Grey Horse Corporation
TSX : GHC

Grey Horse Corporation

February 28, 2007 17:00 ET

Grey Horse Capital Reports Strong Period-End Results

Revenues up 67%; Earnings up 94% for the six-month period-ended December 31, 2006; 8th consecutive profitable quarter

TORONTO, ONTARIO--(CCNMatthews - Feb. 28, 2007) - Grey Horse Capital Corporation (TSX:GHC) ("Grey Horse" or "the Corporation"), a Canadian financial services company serving the corporate and institutional market, reported today its financial results for the six-month fiscal period ended December 31, 2006.

Change in Fiscal Year-end

As previously reported, the grant of a federal trust charter to Equity Transfer & Trust Company ("ETT"), the Corporation's wholly-owned subsidiary, on June 1, 2006 necessitated a change in ETT's fiscal year-end to December 31 in order to comply with the legislation and regulations applicable to federally regulated financial institutions. In order to simplify accounting procedures, Grey Horse also changed its fiscal year to match that of ETT, which shortened the Corporation's fiscal year, commencing July 1, 2006, to a six-month period ending December 31, 2006. Beginning January 2007, the Corporation's fiscal year will commence in January and end in December.

Financial Highlights

For the fiscal period ending December 31, 2006, the following information was determined in accordance with Canadian Generally Accepted Accounting Principles:



-------------------------------------------------
3 months ended Dec. 31 6 months ended Dec. 31
-------------------------------------------------
2006 2005 2006 2005
-------------------------------------------------------------------------
Unaudited Unaudited Audited Unaudited
-------------------------------------------------------------------------
Consolidated revenue $ 2,825,194 $ 1,635,338 $ 5,222,067 $ 3,132,003
-------------------------------------------------------------------------
Net income $ 376,681 $ 192,957 $ 719,358(i) $ 371,203
-------------------------------------------------------------------------
Earnings per share
(EPS), basic $ 0.06 $ 0.06 $ 0.12 $ 0.12
-------------------------------------------------------------------------
EPS, diluted $ 0.06 $ 0.05 $ 0.11 $ 0.09
-------------------------------------------------------------------------
Annualized Return
on equity 14% 30% 13% 30%
-------------------------------------------------------------------------
Cash balance $ 5,205,258 $ 921,216 $ 5,205,258 $ 921,216
-------------------------------------------------------------------------
(i) The six month results include items not expected to reoccur,
totalling approximately $230,000 ($148,000 after tax), and relate to
the Corporation's move into new office space and to a severance payment
to a former officer of ETT.


Consolidated revenue and Net Income for the six-month fiscal period ended December 31, 2006, derived from Grey Horse's wholly-owned subsidiary, ETT,increased 67% and 94% respectively over the same six-month period ended December 31, 2005. For the three months ended December 31, 2006, Grey Horse's consolidated revenue and Net Income increased 73% and 95% respectively over the same three-month period the year prior. As in prior periods, the increase in revenue is attributable to ETT's growing client base, to an increase in the average revenue per client and to new service lines (e.g. corporate trust services and the news wire service offered through a channel partnership with CCN Matthews). Also, the figures for July 2006 to December 2006 include items not expected to reoccur, totalling approximately $230,000 ($148,000 after tax), and relate to the Corporation's move into new office space and to a severance payment to a former officer of ETT.

Earnings per share (EPS), basic, at December 31, 2006 remained substantially unchanged compared with the three-month and six-month period the year prior as a result of the Corporation's recapitalisation from April 2006 to June 2006, which increased the number of common shares outstanding and eliminated the Corporation's funded debt. The recapitalisation, combined with the improvement in operating results, led to a substantial increase in the Corporation's consolidated cash position from approximately $920,000 at December 2005 to $5.2 million at December 2006.

Grey Horse President and CEO Kevin Reed said, "We are pleased to see that the expansion of our customer base contributed to strong results for the shortened fiscal period ended December 31, 2006. In 2007, we believe that ETT's new federal trust charter, combined with the recent acquisition of Global Corporate Compliance Inc. and the launch of the foreign exchange product will facilitate the rollout of quality, cost-effective services to a broader range of clients across Canada."

In January 2007, the Corporation announced two important initiatives: the acquisition of 100% of the issued and outstanding shares of Calgary-based Global Corporate Compliance Inc. ("GCC") and the launch of Equity Foreign Exchange Services Inc. ("EFX"). The acquisition of GCC, which provides corporate secretary and regulatory compliance services to approximately 170 publicly traded issuers across Canada, facilitates the Corporation's entry into the Alberta market and complements ETT's service offering. EFX, which provides competitively priced foreign exchange services, will seek to address the foreign exchange needs of ETT clients. Its Drill FX™ product is tailored to ETT's resource-based clients. In the cases of GCC and EFX, the Corporation has retained experienced managers to lead the respective operations.

Paul G. Smith, Grey Horse's Executive Vice President and Chief Financial Officer commented, "Grey Horse's strong operating results and growing cash position allows us to continue the investment in human resources and in management support systems to meet increasing customer demand and allows the Corporation to actively consider acquisition opportunities as they arise."

Appointment of new ETT President

As announced on February 26, 2007, the Corporation appointed Terry Martinuk as president of ETT. Mr. Martinuk brings over twenty-five years of stock transfer and corporate trust experience to ETT, is widely respected in the industry and is a welcome addition to the management team.

About Grey Horse

Through its wholly owned subsidiaries -- Equity Transfer & Trust Company, Global Corporate Compliance Inc. and Equity Foreign Exchange Services Inc. -- Grey Horse provides transfer agency, corporate trust, corporate secretary and foreign exchange services to corporations in North American capital markets. Learn more at www.greyhorsecapital.com

Certain information included in this press release is forward-looking and may involve risks and uncertainties. The results or events predicted in these statements may differ materially from actual results or events. Factors that might cause a difference include, but are not limited to, competitive developments, risks associated with Grey Horse's growth, the state of the financial markets, regulatory risks and other factors. Unless otherwise required by applicable securities laws, Grey Horse disclaims any intention or obligation to update or revise any forward-looking statements, whether as a result of new information, future events or otherwise. More detailed information about potential factors that could affect Grey Horse's financial and business results is included in public documents Grey Horse files from time to time with Canadian securities regulatory authorities.



GREY HORSE CAPITAL CORPORATION

Management's Discussion and Analysis (MD&A) - Fiscal Period
Ended December 31, 2006


This MD&A for the six-month fiscal period ended December 31, 2006 provides an overview of Grey Horse Capital Corporation ("Grey Horse" or "GHC" or "the Corporation"). The objective of this MD&A is to present readers with a view of GHC through the eyes of management by interpreting the material trends and uncertainties that affected the operating results, liquidity and financial position of the Corporation during the period or that may affect future results. The MD&A has been prepared with reference to National Instrument 51-102 "Continuous Disclosure Obligations" of the Canadian Securities Administrators, and should be read in conjunction with the Corporation's audited consolidated financial statements and notes for the fiscal period ended December 31, 2006. Except as otherwise indicated, all financial information related herein is determined in accordance with Canadian Generally Accepted Accounting Principles (GAAