation. The
TaxMax product allows a prospective car purchaser to have his or her personal
"tax refund" sent directly from the governmental taxation authority to the
automobile dealer to be issued as the down payment on an automobile purchase.
TaxMax combines electronic tax filing, electronic communication and interactive
telephony to produce a unique marketing and sales promotion product. TaxMax
makes rapid, on-site tax filing available to the retail marketplace of used cars
as a unique winter sales builder for dealerships. TaxMax can prepare a tax
return submitted from any location in the United States in 30 minutes or less,
while the taxpayer is at the dealership; the dealership requires no tax
knowledge. The refund due to the taxpayer is then routed to and controlled by
the submitting dealership, providing a down payment for the purchase of the used
car. TaxMax has a customer base of approximately 800 automobile dealers.
ACQUISITION OF FINANCIAL BUSINESS SYSTEMS, INC.
On July 12, 2000, pursuant to an Agreement and Plan of Merger between
Carbiz, FBS and W. Carroll Byrum, Carbiz acquired all of the issued and
outstanding shares of FBS for a proposed purchase price of U.S. $1,250,000,
which purchase price was satisfied by the payment of U.S. $625,000 cash, and the
issuance of $625,000 in common shares of Carbiz.
FBS is a DOS-based software company based out of Chesapeake, Virginia,
which produces a full line of software products including "finance and
insurance", "sub-prime", "buy-here-pay-here" and rental car programs. FBS has a
customer base of approximately 850 automotive dealer customers. As a DOS-based
company, FBS is positioned to take advantage of the upgraded Carbiz Windows-TM-
and Internet-based products. The market opportunity for Carbiz is centered on
the US used-car dealership market, over half of which are not computerized and
where DOS-based products are still largely used.
ACQUISITION OF COMPUTERIZED AUTOMOTIVE TECHNOLOGIES INC.
On July 11, 2000, Carbiz pursuant to an Agreement and Plan of Merger
between Carbiz, 727659 Delaware, Inc. (a wholly-owned subsidiary of Carbiz),
Computerized Automotive Technologies, Inc. ("CAT"), and the shareholders of CAT
acquired CAT through a merger for a purchase price of U.S. $1,500,000, which
purchase price was satisfied by the payment of U.S. $627,000 cash and the
issuance of U.S. $873,000 in common shares of Carbiz.
CAT is a software company based out of Kansas City, Missouri and has
been a leading participant in the U.S. finance and insurance, leasing and
special financing market for over 15 years. It has made over 2500 installations
of software and systems to dealerships and has considerable experience with
finance and insurance integration with accounting software. CAT has a customer
base of approximately 820 automobile dealer customers.
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RISK FACTORS
CARBIZ BELIEVES THAT AN INVESTMENT IN ITS COMMON SHARES INVOLVES A HIGH
DEGREE OF RISK. INVESTORS SHOULD CAREFULLY CONSIDER THE FOLLOWING RISKS AND
OTHER INFORMATION CONTAINED IN THIS ANNUAL REPORT BEFORE PURCHASING COMMON
SHARES OF CARBIZ.
WE HAVE A LIMITED OPERATING HISTORY AND EXPECT TO ENCOUNTER DIFFICULTIES FACED
BY EARLY STAGE COMPANIES IN NEW AND RAPIDLY EVOLVING MARKETS.
We have only a limited operating history providing our products upon
which to base an evaluation of our current business and future prospects. We
began offering Carbiz's products and services in March of 1998. Accordingly, the
revenue and potential profitability of our business and the related market are
unproven. In addition, because this market is relatively new and rapidly
evolving, we have limited insight into trends that may emerge and affect our
business. The risks include our ability to:
- attract more clients and retain existing clients;
- effectively market and maintain our brand name;
- respond effectively to competitive pressures;
- continue to develop and upgrade our technology; and
- attract, integrate, retain and motivate qualified personnel.
If we are unsuccessful in addressing some or all of these risks, our business
and operating results would be adversely affected.
WE HAVE A HISTORY OF LOSSES AND EXPECT TO INCUR SIGNIFICANT LOSSES FOR THE
FORESEEABLE FUTURE .
We have not achieved profitability and, as we expect to incur
significant operating expenses and to make significant capital expenditures, we
expect to continue to experience significant losses and negative cash flow in
the foreseeable future. We recorded a net loss of approximately $1.4 million for
the year ended January 31, 2000. We had an accumulated deficit of $2,417,825 as
of January 31, 2000. Even if we do achieve profitability, we cannot assure you
that we can sustain or increase profitability on a quarterly or annual basis in
the future. Failure to achieve or maintain profitability may materially and
adversely affect the market price of our Common Shares.
WE MAY BE UNABLE TO CONTINUE TO BUILD AWARENESS OF THE CARBIZ BRAND NAME.
Building recognition of our brand is critical to establishing the
advantage of being among the first providers of software and Internet products
for the automotive sales finance industry and attracting new clients. If we fail
to successfully promote and maintain our brand or incur significant expenses in
promoting our brand without an associated increase in our revenue, our business,
results of operations and financial condition may be materially and adversely
affected.
WE MAY BE UNABLE TO RESPOND TO THE RAPID TECHNOLOGICAL CHANGE AND CHANGING
CLIENT PREFERENCES IN OUR INDUSTRY AND THIS MAY HARM OUR BUSINESS.
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Business on the Internet is characterized by rapid technological
change. Sudden changes in client and Internet user requirements and preferences,
frequent new product and service introductions embodying new technologies, such
as broadband communications, and the emergence of new industry standards and
practices could render our service and proprietary technology and technology
systems obsolete. The rapid evolution of these products and services will
require that we continually improve the performance, features and reliability of
our service and products. If any of our new services, including upgrades, do not
meet our clients' or Internet users expectations, our business may be harmed.
Updating our technology may require significant additional capital expenditures
and could materially and adversely affect our business, results of operations
and financial condition.
IF WE ARE NOT COMPETITIVE IN THE MARKET, OUR BUSINESS COULD BE HARMED.
There are other competitors which supply similar products to those
provided by Carbiz. Some of the main competitors are much larger and better
capitalized than us. We believe that competition will increase as our current
competitors increase the sophistication of their offerings and as new
participants enter the market. Many of our current and potential competitors
have:
- longer operating histories;
- larger client bases;
- greater brand recognition;
- more diversified lines of products and services; and
- significantly greater financial, marketing and other resources.
These competitors may enter into strategic or commercial relationships
with larger, more established and better financed companies. These competitors
may be able to:
- undertake more extensive marketing campaigns;
- adopt more aggressive pricing policies; and
- make more attractive offers to businesses to induce them to use
their products or services.
Increased competition could result in pricing pressures, reduced operating
margins and loss of market share.
IF WE DO NOT SUCCESSFULLY INTEGRATE OUR ACQUISITIONS, OUR BUSINESS COULD BE
HARMED.
We have grown Carbiz through the acquisition of a number of similar
businesses. In the future, we may acquire or invest in complementary companies,
products or technologies. Acquisitions and investments involve numerous risks to
us, including:
- difficulties in integrating operations, technologies, products
and personnel with Carbiz;
- diversion of financial and management resources from efforts
related to Carbiz's then-existing operations;
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- potential loss of either our existing key employees or key
employees of any companies we acquire; and
- our inability to generate sufficient revenue to offset
acquisition or investment costs.
The foregoing difficulties could disrupt our ongoing business, distract our
management and employees, increase our expenses and adversely affect our results
of operations. Furthermore, we may incur debt or issue equity securities to pay
for any future acquisitions. We cannot assure you that our acquisitions will
result in the company increasing its revenues more than the expenses incurred in
connection with such acquisitions.
OUR BUSINESS AND PROSPECTS WOULD SUFFER IF WE ARE UNABLE TO PROTECT AND ENFORCE
OUR INTELLECTUAL PROPERTY RIGHTS.
Our success and ability to compete depend, in part, upon the protection
of our intellectual property rights relating to the technology underlying our
services and software products. We also rely upon copyright, trade secret and
trademark law, written agreements and common law to protect our proprietary
technology, processes and other intellectual property, to the extent that
protection is sought or secured at all. Carbiz is in the process of obtaining
trademark protection for the names "Carbizlot", "Full Spectrum 2000",
"Sur-Clean" and "Carbiz.com" in the United States and Canada. Until we obtain
approval from the respective patent authority in each country, there is no
assurance that such names will not effectively be copied by other parties.
We cannot assure you that any steps we might take will be adequate to
protect against infringement and misappropriation of our intellectual property
by third parties. Similarly, we cannot assure you that third parties will not be
able to independently develop similar or superior technology, processes or other
intellectual property. The unauthorized reproduction or other misappropriation
of our intellectual property rights could enable third parties to benefit from
our technology without paying for it. If this occurs, our business, results of
operation and financial condition would be materially and adversely affected. In
addition, disputes concerning the ownership on rights to use intellectual
property could be costly and time consuming to litigate, may distract management
from operating our business and may result in a loss of significant rights.
WE CANNOT PREDICT OUR FUTURE CAPITAL NEEDS TO EXECUTE OUR BUSINESS STRATEGY AND
WE MAY NOT BE ABLE TO SECURE ADDITIONAL FINANCING.
To the extent that we require additional funds to support or operations
or the expansion of our business, or to pay for acquisitions, we may need to
sell additional equity, issue debt or convertible securities or obtain credit
facilities through financial institutions. In the past, we have obtained
financing principally through the sale of preferred stock, common stock and
warrants. If additional funds are raised through the issuance of debt or
preferred equity securities, these securities could have rights, preferences and
privileges senior to the holders of the common stock. The terms of any debt
securities could impose restrictions on our operations. If additional funds are
raised through the issuance of additional equity or convertible securities, our
stockholders could suffer dilution. We cannot assure you that additional
funding, if required, will be available to us in amounts or on terms acceptable
to us. If sufficient funds are not available or are not available on acceptable
terms, our ability to fund our expansion, take advantage of acquisition
opportunities, develop or enhance our services or products, or otherwise respond
to competitive pressures would be significantly limited. Those limitations would
materially and adversely affect our business, results of operations and
financial condition.
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FLUCTUATIONS IN OUR OPERATING RESULTS AND THE COMPOSITION OF OUR REVENUES,
PARTICULARLY COMPARED TO THE EXPECTATIONS OF INVESTORS, MAY LEAD TO A REDUCED
PRICE OF OUR COMMON STOCK.
Our operating results have varied in the past, and we expect that they
will continue to vary in the future as a result of a number of factors, many of
which are beyond our control. These factors include:
- Demand for our products and services;
- Increases in our operating expenses;
- Competition in our industry;
- Timing of new products and services;
- The loss of any key employees and timing of our new hires; and
- Significant downturns in the Canadian, U.S. and international
economies.
In addition, we have not yet experienced a consistent pattern of
revenues such that we can accurately predict our future revenues. Due to the
foregoing factors, our annual or quarterly results of operations may not meet
the expectations of investors.
OUR ABILITY TO ACHIEVE OR MAINTAIN PROFITABILITY WILL BE CONSTRAINED IF WE DO
NOT EFFECTIVELY MANAGE OUR RAPID GROWTH.
As a result of our acquisitions and organic growth, we have recently
increased our employee base to meet increasing demand for our products and
services. As we expand our operations, we expect to continue to increase the
size of our employee base. Our management and operations have been strained by
this growth and will continue to be strained by our anticipated growth. To
compete effectively and to manage future growth, we must continue to improve our
financial and management controls, reporting systems and procedures on a timely
basis. We must also expand, train and manage our employee base. If we are not
successful in managing our growth, our ability to achieve or maintain
profitability may be harmed.
WE MAY BE UNABLE TO ATTRACT AND RETAIN KEY PERSONNEL, WHICH WOULD ADVERSELY
AFFECT OUR ABILITY TO DEVELOP AND EFFECTIVELY MANAGE OUR BUSINESS.
Our future performance will depend largely on the efforts and abilities
of our senior executives, namely Carl Ritter, our founder and Chief Executive
Officer, and certain other key technical, sales and marketing and managerial
personnel. Our success will depend on our ability to attract and retain these
key employees in the future. The market for such persons is extremely
competitive and we may not find qualified replacements for personnel who leave
us. The loss of, or the inability to attract, any one or more of our key
personnel and particular, Mr. Ritter, may harm our ability to develop and
effectively manage our business.
A SUCCESSFUL PRODUCT LIABILITY CLAIM MAY HARM OUR FINANCIAL CONDITION.
The complex nature of products and services increases the likelihood
that we may face product liability claims in the future. Any provisions in our
agreements with our clients designed to limit our exposure to potential product
liability claims and any product liability insurance may not be adequate to
protect us from such claims. A successful product liability claim brought
against us could harm our financial condition. Even if
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unsuccessful, any product liability claim could result in costly litigation and
divert management's attention and resources.
ANY FUTURE ACQUISITIONS MAY BE DIFFICULT AND DISRUPTIVE, AND CARBIZ'S OPERATING
RESULTS MAY BE HARMED IF CARBIZ CANNOT ADDRESS THE CHALLENGES PRESENTED BY
ACQUISITIONS.
Carbiz has acquired a number of businesses to expand its operations or
market presence and intends to continue its expansion by acquiring or investing
in companies, assets or technologies that complement its business and offer
opportunities for growth. These transactions involve many risks and challenges
that Carbiz might not successfully overcome, including:
- Difficulties in assimilating technologies, products, personnel
and operations;
- Disruption of Carbiz ongoing business and diversion of
management's attention from other business concerns;
- Risks of entering markets in which Carbiz has no or limited prior
experience;
- Issuances of equity securities that may dilute ownership interest
of the holders of Carbiz's Common Shares;
- Cash payments to or the assumption of debt or other liabilities
of the companies that Carbiz acquires; and
- Large write-offs and amortization expenses related to goodwill
and other intangible assets.
Any inability to address these risks could negatively impact Carbiz's
operating results. Any failure to successfully integrate the employees of the
acquired companies into our operations will increase Carbiz's operating expenses
and may adversely impact its revenues. Moreover, any future acquisitions or
investments, even if successfully completed, may not generate any additional
revenue or provide any benefit to Carbiz's business.
WE DEPEND ON THE CONTINUED VIABILITY OF THE INTERNET.
To the extent that the Internet continues to experience growth in the
number of users and frequency of use by consumers resulting in increased
bandwidth demands, we cannot assure you that the infrastructure for the Internet
will be able to support the demands placed upon it. The Internet has experienced
outages and delays as a result of damage to portions of its infrastructure.
Outages or delays could adversely affect online sites, email and the level of
traffic on the Internet. We also depend on the Internet service providers that
provide our clients and Internet users with access to Carbiz's services and
products. In the past, users have experienced difficulties due to system
failures unrelated to our service. In addition, the Internet could lose its
viability due to delays in the adoption of new standards and protocols required
to handle increased levels of Internet activity. Insufficient availability of
telecommunication services to support the Internet also could result in slower
response times and negatively impact use of the Internet generally. If the use
of the Internet fails to grow or grows more slowly than expected, if the
infrastructure for the Internet does not effectively support growth that may
occur or if the Internet does not become a viable commercial marketplace, we may
not achieve profitability and our business, results of operations and financial
condition will suffer.
WE MAY BECOME SUBJECT TO BURDENSOME GOVERNMENT REGULATION AND LEGAL
UNCERTAINTIES.
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Laws and regulations directly applicable to Internet communications,
commerce and advertising are becoming more prevalent. The United States Congress
has enacted Internet legislation relating to issues such as children's privacy,
copyright and taxation. The children's privacy legislation imposes restrictions
on the collection, use and distribution of personal identification information
obtained online from children under the age of 13. The copyright legislation
establishes rules governing the liability of the Internet service providers and
the Web site publishers for the copyright infringement of Internet users. The
tax legislation places a moratorium on certain forms of Internet taxes for three
years, however, this moratorium does apply to sales and use taxes. Additionally,
the European Union recently adopted a directive addressing data privacy which
imposes restrictions on the collection, use and processing of personal data.
Existing legislation and any new legislation could hinder the use and growth of
the Internet generally and decrease the acceptance of the Internet as a medium
for communication, commerce and advertising. The laws governing the Internet
remain largely unsettled, even in areas where legislation has been enacted. It
may take several years to determine whether and how existing laws such as those
governing intellectual property, taxation and personal privacy apply to the
Internet and Internet services. In addition, the growth and development of the
market for Internet commerce may prompt call for more stringent consumer
protection laws, both in the US and abroad, which may impose additional burdens
on companies conducting business online. Our business, results of operations and
financial condition could be materially and adversely affected if we do not
comply with recent legislation or laws or regulations relating to the Internet
that are adopted or modified in the future.
SECURITY CONCERNS COULD HINDER COMMERCE ON THE INTERNET.
User concerns about the security of confidential information online has
been a significant barrier to commerce on the Internet and online
communications. Any well-publicized compromise of security could deter people
from using the Internet or other online services or from using them to conduct
transactions that involve the transmission of confidential information. If
Internet commerce is inhibited as a result of such security concerns, our
business would be harmed.
WE HAVE NOT PAID ANY DIVIDENDS TO OUR STOCKHOLDERS AND WE ARE UNSURE AS TO WHEN
WE WILL BE ABLE TO MAKE SUCH PAYMENTS.
The payment of dividends by Carbiz is restricted by the solvency
provisions of the OBCA. To date, we have not paid any dividends on our
outstanding Common Shares. The future payment of dividends will be dependent
upon the financial requirements of the Corporation to fund further growth, the
financial condition of the Corporation and other factors which our board of
directors may consider in the circumstances. It is not contemplated that any
dividends will be paid in the immediate or foreseeable future.
OUR BUSINESS MAY BE ADVERSELY IMPACTED BY FLUCTUATIONS OF EXCHANGE RATES.
Carbiz is planning to market its products in the United States and any
fluctuations in the exchange rates could adversely affect our profits. We cannot
assure you that we will be able to minimize the significance of the impact of
such fluctuations on our business.
CONFLICTS OF INTEREST MAY RESULT IN FINANCIAL TERMS THAT ARE LESS FAVORABLE TO
CARBIZ THAN IF DEALING WITH AN UNAFFILIATED THIRD PARTY.
There are potential conflicts of interest to which the directors of
Carbiz may be subject from time to time in connection with the operation of
Carbiz. Conflicts of interest, if any, which arise will be subject to and
governed by procedures prescribed by the OBCA which require a director or
officer of a corporation who is a
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party to, or is a director or an officer of or has a material interest in any
person who is a party to, a material contract or proposed material contract with
Carbiz to disclose his interest and, in the case of directors, to refrain from
voting on any matter in respect of such contract unless otherwise permitted
under the OBCA. While Carbiz believes that any such transactions have been
entered into on an arms-length basis, there can be no assurance that Carbiz will
not enter into such transactions in the future that could adversely impact
Carbiz to the extent that financial terms are less favorable to Carbiz than if
dealing with an unaffiliated third party. See Item 13 of this Annual Report for
a discussion of Carbiz's transactions with related parties.
SPECIAL NOTE REGARDING FORWARD-LOOKING STATEMENTS
This Annual Report may contain forward-looking statements that address,
among other things, market acceptance of our products and services, expansion
into new targeted industries, product development, sales and marketing
strategies, development and maintenance of strategic alliances, technological
advancement, global expansion, projected capital expenditures, liquidity and
availability of additional funding sources. These statements may be found in the
sections of this prospectus entitled "Risk Factors," "Management's Discussion
and Analysis of Financial Condition and Results of Operations," "Our Business"
and in this Annual Report generally. In some cases, you can identify
forward-looking statements by terminology such as "may," "will," "should,"
"expects," "plans," "anticipates," "believes," "estimates," "predicts,"
"potential," "continue" or the negative of such terms or other comparable
terminology. Our actual results could differ materially from those anticipated
in these forward-looking statements as a result of various factors, including
all the risks discussed in "Risk Factors" and elsewhere in this Annual Report.
Unless required by law, we undertake no obligation to update publicly any
forward-looking statements after the date of this Annual Report to conform such
statements to actual results.
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ITEM 2. DESCRIPTION OF PROPERTY
Carbiz currently leases approximately 5,300 square feet of office
space, as its head office space, at 180 Lesmill Road, Toronto, Ontario under a
month-to-month lease arrangement with the owner of the property. The cost of the
lease to Carbiz is Cdn$7,645 per month.
Carbiz has a lease for 1,674 square feet of office space located at
Units 2 and 3, 5080 Timberlea Blvd., Mississauga, Ontario, expiring January 30,
2003. The rent payable on the lease to Carbiz is Cdn.$1,388 per month. This
property has been sublet to a third party.
Carbiz currently leases approximately 5,500 square feet of office space
located at 1462 Main Street, Sarasota, Florida under a month-to-month lease
arrangement with the owner of the property. The cost of the lease is US$3,838
per month.
Carbiz currently leases approximately 3,200 square feet of office space
located at 3587-D Forest Haven Lane, Chesapeake, VA under a month-to-month lease
arrangement with the landlord. The cost of the lease is US $1,875.
Carbiz currently leases 3,220 square feet of office space at 2405
Grand, Suite 300, Kansas City, MO under a three (3) year lease. The rent payable
under this lease is currently $5,031 per month.
Carbiz has signed an agreement to lease property located at 7560
Commerce Court, Sarasota, FL effective as of October of 2000. The rent payable
under this lease agreement will be $10,250 per month.
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ITEM 3. LEGAL PROCEEDINGS
Carbiz is not currently a party to any legal proceedings. While
management of Carbiz is currently not aware of any other legal proceedings
initiated against Carbiz, from time to time, Carbiz may become subject to claims
and litigation generally associated with any business venture in the ordinary
course of its operations.
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ITEM 4. CONTROL OF REGISTRANT
Carbiz is not controlled, directly or indirectly, by any other
corporation or by any foreign government.
The following tables set forth information regarding the beneficial
ownership of Carbiz's common shares as of January 31, 2000 for (a) any person
who is known by Carbiz to be the owner of more than 10% of any class of Carbiz's
voting securities, and (b) the total amount of any class of Carbiz's voting
securities owned by the officers and directors as a group without naming them.
The information in the tables do not reflect ownership of warrants, but do
reflect ownership of options.
PRINCIPAL SHAREHOLDERS
<TABLE>
<CAPTION>
NAME AND PERCENTAGE
MUNICIPALITY OF RESIDENCE NUMBER OF SHARES OF SHARES
------------------------- ---------------- -----------
<S> <C> <C>
Carl Ritter(1)(2)(3) 2,325,901 11%
Toronto Canada
John Galluci(2)(4) 3,582,240 17%
Toronto, Canada
Directors and Officers as a 7,383,699(5) 11%
Group
</TABLE>
NOTES:
(1) These shares are subject to an escrow agreement.
(2) Carl Ritter and John Gallucci also have options to purchase an additional
546,671 common shares.
(3) 265,002 common shares are owned by Carl Ritter and 2,060,899 common shares
are owned by 1043917 Ontario Inc., a holding company controlled by Carl
Ritter.
(4) 3,332,240 common shares are owned by 1144822 Ontario Inc., a holding
company in which John Gallucci is President and 1/3 owner.
(5) All of the common shares held by the Directors and Officers as a group are
held by each director and/or officer in their respective personal capacity,
through an RRSP, through a corporation in which they have a controlling
interest in, or as joint tenants with their respective spouse.
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ITEM 5. NATURE OF TRADING MARKET
Carbiz's common shares trade on the Canadian Venture Exchange ("CDNX")
under the symbol "CZ". On July 14, 1998 Carbiz completed its initial public
offering by the issuance of 1,500,000 Common Shares and its shares were listed
for trading on the junior capital pool board of The Alberta Stock Exchange (the
"ASE") on July 23, 1998.
The following table sets forth the price range (high and low) and
trading volume of the common shares since July 23, 1998 (the date on which
trading in the common shares began), as reported by the CDNX:
<TABLE>
<CAPTION>
CDNX
-----------------------------------------
HIGH LOW VOLUME
---------- -------- -----------
$ $
<S> <C> <C> <C>
1998
3rd Quarter 0.48 0.40 831,500
4th Quarter 1.25 0.42 786,625
1999
1st Quarter 0.80 0.41 224,106
2nd Quarter 2.50 0.70 5,534,250
3rd Quarter 1.50 0.75 640,680
4th Quarter 1.60 1.00 1,950,623
2000
1st Quarter 8.00 1.05 12,911,012
April 4.00 1.70 2,522,929
May 2.50 1.00 1,128,648
June 1 to June 12 2.00 1.61 361,875
</TABLE>
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ITEM 6. EXCHANGE CONTROLS AND OTHER LIMITATIONS AFFECTING SECURITY HOLDERS.
There is no law or governmental decree or regulation in Canada that
restricts the export or import of capital, or affects the payment of dividends,
interest or other payments to non-resident holders of Common Shares, other than
withholding tax requirements.
There is no limitation imposed by Canadian law on the right of a
non-resident to hold or vote Common Shares, other than as provided by the
Investment Canada Act(the "Act") enacted on June 20, 1985, as amended, as
further amended by the North American Free Trade Agreement (NAFTA)
Implementation Act (Canada) and the World Trade Organization (WTO) Agreement
Implementation Act, which requires the prior notification and, in certain cases,
advance review and approval by the Government of Canada of the acquisition by a
"non-Canadian" of "control" of a "Canadian business", all as defined in the Act.
For the purposes of the Act, "control" can be acquired through the acquisition
of all or substantially all of the assets used in the Canadian business or the
direct or indirect acquisition of interests in an entity that carries on a
Canadian business, or which controls the entity which carries on the Canadian
business. Under the Act, control of a corporation is deemed to be acquired
through the acquisition of a majority of the voting shares of a corporation, and
is presumed to be acquired where one-third or more, but less than a majority, of
the voting shares of a corporation are acquired, unless it can be established
that Carbiz is not controlled in fact through the ownership of voting shares.
Other rules apply with respect to the acquisition of non-corporate entities.
Investments requiring review and approval include direct acquisitions
of Canadian businesses with assets with a gross book value of $5.0 million or
more; indirect acquisitions of Canadian businesses with assets of $50.0 million
or more; and indirect acquisitions of Canadian businesses where the value of
assets of the entity or entities carrying on business in Canada, control of
which is indirectly being acquired, is greater than $5.0 million and represents
greater than 50% of the total value of the assets of all the entities, control
of which is being acquired. Generally speaking, the value of the business
acquisition threshold (the "Threshold") is increased from those levels outlined
where the acquisition is by a member of NAFTA or a WTO Investor or by a
non-Canadian other than a WTO Investor where the Canadian business that is the
subject of the investment is immediately before the investment controlled by a
WTO Investor. The Threshold is to be determined yearly in accordance with a
formula set forth in the Act.
Different provisions and considerations apply with respect to
investment to acquire control of a Canadian business that, as defined in the Act
or regulations:
- Engages in production of uranium and owns an interest in
producing uranium property in Canada;
- Provides financial services;
- Provides transportation services;
- Is a cultural business.
Carbiz is considered to be a cultural business pursuant to the Act.
If an investment is reviewable, an application for review in the form
prescribed by regulation is normally required to be filed with the Ministry of
Industry, Director of Investment prior to the investment taking place and the
investment may not be consummated until the review has been completed and
ministerial approval obtained. Applications for review concerning indirect
acquisitions maybe filed up to 30 days after the investment is consummated.
Applications concerning reviewable investments in culturally sensitive and other
specified activities referred to in the preceding paragraph are required upon
receipt of a notice for review. There is, moreover, provision for the Minister
(a person designated as such under the Act) to permit an investment to be
consummated prior to completion of review if he is satisfied that delay would
cause undue hardship to the acquirer or jeopardize the operation of the Canadian
business that is being acquired.
Upon review of an application for review, the Minister will then
determine whether the investment is likely to be of "net benefit to Canada,"
taking into account the information provided and having regard to certain
factors of assessment prescribed under the Act. Among the factors to be
considered are:
- the effect of the investment on the level and nature of economic
activity in Canada, including the effect on employment, on resource
processing, on the utilization of parts, components and services
produced in Canada, and on exports from Canada;
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- the degree and significance of participation by Canadians in the
Canadian business and in any industry in Canada of which it forms a
part;
- the effect of the investment on productivity, industrial efficiency,
technological development, product innovation and product variety in
Canada;
- the effect of the investment on competition within any industry or
industries in Canada;
- the compatibility of the investment with national industrial,
economic and cultural objectives enunciated by the government or
legislature of any province likely to be significantly affected by the
investment; and
- the contribution of the investment to Canada's ability to compete in
world markets
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ITEM 7. TAXATION
UNITED STATES FEDERAL INCOME TAX CONSIDERATIONS
The following is a summary of the material United States federal income
tax considerations arising from the acquisition, ownership and disposition of
our common shares by a United States holder. A United States holder is:
- an individual citizen or resident of the United States;
- a corporation created or organized in or under the laws of the
United States or any of its political subdivisions; or
- an estate or trust the income of which is subject to United
States federal income taxation regardless of its source.
This summary deals only with common shares that are held as a capital
asset by a United States holder, and does not address tax considerations
applicable to United States holders that may be subject to special tax rules,
such as:
- dealers or traders in securities or currencies;
- financial institutions or other United States holders that treat
income in respect of our common shares as financial services
income;
- life insurance companies;
- tax-exempt entities;
- United States holders that hold our common shares as a part of a
straddle or conversion transaction or other arrangement involving
more than one position or that hedge against currency risks in
respect of our common shares;
- United States holders that own, or are deemed for United States
tax purposes to own, 10% or more of the total combined voting
power of all classes of our voting shares;
- United States holders that have a principal place of business or
"tax home" outside the United States; or
- United States holders whose "functional currency" is not the
United States dollar.
The discussion below is based upon the provisions of the United States
Internal Revenue Code of 1986, as amended (the "Code"), and regulations, rulings
and judicial decisions as of the date of this prospectus; any authority may be
repealed, revoked or modified, perhaps with retroactive effect, so as to result
in federal income tax consequences different from those discussed below. The
following discussion does not purport to describe all of the tax considerations
that may be relevant to you. We advise you to consult your own tax advisor.
DISTRIBUTIONS
Distributions that we make with respect to our common shares, other
than distributions in liquidation and distributions in redemption of shares that
are treated as exchanges, will be taxed to United States holders as ordinary
dividend income to the extent that the distributions do not exceed the current
and accumulated earnings and profits of the Company, as determined for United
States federal income tax purposes. The amount treated as a dividend will
include any Canadian withholding tax deducted from the distribution.
Distributions, if any, in
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excess of the current and accumulated earnings and profits of the Company, as
determined for United State federal income tax purposes, will constitute a
nontaxable return of capital to a United States holder and will be applied
against and reduce the United States holder's tax basis in our common shares. To
the extent that these distributions exceed the tax basis of the United States
holder in its shares of our common shares, the excess generally will be treated
as capital gain.
In the case of distributions in Canadian dollars, the amount of the
distributions generally will equal the United States dollar value of the
Canadian dollars distributed, determined by reference to the spot currency
exchange rate on the date of receipt of the distribution by the United States
holder, and the United States holder will realize separate foreign currency gain
or loss only to the extent that gain or loss arises as a result of foreign
currency fluctuations from the date the distribution is received (or deemed
received) to the date such distribution is converted into United States dollars.
Any foreign currency gain or loss generally will be treated as ordinary income
or loss.
Dividends that we pay will not be eligible for the dividends-received
deduction generally allowed to United States corporations under Section 243 of
the Code.
SALE OR EXCHANGE
Upon a sale or exchange of our common shares to a person other than
Carbiz, a United States holder will recognize gain or loss in an amount equal to
the difference between the amount realized on the sale or exchange and the
United States holder's adjusted tax basis in the common shares (determined in
U.S. dollars). Any gain or loss recognized will be capital gain or loss and will
be long-term capital gain or loss if the United States holder has held our
common shares for more than one year.
FOREIGN TAX CREDIT
In general, in computing its United States federal income tax
liability, a United States holder may elect for each taxable year to claim a
deduction or, subject to the limitations on foreign tax credits generally, a
credit for foreign income taxes paid or accrued by it, including any non-United
States taxes withheld from distributions, if any, that we pay on our common
shares. For foreign tax credit purposes, under Section 904(g) of the Internal
Revenue Code, in the event that at least 50 percent of our shares (determined by
vote or value) is owned, directly, indirectly or by attribution, by United
States persons, and subject to the limitations described below, a portion of the
dividends that we pay in each taxable year will be treated as United
States-source income, depending in general upon the ratio for that taxable year
of our United States-source earnings and profits to our total earnings and
profits. The remaining portion of our dividends will be treated as
foreign-source income and generally will be treated as passive income, subject
to the separate foreign tax credit limitation for passive income. The
application of Section 904(g) is subject to two limitations. First, if, in any
taxable year, we have earnings and profits and less than 10 percent of those
earnings and profits are from United States sources, then, in general, dividends
that we pay from our earnings and profits for that year will be treated entirely
as foreign-source income. Second, because dividends that we pay are treated
entirely as foreign-source income under the Canada-United States Income Tax
Convention, a United States holder that qualifies for the benefits of the
Convention may elect to have the portion of those dividends that would be
treated as United States-source income under Section 904(g) instead treated as
foreign-source income that is subject to a separate foreign tax credit
limitation.
Gain or loss realized by a United States holder on the sale or exchange
of our common shares generally will be treated as United States source gain or
loss for United States foreign tax credit purposes.
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If we were to be a passive foreign investment company (see "--Passive
Foreign Investment Companies" below), special rules would apply to the
calculation of foreign tax credits.
The availability of foreign tax credits depends on the particular
circumstances of each United States holder. The rules regarding foreign tax
credits are complex, and we advise you to consult your own tax advisor.
BACKUP WITHHOLDING TAX
Backup withholding tax at a rate of 31% may apply to payments of
dividends and to payments of proceeds of the sale or other disposition of our
common shares within the United States by a non-corporate United States holder,
if the holder fails to furnish a correct taxpayer identification number or
otherwise fails to comply with applicable requirements of the backup withholding
tax rules. Backup withholding tax is not an additional tax and may be credited
against a United States holder's United States federal income tax liability,
provided that correct information is provided to the Internal Revenue Service.
PASSIVE FOREIGN INVESTMENT COMPANIES
In general, a foreign corporation is a passive foreign investment
company for any taxable year in which (i) 75% or more of its gross income
consists of passive income (such as dividends, interest, rents and royalties,
other than certain rents and royalties derived in the active conduct of a trade
or business) or (ii) 50% or more of the average of the quarterly values of its
assets consists of assets that produce, or are held for the production of,
passive income.
Based on our current and projected income, and our estimates as to the
market value of our assets as determined by reference to the expected market
value of our common shares when issued, we do not expect to be considered to be
a passive foreign investment company. However, because the determination of
whether we are a passive foreign investment company is based on the composition
of our income and assets from time to time and because the market price of our
shares is likely to fluctuate after the offering, there can be no assurance that
we will not be considered a passive foreign investment company for any fiscal
year. If we are a passive foreign investment company at any time that you own
common shares, you generally will be subject to the rules described below, even
if we subsequently cease to be a passive foreign investment company. United
States holders will be responsible for determining whether we are a passive
foreign investment company each year for purposes of applying the rules
described below.
Except as described below regarding the mark-to-market election, if we
are considered to be a passive foreign investment company, the following special
rules will generally apply to:
- any gain realized on the sale or other disposition (including a
pledge as security for a loan) of our common shares, and
- any "excess distribution" on the common shares (generally, any
distributions received by you on the common shares in a taxable
year other than the first year in which you hold the common
shares that are greater than 125% of the average annual
distributions received by you in the preceding three taxable
years, or, if shorter, your holding period for the common
shares).
Under these rules:
- the gain or excess distribution would be allocated ratably over
your holding period for the common shares;
24
<PAGE>
- the amount allocated to the current taxable year and to taxable
years before the first day in which we became a passive foreign
investment company would be taxed as ordinary income; and
- the amount allocated to each of the prior taxable years in which
we were a passive foreign investment company would be subject to
tax at the highest rate of tax in effect for a corporate or
individual taxpayer, as applicable, that year, and an interest
charge for the deemed deferral benefit would be imposed on the
resulting tax attributable to such prior year.
Alternatively, when the common shares are regularly traded on the
Nasdaq National Market (or another qualifying market), you will be able to make
a mark-to-market election with respect to the common shares. If you make the
mark-to-market election upon acquisition of the common shares, you will be
required to include in income as ordinary income each year the excess of the
fair market value of the common shares over your adjusted basis in the common
shares, and generally will be entitled to deduct as an ordinary loss each year
the lesser of (a) the excess of your original or, if applicable, adjusted basis
in the common shares over their fair market value, and (b) the excess of the
total amount of income included in prior years over the total amount of
deductions allowed in prior years under the mark-to-market rules. Your adjusted
basis in the common shares will be increased by the amount of any income
inclusions and will be decreased by the amount of any deductions. If you dispose
of the common shares for an amount in excess of your adjusted basis, the gain
will be taxed at ordinary income tax rates.
You should consult your tax advisor about the availability of the
mark-to-market election and whether doing so would be advisable in your specific
situation.
A U.S. investor who owns common shares during any year that we are a
passive foreign investment company must file Internal Revenue Service Form 8621,
describing any distributions received from the ownership of common shares and
any gain realized on the sale or other disposition of common shares.
25
<PAGE>
ITEM 8. SELECTED FINANCIAL DATA
THE FOLLOWING SELECTED FINANCIAL DATA IS QUALIFIED IN ITS ENTIRETY BY, AND
SHOULD BE READ IN CONJUNCTION WITH, THE CONSOLIDATED FINANCIAL STATEMENTS AND
NOTES THERETO, INCLUDED AS AN EXHIBIT TO THIS ANNUAL REPORT.
The following table sets forth information from the audited
consolidated results for the fiscal years ended January 31, 2000, January 31,
1999 and January 31, 1998, which have been audited by the Corporation's
auditors. The Corporation's financial statements are stated in Canadian dollars
and are prepared in accordance with Canadian Generally Accepted Accounting
Principles which conform in all material respects with United States Generally
Accepted Accounting Principles except as referred to in Note 12 of the audited
financial statements and Note 11 of the unaudited financial statements.
<TABLE>
<CAPTION>
YEARS ENDED JANUARY 31
-----------------------------------------------------------
2000 1999 1998
---- ---- ----
<S> <C> <C> <C>
Sales $ 1,750,190 $ 1,014,495 $ 1,032,880
Cost of Sales 801,711 440,346 265,967
----------- ------------ -----------
Gross Profit 948,479 576,149 835,901
Interest and other income 44,171 2,342 68,988
Operating expenses 2,093,194 1,081,813 989,692
Amortization 2,359,163 1,253,330 158,442
----------- ------------ -----------
Net Loss (1,366,513) (676,839) (312,233)
Accumulated deficit $(2,417,825) $(1,051,312) $(374,473)
Loss per share $ (0.08) $ (0.06) $ (0.03)
</TABLE>
<TABLE>
<CAPTION>
AS OF JANUARY 31
-----------------------------------------------------------
2000 1999 1998
---- ---- ----
<S> <C> <C> <C>
Cash and Cash Equivalents $ 1,098,489 $ 75,377 $ 55,951
Total Assets 2,952,567 731,075 844,390
Total Liabilities 414,453 300,294 190,458
Shareholders' Equity 2,538,114 (219) 222,932
</TABLE>
26
<PAGE>
ITEM 9. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
OF OPERATIONS.
OVERVIEW
Carbiz has attempted to capitalize itself in the automotive sales
finance industry through a growth strategy that emphasizes three principal
components: (i) acquiring a significant number of companies involved in the
business of developing, marketing, distributing and supporting software and
Internet products for the sales finance industry, (ii) acquiring companies that
further support Carbiz's business involvement in F&I credit insurance, extended
warranties and other after market car care products; and (iii) improving the
revenue and profitability of newly acquired and established operations. As a
result of the successful implementation of this strategy, the Carbiz has grown
significantly. Managing Carbiz's growth by successfully integrating newly
acquired operations with existing facilities and optimizing economies of scale
is critical to our profitability, and it will continue to be one of the most
important responsibilities and challenges facing us.
Due to the successful implementation of Carbiz's business strategy, it
has grown substantially in size and operational costs have grown accordingly. As
expected, Carbiz's growth has resulted in increased infrastructure and field
level staffing. Management continues to review Carbiz's operating performance
and attempts to implement changes were necessary to improve Carbiz's long-term
financial performance. In particular, in an effort to reduce operating costs and
reduce general and administrative expenses as a percentage of revenue,
management performed a detailed review of the principal components of the
Company's operational, administrative and capital structure. To date, Carbiz has
acquired six companies during fiscal 1999 and 2000 for consideration of
approximately $8 million in cash and securities. Please see recent developments
in Item 1 for a discussion of the acquisition activity of Carbiz. Carbiz expects
to commit significant resources in the immediate future to the integration of
the acquired businesses into its operations.
ESCROW AGREEMENT
An aggregate of 1,350,000 common shares have been deposited with CIBC
Mellon Trust Company pursuant to an Escrow Agreement dated as of June 18, 1998
(the "Escrow Agreement"). Pursuant to the Escrow Agreement, the Major
Transaction having been completed on December 18, 1998, the escrowed securities
shall be released upon the written consent of the Executive Director of the
Alberta Securities Commission (the "Executive Director") as to one-third of the
escrowed securities on the first anniversary of the completion of the Major
Transaction. At the time of consent for the first release, the Executive
Director may also consent to the second and third anniversary releases.
The ASE required that 5,059,566 of the 7,935,311 common shares issued
to the Pre-Tender Agreement Shareholders and Related Parties be placed in escrow
pursuant to an Alberta Stock Exchange Escrow Agreement on Form 10B. The escrow
agreement provides that the common shares held thereunder may not be sold,
released, transferred or otherwise dealt with without the written consent of the
ASE. The escrow agreement allows for the common shares held thereunder to be
released on the basis of one common share for each $0.20 of cash flow realized
through the operations of Carbiz. Cash flow is defined as net income adjusted
for depreciation, depletion, deferred taxes and amortization of goodwill and
research and development costs. To date, none of these common shares have been
released from escrow pursuant to these terms.
The ASE required that the remaining 2,875,745 common shares issued to
the Pre-Tender Agreement Shareholders and Related Parties be placed and held in
escrow pursuant to an Alberta Stock Exchange Escrow Agreement on Form 10A. The
escrow agreement provides that the common shares held thereunder may not be
27
<PAGE>
sold, released, transferred or otherwise dealt with without the written consent
of the ASE. The escrow agreement allows for one-third of these escrowed shares
to be released on each of the first, second and third anniversaries of the
completion of the Major Transaction of Carbiz upon the consent of the ASE. To
date, none of these common shares have been released from escrow pursuant to
these terms.
RESULTS OF OPERATIONS
YEAR ENDED JANUARY 31, 2000 COMPARED TO YEAR ENDED JANUARY 31, 1999
REVENUE
Sales increased to $1,750,190 for the year ended January 31, 2000
compared to $1,014,495 for the year ended January 31, 1999. This represents an
increase of 73%. Approximately 88% of this increase or $645,897 is attributable
to the additional revenue generated by (Atlantic Canada) Marketing Professionals
Inc. and Autosure Financial Corporation Atlantic Limited. These two companies
were acquired by Carbiz in August of 1999. Continued increase in sales of the
Full Spectrum 2000 software and the Generator infomercial accounted for 9% of
the sales growth increase. The remaining 3% was as a result of increased sales
in other product lines.
COST OF SALES AND GROSS MARGIN
Cost of sales increased from $440,346 for the year ended January 31,
1999 to $801,711 for the year ended January 31, 2000. This represents an 82%
increase. Additional cost of sales directly relating to sales generated by
Atlantic Canada amount to $115,007 or 32% of the increase. The costs associated
with the direct advertising and creation of the Generator infomercial accounted
for $233,217 or 64% of the increase. The remaining 4% increase was due to the
continued increase in costs related to enhancing Full Spectrum 2000.
Carbiz's accounting policy is to expense costs as incurred and not to capitalize
them.
INTEREST OTHER INCOME
Interest other income increased to $44,171 from $2,342, representing a
net increase of $41,829. This was generated by interest-bearing investments held
by Carbiz. Carbiz had a net increase in cash attributable to financing
activities which raised $2.9 million. The funds were invested in interest
bearing notes which generated interest income.
OPERATING EXPENSES
Operating expenses for year ended January 31, 2000 increased to
$2,093,194 from $1,081,813 for the same period in 1999, an increase of 93%. 28%
or $289,126 of this increase in attributed to the addition of Altantic Canada to
the organization during the year. Continued expansion of Carbiz during the year
required additions in support staff and additional promotional expenses.
Increase of these expenses accounted for 38% of the increase in operating
expenses. Professional fees incurred represented 29% of the increase in
operating costs. These fees are directly related to costs associated with being
a publicly traded company (i.e. ASE sustaining fees and continuous disclosure
filing fee).
BAD DEBT
Bad debt expense increased from $9,008 for the year ended January 31,
1999 to $49,154 for the same period ended January 31, 2000. A majority of this
increase was a provision made for customers undergoing financial restructuring.
The total amount owed to Carbiz by these customers was included as a bad debt
item.
28
<PAGE>
Provisions for other various accounts which are in default positions are related
to services and support which have been discontinued.
DEPRECIATION AND AMORTIZATION EXPENSE
Total amortization increased by $1,105,833 or 88% for the year ended
January 31, 2000 as compared with the same period in 1999. During the period
ended January 31, 2000, Capital assets depreciation expense increased by 90%.
This increase was caused by the addition of various computers and related assets
during the year. Net capital asset additions totaled $248,728 for the year. The
Goodwill amortization increase of $62,535 is directly related to the
acquisitions in Atlantic Canada.
NET LOSS
Net loss for the year ended January 31, 2000 was $1,366,513 compared to
$676,839 for the year ended January 31, 1999, representing an increase of 102%.
This increase was primarily due to increases in operating expenses, cost of
goods sold, and amortization as explained in the respective sections above.
CAPITAL EXPENDITURES AND ACQUISITIONS
Carbiz has been expanding staff in all areas of the operation during
the year ended January 31, 2000. Additional expenditures have been made in
sales, programming and administration departments in anticipation of expanded
sales. Carbiz acquired additional computer equipment and related furniture to
support the staff expansion, totaling $248,728. In August 1999, the company
acquired all the outstanding preferred common shares of MPI Marketing
Professional Inc. and Autosure Financial Corporation Atlantic Limited. Net cash
consideration on the acquisition was $356,720.
LIQUIDITY AND CAPITAL RESOURCES
Carbiz.com Inc. has no long term or short term debt. Working capital as
at January 31, 2000 amounts to $1,097,567.
YEAR ENDED JANUARY 31, 1999 COMPARED TO YEAR ENDED JANUARY 31, 1998
REVENUES
Carbiz generated revenue of $1,014,495 for the year ended January 31,
1999 compared to $1,032,880 for the year ended January 31, 1998, representing a
decrease of 1.8%. The decrease in sales was caused by the loss in revenue
resulting from the bankruptcy of a major U.S. account in the latter part of
1998, which was only partially offset by sales to new customers.
COST OF SALES AND GROSS MARGIN
For the year ended January 31, 1999, the cost of sales for Carbiz was
$440,346 compared to $265,967 for the year ended January 31, 1998. This increase
was due primarily to an increase in Carbiz's programming staff which was
required to complete development of Full Spectrum Deskman 2000. The increase in
cost of sales reduced the gross margin by 25%.
OPERATING EXPENSES
29
<PAGE>
Carbiz incurred operating expenses of $1,081,813 during the year ended
January 31, 1999 compared to $989,692 during the year ended January 31, 1998,
representing an increase of 9.3%. This increase was primarily attributable to an
increase in consulting and professional fees attributable to the listing of
Carbiz on The Alberta Stock Exchange and the Major Transaction of Carbiz.
DEPRECIATION AND AMORTIZATION EXPENSES
Depreciation expense increased to $171,517 for the year ended January
31, 1999 compared to $158,442 for the year ended January 31, 1998, representing
an increase of 8.3%. This increase resulted from the increased value of Carbiz's
computer software products. Carbiz added fixed assets late in the fiscal year of
1998; this deferred the impact on depreciation to the fiscal year 1999.
INCOME TAXES
As Carbiz continued to operate in a loss position for both accounting
and tax purposes, Carbiz was able to carry the losses forward and pay no tax
during this period.
NET LOSS
Net loss for the year ended January 31, 1999 was $676,839 compared to
$312,233 for the year ended January 31, 1998, representing an increase of 117%.
This increase was primarily due to an increase in operating expenses and in the
cost of sales, as discussed in the respective sections above.
CAPITAL EXPENDITURES AND ACQUISITIONS
During the fiscal year 1999, Carbiz expanded its staff in all
operational areas such as sales, programming and administration. With the
increase in employees, Carbiz needed to purchase additional workstations and
computer equipment. Expenditures for the year ended 1999 were $5,651.
LIQUIDITY AND CAPITAL RESOURCES
As at January 31, 1999, Carbiz had no long term debt and a working
capital deficit of $56,266.
30
<PAGE>
ITEM 9A. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK.
Carbiz is subject to two main market risks: Interest rate risk and
foreign currency exchange risk.
Carbiz's investment portfolio consists primarily of investments in
interest bearing notes and GICs, and such portfolio does not subject Carbiz to
material market risk exposures.
Revenues are typically received from US and international sources in US
dollars while costs are payable primarily in Canadian dollars. Accordingly,
operating results can be affected by fluctuations in the US dollar exchange
rate. Currency exchange rates are determined by market factors beyond the
Company's control and may vary substantially during the course of a production.
If the Canadian dollar were to strengthen in relation to the U.S. dollar, the
Company's effective costs would rise in relation to its revenues. The Company
does not maintain US currency balances in excess of its estimated US payables.
To date, the Company has not entered into agreements for any material hedging
instruments.
31
<PAGE>
ITEM 10. DIRECTORS AND OFFICERS OF REGISTRANT.
The following table lists as of January 31, 2000 the names of the
Directors and/or Executive Officers of Carbiz. The Directors have served in
their respective capacities since their election and will serve until the next
Annual General Meeting of the shareholders or until a successor is duly elected,
unless the office is vacated in accordance with the governing documents of
Carbiz. The Executive Officers are appointed by the Directors and serve until
the earlier of their resignation or removal with or without cause by the
Directors. Unless otherwise noted, all Directors and Executive Officers are
residents and citizens of Canada.
<TABLE>
<CAPTION>
NAME OFFICE PRINCIPAL OCCUPATION AND POSITIONS
------------------------- ------------------------------- ------------------------------------------------------------
<S> <C> <C>
Carl Ritter, Chief Executive Officer and Chief Executive Officer, Carbiz, since date of inception
Director
Carlo Sistilli(1)(2) Chief Financial Officer and Chief Financial Officer of Carbiz, since date of inception
Director
John Gallucci Director Director of Carbiz
Ross Quigley(1) Director Director of Carbiz
Mark Wayne(1) Director Director of Carbiz
Aldo Sistilli(2) Corporate Secretary and Vice Corporate Secretary of Carbiz as of June 1, 1999
President, Finance Vice President, Finance, since March, 1998
James Richard Reeves President President of Carbiz as of May 29, 2000; and President of
(resident of the United Carbiz US operations since March 2000
States - Sarasota,
Florida)
Allen Beesley Chief Operating Officer Chief Operating Officer of Carbiz as of February 7, 2000
</TABLE>
NOTES:
(1) Member of the Audit Committee.
(2) Carlo Sistilli and Aldo Sistilli are brothers.
The following is a brief description of the key management of Carbiz:
CARL RITTER - CHIEF EXECUTIVE OFFICER AND DIRECTOR
Mr. Ritter has 18 years experience in the retail automotive industry,
having held several senior management positions from 1978 to 1995 with Golden
Mile Motors Corp., which owned and operated several automobile dealerships in
Ontario. In 1995, Mr. Ritter founded Data Gathering Service Inc., a private
company involved in the development of software and Internet applications for
the automotive industry.
CARLO SISTILLI - CHIEF FINANCIAL OFFICER AND DIRECTOR
Mr. Sistilli has been a Certified Management Accountant since 1986. For
the past eight years Mr. Sistilli has been a partner in the firm Sistilli &
Sistilli CMA's, and has been a sole practitioner, Carlo Sistilli CMA, since
March, 1998. Both CMA firms provide accounting, tax and computer consulting
services to the public. From 1984 until 1992, Mr. Sistilli held a variety of
senior management positions with Cabot Trust, including controller, manager of
systems and manager of internal audit. Mr. Sistilli joined DGS as Chief
Financial Officer in January, 1997. Mr. Sistilli has been the owner of CJS
Consulting, a computer and accounting consulting firm since October of 1992.
32
<PAGE>
JAMES RICHARD REEVES - PRESIDENT
Mr. James Reeves has held the position of President of Advanced Dealer
Services Inc. since 1997, a private company engaged in software development,
training and consulting; from 1996 - 1997 President of Dealer Controlled
Financing, Inc. a national automotive training and consulting company; from 1986
- 1996 President of Reeves Data Corporation, a national software development
company; from 1996 - 1997 President of UC-1, Inc.
ALLAN BEESLEY - CHIEF OPERATING OFFICER
Allan Beesley has been involved in various aspects of business
development and marketing for both multinational and smaller companies competing
in the information technology and consumer packaged goods industries for over 20
years. His academic credentials include a B.Sc. and an MBA from York University
and he is currently Vice Chairman of the Chartered Institute of Marketing
Management of Ontario. Between February 1998 and April 1999, Mr. Beesley was
responsible for sales planning with Compaq Canada Inc. From July 1996 to
February 1998, he was involved in business development with Luminart Inc. and
was VP Sales and Marketing for Melitta Canada from November 1992 to December
1994. Prior to this Mr. Beesley also served with Avon Canada as Vice President,
Marketing, with Revlon Canada as Vice President and Director of Marketing and
with Benckiser Inc., a company in the packaged goods industry, as President and
Chief Executive Officer.
ALDO SISTILLI - CORPORATE SECRETARY AND VICE PRESIDENT, FINANCE
Mr. Aldo Sistilli is a Certified Management Accountant (1989). From
1984 to 1998, Mr. Sistilli held Management Accounting positions in such
companies as Domtar Packaging, Avery Dennison, Paccar Financial Services and
Canada Packers. He has also been a partner in the firm Sistilli & Sistilli CMA's
since 1992, and a sole practitioner, Aldo Sistilli CMA, since 1998. Both firms
provide accounting, tax and computer consulting services to the public. Mr.
Sistilli joined DGS as Controller in March of 1998.
JOHN GALLUCCI - DIRECTOR
Mr. Gallucci has been President of Tregal Holdings Ltd. ("Tregal")
since 1994. Tregal is a private, family controlled investment company primarily
holding real estate assets. Mr. Gallucci was President of Richbourne Investors
Inc. ("Richbourne"), also a private, family controlled investment company
primarily holding real estate assets from 1987 to October 1, 1998, when
Richbourne amalgamated with Tregal to form Tregal Holdings Ltd.
ROSS QUIGLEY - DIRECTOR
Mr. Quigley has been the Chief Executive Officer of: The Medipac
International group of companies since 1983; the Reed Mather Insurance Group
Inc. since 1988; and Group Services Insurance Brokers Ltd. since 1972. These are
private companies engaged in specialized insurance products and administration
services, including strategic alliance partnerships, publishing and tradeshow
development.
MARK WAYNE - DIRECTOR
Mr. Wayne is a lawyer (non-practicing) and a Chartered Financial
Analyst. He practiced law from 1980 to 1987 in Calgary, specializing in the
fields of corporate and securities law. In 1987 he founded AltaFund
33
<PAGE>
Investment Corp. ("AltaFund"), a public investment company trading on the CDNX.
He served as President of AltaFund until April 1991 when AltaFund was converted
into a mutual fund and management was assumed by an independent fund manager.
Mr. Wayne was a Vice President of Altamira Financial Services Ltd., a mutual
fund company, from July 1991 to October 1998. He is currently President of
Unicus Funds Ltd., a private company providing financial advisory services. He
is a director of six other public companies: Helix Hearing Care of America Corp,
Montreal Exchange; FinTech Services Ltd., CDNX; Thermax International Corp.,
CDNX; MedMira Inc., CDNX; TM Capital Corp., CDNX and Waldorf Ventures Inc.,
CDNX.
34
<PAGE>
ITEM 11. COMPENSATION OF DIRECTORS AND OFFICERS.
CASH
No remuneration has been paid to directors in their capacity as
directors. No consulting fees and/or remuneration has been paid to any promoter,
officer, director, other insider or any associate or affiliate thereof nor was
any remuneration paid to any party for any work performed of a public/investor
relations nature prior to the completion of Carbiz's Major Transaction.
The following table sets forth compensation in respect of the
President, the Chief Executive Officer, the Chief Financial Officer, the Chief
Operating Officer and the Vice President, Finance/Corporate Secretary of Carbiz
for the years ended January 31, 1998, January 31, 1999 and January 31, 2000:
<TABLE>
<CAPTION>
------------------------- ---------------- ---------------------------------------------- ---------------- ----------------------
ANNUAL COMPENSATION
---------------------------------------------- SECURITIES
NAME AND OTHER ANNUAL UNDER OPTIONS
PRINCIPAL SALARY(1)(2) BONUS COMPENSATION GRANTED(3) ALL OTHER
POSITION YEAR ENDED ($) ($) ($) (#) COMPENSATION ($)
------------------------- ---------------- -------------- ---------- -------------------- ---------------- ----------------------
<S> <C> <C> <C> <C> <C> <C>
Carl Ritter January 31, 109,500 - - 89,671 -(2)
Chief Executive Officer 2000
------------------------- ---------------- -------------- ---------- -------------------- ---------------- ----------------------
January 31, 82,500 - - 180,000 -
1999
------------------------- ---------------- -------------- ---------- -------------------- ---------------- ----------------------
January 31, 90,699 - - -
1998
------------------------- ---------------- -------------- ---------- -------------------- ---------------- ----------------------
Carlo Sistilli January 31, 31,200 - - 20,000 -
Chief Financial Officer 2000
------------------------- ---------------- -------------- ---------- -------------------- ---------------- ----------------------
January 31, 31,200 - - 40,000 -
1999
------------------------- ---------------- -------------- ---------- -------------------- ---------------- ----------------------
January 31, 29,600 - - -
1998
------------------------- ---------------- -------------- ---------- -------------------- ---------------- ----------------------
Aldo Sistilli January 31, 63,320(1) - - 40,000 -
Corporate Secretary and 2000
Vice President, Finance
------------------------- ---------------- -------------- ---------- -------------------- ---------------- ----------------------
January 31, 29,800 - - 31,500 -
1999
------------------------- ---------------- -------------- ---------- -------------------- ---------------- ----------------------
January 31, - - -
1998
------------------------- ---------------- -------------- ---------- -------------------- ---------------- ----------------------
</TABLE>
NOTE:
(1) Perquisites and other personal benefits received by Messrs. C. Sistilli and
A. Sistilli for each of the years ended January 31, 2000, January 31, 1999
and January 31, 1998 did not exceed the lesser of $50,000 and 10% of total
annual salary and bonus.
(2) For the period ended April 30, 2000, Mr. Ritter has received from the
company a golf course membership and yearly fees totalling $42,621.61.
Perquisites and other personal benefits received by Mr. Ritter for the each
of the years ended January 31, 2000, January 31, 1999 and January 31, 1998
did not exceed the lesser of $50,000 and 10% of total annual salary and
bonus.
35
<PAGE>
(3) See "Executive Compensation - Stock Option Plan", "Stock Options" and
"Price Range and Trading Volume of Common Shares".
(4) James Richard Reeves and Allan Beesley became named executive officers
following the most recently completed year end of Carbiz.
DIRECTORS
Unicus Funds Ltd., a financial consulting company wholly owned by Mark
Wayne, a director of Carbiz, was paid an aggregate of $10,000 for financial
consulting services to Carbiz during the fiscal year ended January 31, 2000.
Otherwise, the directors of Carbiz receive and have received no remuneration in
their capacities as such. The directors are eligible to receive stock options
under Carbiz 's stock option plan. See "Item 12 of this Annual Report".
36
<PAGE>
ITEM 12. OPTIONS TO PURCHASE SECURITIES FROM REGISTRANT OR SUBSIDIARIES.
Carbiz has adopted a stock option plan (the "Plan") for senior
officers, directors and full-time employees of Carbiz and any subsidiary which
permits granting of options to purchase up to a maximum of 10% of the
outstanding Common Shares. The number of options and the exercise price of all
options is set by the board of directors of Carbiz or a committee thereof, at
the time of grant provided that the exercise price shall not be less than the
market price of the Common Shares on the stock exchange on which such shares are
traded less the discounts permitted by the rules of such exchange.
The following table sets forth options to purchase common shares which
are outstanding under the Plan as of the date hereof:
<TABLE>
<CAPTION>
NUMBER OF COMMON
SHARES UNDER EXERCISE PRICE
OPTION DATE OF GRANT PER COMMON SHARE EXPIRY DATE
--------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Directors(1) (3 individuals) 135,000 August 1, 1999 $1.00 August 17, 2004
500,000 February 17, 2000 $2.65 February 17, 2005
Officers (4 individuals) 149,671 August 1, 1999 $1.00 August 1, 2004
600,000 February 17, 2000 $2.65 February 17, 2005
Employees (38 individuals) 82,000 December 18, 1998 $0.20 December 18, 2003
102,200 August 1, 1999 $1.00 August 1, 2004
575,000 February 17, 2000 $2.65 February 17, 2005
-------------------
Total 2,143,871
===================
</TABLE>
NOTES:
(1) Excludes options held by Mr. Carl Ritter and Mr. Carlo Sistilli, which are
included in the information set forth opposite "Officers" in this table.
(2) On June 11, 2000, the closing price of the Common Shares on the CDNX was
$1.50 per share. The aggregate value of the unexercised in-the-money
options granted to each of the optionees based on such closing price is
$300,035.50.
37
<PAGE>
ITEM 13. INTEREST OF MANAGEMENT IN CERTAIN TRANSACTIONS.
Unicus Funds Ltd., a financial consulting company wholly-owned by Mark
Wayne, a director of Carbiz, was paid an aggregate of $10,000 for financial
consulting services to Carbiz during the fiscal year ended January 31, 2000.
Carbiz also paid an aggregate of $109,500 to a company owned by Carbiz's
president. Otherwise, the directors of Carbiz receive and have received no
remuneration in their capacities as such. The directors are eligible to receive
stock options under Carbiz 's stock option plan
Since incorporation there has not existed, and there currently does not
exist, any indebtedness of the directors or officers of Carbiz or any of their
associates or affiliates to Carbiz.
Carbiz has recently signed a lease for real property in Sarasota, FL
whereby certain directors, officers and/or shareholders of Carbiz are interested
parties to this lease arrangement. All terms and conditions of the agreements
between Carbiz and any of its directors or executive officers have been
negotiated on an arms-length basis.
38
<PAGE>
PART II
ITEM 14. DESCRIPTION OF SECURITIES TO BE REGISTERED.
Carbiz is authorized to issue an unlimited number of Common Shares
without nominal or par value, of which 21,916,404 Common Shares were issued and
outstanding as fully paid and non-assessable as at the date hereof, and an
unlimited number of Preferred Shares, of which non are issued and outstanding.
The holders of Common Shares are entitled to dividends as and when declared by
the Board of Directors of Carbiz and, upon liquidation, to receive such assets
of Carbiz as are distributable to the holders of Common Shares. All of the
outstanding Common Shares are fully paid and nonassessable.
39
<PAGE>
PART III
ITEM 15. DEFAULTS UPON SENIOR SECURITIES.
Not applicable.
ITEM 16. CHANGES IN SECURITIES, CHANGES IN SECURITY FOR REGISTERED SECURITIES
AND USE OF PROCEEDS.
Not applicable.
40
<PAGE>
PART IV
ITEM 17. FINANCIAL STATEMENTS.
Not applicable. Carbiz's financial statements are stated in Canadian
Dollars (CDN$) and are prepared in accordance with Canadian
ITEM 18. FINANCIAL STATEMENTS.
Carbiz has elected to provide financial statements pursuant to Item 18.
ITEM 19. FINANCIAL STATEMENTS AND EXHIBITS.
(a) Consolidated Financial Statements (Expressed in Canadian dollars) -
January 31, 2000.
41
<PAGE>
SIGNATURES
Pursuant to the requirements of Section 12 of the Securities Exchange
Act of 1934, the registrant certifies that it meets all of the requirements for
filing on Form 20-F and has duly caused this annual report to be signed on its
behalf by the undersigned, thereunto duly authorized.
CARBIZ.COM INC.
By: /s/ CARL RITTER
----------------------------------
Carl Ritter
Chief Executive Officer
Date: AUGUST 18, 2000
--------------------------------
42
<PAGE>
CARBIZ.COM INC.
(FORMERLY DATA GATHERING CAPITAL CORP.)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Expressed in Canadian Dollars)
JANUARY 31, 2000
CARBIZ.COM INC.
(FORMERLY DATA GATHERING CAPITAL CORP.)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Expressed in Canadian Dollars)
JANUARY 31, 2000
INDEX
<TABLE>
<CAPTION>
Page
<S> <C>
Auditors' Report F-2
Consolidated Balance Sheet F-3 & F-4
Consolidated Statement of Operations and Deficit F-5
Consolidated Schedule of Operating Expenses - Schedule A F-6
Consolidated Statement of Cash Flows F-7
Notes to the Consolidated Financial Statements F-8 - F-23
</TABLE>
<PAGE>
CARBIZ.COM INC.
(FORMERLY DATA GATHERING CAPITAL CORP.)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Expressed in Canadian Dollars)
JANUARY 31, 2000
AUDITORS' REPORT
TO THE SHAREHOLDERS OF
CARBIZ.COM INC.
(FORMERLY DATA GATHERING CAPITAL CORP.)
We have audited the consolidated balance sheets of Carbiz.com Inc.
(formerly Data Gathering Capital Corp.) as at January 31, 2000 and January 31,
1999 and the consolidated statements of operations and deficit and cash flows
for each of the years in the three year period ended January 31, 2000. These
consolidated financial statements are the responsibility of the company's
management. Our responsibility is to express an opinion on these consolidated
financial statements based on our audit.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform an audit to obtain
reasonable assurance whether the consolidated financial statements are free of
material misstatement. An audit includes examining, on a test basis, evidence
supporting the amounts and disclosures in the consolidated financial statements.
An audit also includes assessing the accounting principles used and significant
estimates made by management, as well as evaluating the overall financial
statement presentation.
In our opinion, these consolidated financial statements present fairly,
in all material respects, the financial position of the company as at January
31, 2000 and January 31, 1999 and the results of its operations and its cash
flows for each of the years in the three year period ended January 31, 2000 in
accordance with Canadian generally accepted accounting principles.
"Goldfarb Shulman Patel & Co. LLP"
Toronto, Canada
February 29, 2000 CHARTERED ACCOUNTANTS
(Except for note 12 which is
as of June 29, 2000)
<PAGE>
CARBIZ.COM INC.
(FORMERLY DATA GATHERING CAPITAL CORP.)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Expressed in Canadian Dollars)
JANUARY 31, 2000
PLEASE NOTE THAT THERE ARE DIFFERENCES BETWEEN U.S. AND CANADIAN GAAP
AND SUCH DIFFERENCES ARE SET FORTH IN NOTE 13 HEREIN.
ASSETS
<TABLE>
<CAPTION>
January 31 January 31
2000 1999
---------- ------------
<S> <C> <C>
CURRENT ASSETS
Cash $ 305,101 $ 35,377
Short-term investments 793,388 40,000
Accounts receivable 347,131 146,458
Sundry assets 66,400 22,193
---------- ----------
1,512,020 244,028
CAPITAL ASSETS - note 3 276,378 85,236
INTANGIBLE ASSETS - note 4 1,164,169 401,811
---------- ----------
$2,952,567 $ 731,075
========== ==========
</TABLE>
<PAGE>
CARBIZ.COM INC.
(FORMERLY DATA GATHERING CAPITAL CORP.)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Expressed in Canadian Dollars)
JANUARY 31, 2000
LIABILITIES
<TABLE>
<CAPTION>
January 31 January 31
2000 1999
----------- ------------
<S> <C> <C>
CURRENT LIABILITIES
Accounts payable $ 399,831 $ 300,294
Customer deposits 14,622
----------- ------------
414,453 300,294
----------- ------------
NON-CONTROLLING INTEREST - note 5(a) 431,000
-----------
SHAREHOLDERS' EQUITY
SHARE CAPITAL - note 5 4,955,939 1,051,093
DEFICIT (2,417,825) (1,051,312)
----------- -----------
2,538,114 (219)
----------- -----------
$ 2,952,567 $ 731,075
=========== ===========
</TABLE>
Approved by the Board:
"Carl Ritter"
"Ross Quigley"
<PAGE>
CARBIZ.COM INC.
(FORMERLY DATA GATHERING CAPITAL CORP.)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Expressed in Canadian Dollars)
JANUARY 31, 2000
<TABLE>
<CAPTION>
For the Years Ended
January 31 January 31 January 31
2000 1999 1998
----------- ----------- -----------
<S> <C> <C> <C>
SALES $ 1,750,190 $ 1,014,495 $ 1,032,880
COST OF SALES 801,711 440,346 265,967
----------- ----------- -----------
GROSS PROFIT 948,479 574,149 766,913
INTEREST AND OTHER INCOME 44,171 2,342 68,988
----------- ----------- -----------
992,650 576,491 835,901
----------- ----------- -----------
OPERATING EXPENSES - Schedule A 2,093,194 1,081,813 989,692
AMORTIZATION
Capital assets 67,315 35,398 32,042
Computer software development costs 97,244 97,244 97,244
Goodwill 101,410 38,875 29,156
----------- ----------- -----------
2,359,163 1,253,330 158,442
----------- ----------- -----------
NET LOSS FOR THE YEAR (1,366,513) (676,839) (312,233)
DEFICIT - beginning of the year (1,051,312) (374,473) (62,240)
----------- ----------- -----------
DEFICIT - end of the year $(2,417,825) $(1,051,312) $ (374,473)
=========== =========== ===========
LOSS PER SHARE $ (0.08) $ (0.06) $ (0.03)
=========== =========== ===========
</TABLE>
<PAGE>
CARBIZ.COM INC.
(FORMERLY DATA GATHERING CAPITAL CORP.)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Expressed in Canadian Dollars)
JANUARY 31, 2000
<TABLE>
<CAPTION>
For the Years Ended
January 31 January 31 January 31
2000 1999 1998
----------- ------------ ------------
<S> <C> <C> <C>
Automobile $ 81,707 $ 29,714 $ 24,993
Bad debts 49,154 9,008 54,638
Management and consulting fees 436,267 317,503 263,105
Office and general 129,438 111,727 72,859
Office salaries and services 145,048 69,848 166,956
Professional fees 387,459 118,460 41,086
Rent 116,588 70,514 67,347
Sales commissions 367,756 149,890 137,750
Sales promotion 177,244 95,386 67,347
Telephone 61,607 49,165 41,526
Travel 140,926 60,598 52,300
---------- ---------- ----------
$2,093,194 $1,081,813 $ 989,692
========== ========== ==========
</TABLE>
<PAGE>
CARBIZ.COM INC.
(FORMERLY DATA GATHERING CAPITAL CORP.)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Expressed in Canadian Dollars)
JANUARY 31, 2000
<TABLE>
<CAPTION>
For The Years Ended
January 31 January 31 January 31
2000 1999 1998
------------ ------------ -----------
<S> <C> <C> <C>
CASH PROVIDED BY (USED IN):
OPERATING ACTIVITIES
Net loss for the year $(1,366,513) $ (676,839) $ (312,233)
Adjustments for:
Amortization of capital assets 67,315 35,398 32,042
Amortization of intangible assets 198,654 136,119 126,400
----------- ----------- -----------
(1,100,544) (505,322) (153,791)
Net changes in working capital balances
Accounts receivable (200,673) (32,181) (27,367)
Sundry assets 5,452 (944) (12,478)
Accounts payable (41,038) 134,836 146,001
Customer deposits 14,622 (8,925)
----------- ----------- -----------
(1,322,181) (403,611) (56,560)
----------- ----------- -----------
FINANCING ACTIVITIES
Share capital 2,973,846 453,688 203,823
Decrease in advances from shareholder (926)
Decrease in loan payable (25,000) 25,000
----------- ----------- -----------
2,973,846 428,688 227,897
----------- ----------- -----------
INVESTING ACTIVITIES
Acquisition of subsidiaries, net of cash acquired - note 2 (356,770)
Acquisition of capital assets (248,728) (5,651) (96,724)
Acquisition of intangible assets (23,055) (291,561)
----------- ----------- -----------
(628,553) (5,651) (388,285)
----------- ----------- -----------
INCREASE IN CASH 1,023,112 19,426 (216,948)
CASH AND CASH EQUIVALENTS - beginning of the year 75,377 55,951 272,899
----------- ----------- -----------
CASH AND CASH EQUIVALENTS - end of the year - note 7 $ 1,098,489 $ 75,377 $ 55,951
=========== =========== ===========
</TABLE>
<PAGE>
CARBIZ.COM INC.
(FORMERLY DATA GATHERING CAPITAL CORP.)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Expressed in Canadian Dollars)
JANUARY 31, 2000
NOTE 1 - SUMMARY OF ACCOUNTING POLICIES
The accounting policies of the company are in accordance with Canadian generally
accepted accounting principles and their basis of application is consistent with
that of the preceding year. All amounts are in Canadian dollars unless otherwise
indicated. Material differences between Canadian and United States GAAP are
described and reconciled in note 13. Outlined below are those policies
considered particularly significant.
Principles of Consolidation
The consolidated financial statements include the accounts of the
company and its subsidiary companies.
Revenue Recognition
The company's revenue is derived from:
a) Sale and installation of computer software products to the automotive
sales industry, related license fees and post contract support and
maintenance agreements. Installation and license fee revenue is
recognized when all services related to the initial installation have
been completed.
b) Commissions on sale of credit insurance by the automotive dealer in
conjunction with financing of the vehicles.
c) Referral fees from financial institutions and automotive dealers along
with other automotive related services.
Capital Assets and Amortization
Capital assets are stated at cost. Amortization is computed over the
estimated useful life of the assets as follows:
Furniture and equipment - 20% declining balance
Computer equipment for internal use
Hardware - 30% declining balance
Software - 33 1/3% straight - line
Leasehold improvements - Equally over 5 years
<PAGE>
CARBIZ.COM INC.
(FORMERLY DATA GATHERING CAPITAL CORP.)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Expressed in Canadian Dollars)
JANUARY 31, 2000
NOTE 1 - SUMMARY OF ACCOUNTING POLICIES (Continued)
Computer Software Costs
Costs of planning, designing and establishing the technological
feasibility of computer software products are charged to expenses when incurred.
The costs of producing product masters (including coding and testing)
incurred subsequent to establishing a product's feasibility are
capitalized. Capitalization of computer software costs ends and
amortization of such costs begins when the product is available for
general release to customers. Amortization is computed using the
straight-line method over the estimated economic life of the product.
Software development costs for each product are carried on the balance
sheet at the lower of unamortized capitalized costs or its net
realizable value. Software development includes the cost of purchased
software.
Goodwill
Goodwill represents the excess cost of the company's investment in its
subsidiaries over the fair market value of net tangible assets
acquired and is being amortized on a straight line basis over 90
months. Impairment of goodwill, if any, is determined by comparing its
carrying value to the estimated future cash flows to be derived from
the assets of the subsidiaries acquired on a non discounted basis.
Foreign Currency Translation
All foreign currencies are translated into Canadian dollars using the
average rates for the year for items in the statement of operations,
current rates for assets and liabilities of current nature included in
the balance sheet and historical rates for other items.
Use of Estimates
The preparation of financial statements in conformity with generally
accepted accounting principles requires management to make estimates
and assumptions that affect the reported amounts of assets and
liabilities and disclosure of contingent assets and liabilities at the
date of the financial statements and the reported amounts of revenues
and expenses during the reporting year. Actual results could differ
from those estimates. These estimates are reviewed periodically, and,
as adjustments become necessary, they are reported in earnings in the
year in which they become known.
<PAGE>
CARBIZ.COM INC.
(FORMERLY DATA GATHERING CAPITAL CORP.)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Expressed in Canadian Dollars)
JANUARY 31, 2000
NOTE 1 - SUMMARY OF ACCOUNTING POLICIES (Continued)
Cash and Cash Equivalents
Cash and cash equivalents consist of cash balances with banks and
investments in term deposits and money market instruments that are
readily convertible into cash.
NOTE 2 - ACQUISITION
(a) On August 1, 1999 the company acquired all the outstanding
preferred and common shares of MPI Marketing Professionals Inc.
(MPI) and Autosure Financial Corporation Atlantic Ltd.
(Autosure). In payment for such shares, the company issued
434,782 Series B Special Warrants at an ascribed value of $
500,000 and paid $ 650,000 in cash. Each Series B Special Warrant
entitled the holder to acquire one common share at no additional
cost.
The acquisition has been accounted for by the purchase method and
the results of operations of the companies acquired have been
included in these consolidated statements since the acquisition
date.
The excess of the purchase price over the fair value of the net
tangible assets of MPI and Autosure as at August 1, 1999 has been
allocated to goodwill. Below is a summary of the fair value of
assets acquired and consideration given.
Fair value of net assets acquired.
<TABLE>
<CAPTION>
<S> <C>
Cash $ 305,176
Total assets other than cash 59,388
Total liabilities (140,575)
-----------
Net assets acquired 223,989
Goodwill 937,957
-----------
$ 1,161,946
-----------
Consideration
Cash (including professional fees on acquisition
of $ 11,946) $ 661,946
Series B Special Warrants 500,000
-----------
$ 1,161,946
-----------
Cash paid net of cash acquired $ 356,770
===========
</TABLE>
(b) Pursuant to an agreement effective December 18, 1998 between Data
Gathering Capital Corp. (DGC) and Data Gathering Service Inc.
(DGS), a Canadian private company,
<PAGE>
CARBIZ.COM INC.
(FORMERLY DATA GATHERING CAPITAL CORP.)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Expressed in Canadian Dollars)
JANUARY 31, 2000
1. DGC issued 10,635,004 common voting shares in exchange for all the
outstanding voting common shares of DGS on the basis of 4.25 common shares
of DGC for each common share of DGS.
2. DGC issued 1,280,759 warrants in exchange for Series A Warrants of DGS on
the basis of 4.25 warrants of DGC for each warrant of DGS.
3. DGC issued 214,000 warrants in exchange for Series B Warrants of DGS on the
basis of one warrant of DGC for each warrant of DGS.
As a result of the transaction, the former shareholders of DGS owned
approximately 78% of the common voting shares of DGC. Accordingly, the
transaction has been treated for accounting purposes as an acquisition of DGC by
DGS. Application of reverse takeover accounting results in the following:
(i) The consolidated financial statements of the combined entities are issued
under the name of the legal parent (Data Gathering Capital Corp.) but are a
continuation of the financial statements of the legal subsidiary (Data
Gathering Service Inc.).
(ii) As DGS is deemed to be the acquirer for accounting purposes, its assets and
liabilities are included in the consolidated financial statements at their
book values (which do not differ from fair value).
(iii) Comparative figures for the years ended January 31, 1998 and prior reflect
only the assets, liabilities, revenues and expenses of DGS.
(iv) Control of the net assets of DGC is deemed to be acquired by DGS. For the
purpose of this transaction, the deemed consideration is the $326,670
ascribed to 2,925,000 common shares of DGC outstanding at December 18,
1998.
<TABLE>
<CAPTION>
<S> <C>
Deemed Consideration $ 326,670
=========
Assigned value of net assets of DGC
Current assets $ 360,720
Current liabilities (34,050)
---------
$ 326,670
=========
</TABLE>
DGC was established in March 1998 as a Junior Capital Pool Corporation for the
purpose of raising public capital in contemplation of the above noted
transaction.
In the above transaction DGC did not acquire 215,500 non-voting Class B
Preference shares and 215,500 non-voting Class C Preference shares of DGS. As a
result, these shares have been reflected as non-controlling interest in the
consolidated financial statements.
<PAGE>
CARBIZ.COM INC.
(FORMERLY DATA GATHERING CAPITAL CORP.)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Expressed in Canadian Dollars)
JANUARY 31, 2000
NOTE 3 - CAPITAL ASSETS
<TABLE>
<CAPTION>
2000 1999
------------------------------- ---------
Accumulated Net Book Net Book
Cost Amortization Value Value
-------- -------- -------- --------
<S> <C> <C> <C> <C>
Furniture and equipment $108,205 $ 41,370 $ 66,835 $ 14,312
Computer equipment 351,789 145,854 205,935 69,014
Leasehold improvements 20,355 16,747 3,608 1,910
-------- -------- -------- --------
$480,349 $203,971 $276,378 $ 85,236
======== ======== ======== ========
</TABLE>
NOTE 4 - INTANGIBLE ASSETS
<TABLE>
<CAPTION>
2000 1999
------------------------------------ -----------
Accumulated Net Book Net Book
Cost Amortization Value Value
---------- ---------- ---------- ----------
<S> <C> <C> <C> <C>
Computer software
development costs $ 509,275 $ 405,183 $ 104,092 $ 178,281
Goodwill 1,229,518 169,441 1,060,077 223,530
---------- ---------- ---------- ----------
$1,738,793 $ 574,624 $1,164,169 $ 401,811
========== ========== ========== ==========
</TABLE>
<PAGE>
CARBIZ.COM INC.
(FORMERLY DATA GATHERING CAPITAL CORP.)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Expressed in Canadian Dollars)
JANUARY 31, 2000
NOTE 5 - SHARE CAPITAL
The company's authorized share capital consists of the following:
Unlimited number of common shares with voting rights. Unlimited number
of preference shares, issuable in series.
The following is an analysis of the share capital of the company:
<TABLE>
<CAPTION>
Series A Series B
Common Special Special
Shares Warrants Warrants Warrants Amount
------------- ------------- ------------- ------------- -------------
<S> <C> <C> <C> <C> <C>
Share Capital - January 31, 1999 13,560,004 1,494,759 $ 1,051,093
Exercise of warrants 1,494,759 (1,494,759) 814,644
Exercise of stock options 1,014,000 202,800
Acquisition of non-controlling
interest (note (a) below) 501,162 431,000
Net proceeds from issuance of
Series A Special Warrants (note
(b) below) 2,120,000 2,095,650
Issue of Series B Special
Warrants on acquisition (note (c)
below) 434,782 500,000
Shares issued as corporate
finance fee 100,000
Issue of Agent's Special Warrants
in lieu of fee for services
rendered 212,000
Exercise of warrants 2,766,782 (212,000) (2,120,000) (434,782)
Warrants granted (note (b) below) 1,272,000
Legal and other issue related
expenses (139,248)
------------- ------------- ------------- ------------- -------------
Share Capital - January 31, 2000 19,436,707 1,272,000 - - $ 4,955,939
============ ============= ============= ============= =============
</TABLE>
<PAGE>
CARBIZ.COM INC.
(FORMERLY DATA GATHERING CAPITAL CORP.)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Expressed in Canadian Dollars)
JANUARY 31, 2000
NOTE 5 - SHARE CAPITAL (Continued)
a) On May 11, 1999 the company acquired all of the remaining shares
of its legal subsidiary, Data Gathering Service Inc., consisting
of 215,500 Class B and 215,500 Class C preference shares through
the issuance of 501,162 common shares.
b) Pursuant to an agency agreement dated April 28, 1999, the company
issued and sold 2,120,000 Special Warrants priced at $ 1.00 per
Series A Special Warrant for aggregate net proceeds of $
2,095,650. Each Series A Special Warrant entitled the holder to
acquire one common share and one-half (1/2) of one warrant at no
additional cost. Each whole Warrant entitles the holder to
purchase one additional common share at a price of $ 1.25 if
exercised during the first year from date of issue of the Series
A Special Warrant. As of January 31, 2000, 1,060,000 warrants
were outstanding of which 705,000 and 355,000 expire on May 19,
2000 and June 25, 2000 respectively.
As consideration for services rendered in connection with the above
transaction, the company paid the agent's fee through the issuance to the
agent of 212,000 Agent's Special Warrants. In addition, the company granted
to the agent 100,000 common shares as a corporate finance fee. Each Agent's
Special Warrant entitled the holder to acquire one Agent's Share and one
whole Agent's Warrant at no cost. Each whole Agent's Warrant entitles the
holder to purchase one Share at a price of $1.25 if exercised during the
first year from date of issue of the Agent's Special Warrant. As of January
31, 2000, 212,000 warrants were outstanding of which 141,000 expire on May
19, 2000 and 71,000 expire on June 25, 2000.
c) On August 1, 1999 the company acquired all the outstanding
preferred and common shares of MPI Marketing Professionals Inc.
and Autosure Financial Corporation Atlantic Ltd. In payment for
such shares, the company issued 434,782 Series B Special Warrants
at an ascribed value of $ 500,000 and paid $ 650,000 in cash.
Each Series B Special Warrant entitled the holder to acquire one
common share at no additional cost.
WARRANTS OUTSTANDING
<TABLE>
<CAPTION>
Number of Warrants Exercise Price Expiring
--------------------------- ------------------- ---------------
<S> <C> <C>
846,000 $ 1.25 May 19,2000
426,000 $ 1.25 June 25, 2000
</TABLE>
<PAGE>
CARBIZ.COM INC.
(FORMERLY DATA GATHERING CAPITAL CORP.)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Expressed in Canadian Dollars)
JANUARY 31, 2000
NOTE 5 - SHARE CAPITAL (Continued)
STOCK OPTIONS
Under the Stock Option Plan (1998), options may be granted to directors,
officers, employees, and consultants of the corporation at an exercise price
determined by the Board of Directors provided that such exercise price should
not be less than permitted under the rules of any stock exchange where the
shares are listed. The period during which an option may be exercised (the
"Option Period") is determined by the Board at the time the option is granted,
subject to any vesting limitations which may be imposed by the Board in its sole
unfettered discretion at the time such option is granted. The options are
exercisable during a period not to exceed 5 years from the date the option is
granted unless otherwise specifically provided by the Board, and in any event,
no option shall be exercisable for a period exceeding 10 years from the date the
option is granted. Options are exercisable as determined by the Board at the
date of the grant. Shares covered by options granted with respect to any year
may not exceed 10% of the issued and outstanding shares of the corporation,
calculated on a non-diluted basis.
<TABLE>
<CAPTION>
Number of Weighted Average
OPTIONS OUTSTANDING Options Exercise Price
----------------- -----------------
<S> <C> <C>
Balance, beginning of the year 1,423,500 $ 0.20
Options granted during the year 571,671 $ 0.96
Options cancelled (3,000) $ 0.96
Options exercised during the year (1,014,000) $ 0.20
---------------
Balance, end of the year 978,171 $ 0.64
===============
</TABLE>
<TABLE>
<CAPTION>
Number of Options Market Value at
Expiry Date of Options Exercise Price Grant Date
------------------------------------------ -------------------- -------------------- --------------------
<S> <C> <C> <C>
December 18, 2003 409,500 $ 0.20 $ 0.37
April 13, 2004 150,000 $ 0.85 $ 0.85
August 1, 2004 418,671 $ 1.00 $ 1.00
----------------
978,171
================
</TABLE>
At January 31, 2000 common shares authorized for issuance under this plan are
equal to the options outstanding.
<PAGE>
CARBIZ.COM INC.
(FORMERLY DATA GATHERING CAPITAL CORP.)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Expressed in Canadian Dollars)
JANUARY 31, 2000
NOTE 5 - SHARE CAPITAL (Continued)
LOSS PER SHARE
The loss per share is calculated using the weighted average number of
common shares outstanding during the year, which was 16,324,237 shares
(1999 - 10,635,005).
NOTE 6 - INCOME TAXES
The following non-capital losses for income tax purposes are available to
reduce taxable income in future periods.
a) Parent Company
Accumulated losses of $ 174,249 of which $ 20,747 expires in 2006
and $ 153,502 expires in 2007.
b) Subsidiary Companies
Accumulated losses of $ 1,668,246 of which $ 181,153 expires in
2005, $ 503,264 expires in 2006 and $ 983,829 expires in 2007.
In addition, in future years the company will be able to claim
for income tax purposes capital cost allowance and cumulative
eligible capital deduction exceeding amortization charges by $
135,405.
The potential benefits relating to the availability of losses and additional
deductions have not been reflected in the financial statements.
<PAGE>
CARBIZ.COM INC.
(FORMERLY DATA GATHERING CAPITAL CORP.)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Expressed in Canadian Dollars)
JANUARY 31, 2000
NOTE 7 - CASH FLOW INFORMATION
a) Cash and cash equivalents included in the cash flow statement
comprise the following balance sheet items.
<TABLE>
<CAPTION>
January 31 January 31 January 31
2000 1999 1998
---------- ---------- ----------
<S> <C> <C> <C>
Cash $ 305,101 $ 35,377 $ 40,951
Short-term investments 793,388 40,000 15,000
---------- ---------- ----------
$1,098,489 $ 75,377 $ 55,951
========== ========== ==========
</TABLE>
b) Supplemental information
<TABLE>
<CAPTION>
<S> <C>
Non-cash financing activities
Conversion of minority interest into common shares
- note 5(a) $ 431,000
Acquisition of subsidiaries by issuance of common
shares
- note 5(c) 500,000
---------------
$ 931,000
===============
</TABLE>
NOTE 8 - RELATED PARTY TRANSACTIONS
Management and consulting fees expense includes $ 109,500 paid to a
company owned by the president as follows:
<TABLE>
<CAPTION>
<S> <C>
Pursuant to a management contract $104,500
For other services 5,000
--------
$109,500
--------
</TABLE>
NOTE 9 - COMMITMENTS AND CONTINGENT LIABILITIES
(a) Management contract with a company owned by the president for a term
ending January 31, 2005. Under the contract the corporation's
commitment is as follows:
<TABLE>
<CAPTION>
<S> <C>
2001 $ 165,000
2002 173,250
2003 181,912
2004 191,008
2005 200,558
</TABLE>
<PAGE>
CARBIZ.COM INC.
(FORMERLY DATA GATHERING CAPITAL CORP.)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Expressed in Canadian Dollars)
JANUARY 31, 2000
NOTE 9 - COMMITMENTS AND CONTINGENT LIABILITIES (Continued)
(b) Management contract entered into by a subsidiary company, with a
former shareholder of the subsidiary company, for a period of 12
years, commencing May 1, 1998. The base annual fee for the contract is
$ 74,000; with additional amounts to be paid if sales exceed the
target level.
(c) Consulting contracts with the corporation's senior management for a
period of five years commencing November 1, 1999 at an annual
aggregate fee of $ 127,500 in the first year increasing by
approximately 5% in each of the next four years.
(d) Future minimum annual payments under leases for vehicles, equipment
and premises (exclusive of realty taxes and other occupancy charges)
are as follows:
<TABLE>
<CAPTION>
<S> <C>
2001 $ 43,137
2002 35,590
2003 32,152
2004 140
</TABLE>
NOTE 10 - FINANCIAL INSTRUMENTS
The carrying amount of financial instruments including cash, short-term
investments, accounts receivable and accounts payable approximates fair
value because of the limited term of these instruments.
<PAGE>
CARBIZ.COM INC.
(FORMERLY DATA GATHERING CAPITAL CORP.)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Expressed in Canadian Dollars)
JANUARY 31, 2000
NOTE 11 - UNCERTAINTY DUE TO THE YEAR 2000 ISSUE
The Year 2000 Issue arises because many computerized systems use two
digits rather than four to identify a year. Date-sensitive systems may
recognize the year 2000 as 1900 or some other date, resulting in
errors when information using year 2000 dates is processed. In
addition, similar problems may arise in some systems which use certain
dates in 1999 to represent something other than a date. Although the
change in date has occurred, it is not possible to conclude that all
aspects of the Year 2000 Issue that may affect the entity, including
those related to customers, suppliers, or other third parties, have
been fully resolved.
NOTE 12 - SUBSEQUENT EVENTS
a) The corporation finalized the terms of a private placement of
6.75 million Special Warrants at $ 2.00 per Special Warrant for
gross proceeds of $ 13.5 million. Each Special Warrant will
entitle the holder to acquire one common share and one-half of
one share purchase warrant. A full purchase warrant will allow
the holder to purchase one common share at a price of $ 2.25 for
a period of 18 months from the date of closing. The transaction
is expected to close before March 31, 2000.
b) Pursuant to the Stock Option Plan of the corporation, the
corporation has reserved for issuance 1,675,000 options to
purchase common shares of the corporation at an exercise price of
$ 2.65 per common share to various directors, officers and
employees of the corporation.
c) On March 29, 2000 the Company acquired all of the outstanding
common shares of Advanced Dealer Services, Inc., a Florida, USA
based company. As consideration for the purchase, the Company
issued 283,268 common shares valued at $ 1,267,083, and repaid
debt of U.S. $ 763,866 (Cdn $ 1,115,585). Closing costs of
$ 39,380 were also incurred in connection with the acquisition.
d) On April 4, 2000 the Company acquired all of the outstanding
common shares of Abbey Canada Inc. As consideration for the
purchase, the Company issued 40,000 common shares valued at
$ 120,000 and paid $ 60,000 in cash. Closing costs of $ 14,328
were also incurred in connection with the acquisition.
e) On April 24, 2000 the Company executed a letter of intent to
acquire all of the issued and outstanding shares of FBS, a
Virginia, USA based company, for a purchase price of U.S.
$ 1,250,000, which purchase price is to be satisfied by the
payment of U.S. $ 625,000 cash, and the issuance of $ 625,000
in common shares of the Corporation.
<PAGE>
CARBIZ.COM INC.
(FORMERLY DATA GATHERING CAPITAL CORP.)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Expressed in Canadian Dollars)
JANUARY 31, 2000
NOTE 12 - SUBSEQUENT EVENTS (continued)
f) On May 15, 2000 the Company executed a letter of intent to
acquire all of the issued and outstanding shares of CAT, a
Missouri, USA based company, for a proposed purchase price of
U.S. $ 1,500,000, which purchase price is to be satisfied by the
payment of U.S. $ 627,000 cash and the issuance of U.S. $ 873,000
in common shares of the Corporation.
g) On May 19, 2000 the Company acquired all of the issued and
outstanding shares of TaxMax, a Florida, USA based company, for a
purchase price of U.S. $ 439,000 which purchase price was
satisfied by the payment of $ 227,000 cash, the assumption of a
U.S. $ 12,000 small business loan and the issuance of 222,296
common shares of the Company at an ascribed price of $ 1.35
(Cdn.) per share.
h) On May 25 2000, the Company executed a letter of intent to
acquire all of the issued and outstanding shares of United
Autocomp Computer Inc. and a sister company NetChoice Corporation
both of Irvine, California, USA based companies. The purchase
price is U.S. $ 1,100,000 in cash and shares of the Corporation.
i) On June 8, 2000 the Company executed a letter of intent to
acquire all of the issued and outstanding shares of G&L Computer
Systems, Inc. of Fort Worth, Texas, a USA based company. The
proposed purchase price is U.S. $ 650,000 in cash and shares of
the Corporation.
j) On June 19, 2000 the Company executed a letter of intent to
acquire all of the issued and outstanding shares of
IndependentDealer.com LLC of Columbus, Ohio, a USA based company.
The proposed purchase price is U.S. $ 750,000 payable in cash and
700,000 shares of the Corporation.
NOTE 13 - UNITED STATES ACCOUNTING PRINCIPLES
These financial statements have been prepared in accordance with Canadian
generally accepted accounting principles ("Canadian GAAP"), which conform
in all material respects applicable to the company with those in the United
States ("U.S. GAAP") during the years presented except with respect to the
following:
a) Under Canadian GAAP, there is no requirement to record
compensation on the issue of stock options to employees,
consultants or directors. Under U.S. GAAP, compensation would be
accrued at the date of granting of the options calculated as the
difference between the market price and exercise price at the
date of the grant. This amount accrues over the periods of
required service. Accordingly, for U.S. GAAP purposes, for the
year ended January 31, 2000 and January 31, 1999, compensation
related to stock options would be increased and the net loss
would be increased by $ NIL and $ 182,789 respectively.
Additional paid in capital, a component of shareholders equity,
would be increased by $NIL at January 31, 2000 and $ 182,789 at
January 31, 1999.
<PAGE>
CARBIZ.COM INC.
(FORMERLY DATA GATHERING CAPITAL CORP.)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Expressed in Canadian Dollars)
JANUARY 31, 2000
NOTE 13 - UNITED STATES ACCOUNTING PRINCIPLES (continued)
a) continued
U.S. GAAP also requires companies that follow the above method to
disclose the cost of stock compensation awards at their fair
value, at the date the award is granted. The fair value of the
options granted by the corporation during the year was estimated
based on Black- Scholes option-pricing model using the following
assumptions: a 3 to 5 year expected term; a 41% expected
volatility; dividend yield of 0%; and, a risk-free interest rate
of 4.5% to 5.5%. The total value of the 571,671 stock options
that were granted by the corporation during the year was $
644,321 (during the year ended January 31, 1999 1,498,500 stock
options were granted with a total value of $ 665,827). Of this
total amount the pro forma cost of the stock option compensation
for the year ended January 31, 2000 would be $ 128,864 (January
31, 1999 $ 138,733), the resulting pro forma net loss and loss
per share for the year ended January 31, 2000 would be $
1,559,921 and $ 0.10 respectively (January 31, 1999 net loss $
718,328 and loss per share $ 0.07).
The weighted average remaining contractual life and weighted
average exercise price are 4.2 years and $ 0.64 respectively. The
weighted average fair value of options granted during the years
ended January 31, 2000 and January 31, 1999 was $ 1.49 and $
0.45, respectively.
b) In accordance with Canadian GAAP, it is the corporation 's policy
to capitalize and amortize acquired research and development.
Under U.S. GAAP, acquired in-process research and development is
expensed, net of the benefit of tax loss carryforwards. Research
and development acquired in the current and prior years' in the
amount of $ 509,275 is currently being amortized for Canadian
GAAP purposes. Therefore, for U.S. GAAP purposes, for the years
ended January 31, 2000 and 1999, amortization of computer
software development costs expensed would decrease by, and net
loss would decrease by, $ 97,244 per year.
During the year additional research and development was acquired
for $ 23,055. Accordingly, for U.S. GAAP purposes computer
software development costs on the balance sheet would decrease by
$ 23,055 and the net loss for the year ended January 31, 2000
would increase by $ 23,055.
c) The following additional disclosure is required in the financial
statements under U.S. GAAP:
Allowance for doubtful accounts on accounts receivable as
presented in the Canadian GAAP balance sheets as at January 31,
2000 and 1999 were $ 47,764 and $ 13,141 respectively.
<PAGE>
CARBIZ.COM INC.
(FORMERLY DATA GATHERING CAPITAL CORP.)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Expressed in Canadian Dollars)
JANUARY 31, 2000
NOTE 13 - UNITED STATES ACCOUNTING PRINCIPLES (Continued)
d) The following table reconciles net loss for the years reported in
the accompanying statements of operations with that which would
have been reported had the financial statements been presented in
accordance with U.S. GAAP.
<TABLE>
<CAPTION>
For The Year Ended
-----------------------------
January 31 January 31
2000 1999
------------- -------------
<S> <C> <C>
Net loss for the years, Canadian GAAP $ (1,366,513) $ (676,839)
Acquired computer software development costs expensed (23,055)
Decrease in amortization of computer software
development costs 97,244 97,244
Compensation related to employee stock options - note 13(a) (182,789)
------------ ------------
Net loss in conformity with U.S. GAAP $ (1,292,324) $ (762,384)
============ ============
Basic earnings (loss) per common share (U.S. GAAP) $ (0.08) $ (0.07)
============ ============
Weighted average number of common shares 16,324,237 10,995,621
============ ============
</TABLE>
Basic earnings (loss) per common share is determined using the weighted
average number of shares outstanding during the years. Diluted earnings
(loss) per common share are not reflected because the effects of the common
share options outstanding at the end of the years are anti dilutive.
e) The following table indicates the items in the balance sheets
that would be affected had the financial statements been prepared
in accordance with U.S. GAAP. The amounts would be as follows:
<TABLE>
<CAPTION>
January 31 January 31
2000 1999
------------ ------------
<S> <C> <C>
Intangible assets $ 1,060,077 $ 223,530
Deficit (2,704,706) (1,412,382)
Share capital 5,138,728 1,233,882
</TABLE>
<PAGE>
CARBIZ.COM INC.
(FORMERLY DATA GATHERING CAPITAL CORP.)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Expressed in Canadian Dollars)
JANUARY 31, 2000
NOTE 13 - UNITED STATES ACCOUNTING PRINCIPLES (Continued)
f) The following table reconciles the cash flow information that
would be affected had the financial statements been prepared in
accordance with U.S. GAAP, for the year ended January 31, 2000
<TABLE>
<CAPTION>
<S> <C>
Cash flows provided by (used in):
Operating activities in accordance with
Canadian GAAP $ (1,322,181)
Acquired computer software development
costs expensed (23,055)
----------------
Operating activities in accordance with
U.S. GAAP $ (1,345,236)
===============
Investing activities in accordance with
Canadian GAAP $ (628,553)
Acquired computers software development
cost expensed 23,055
----------------
Investing activities in accordance with
U.S. GAAP $ (605,498)
===============
</TABLE>
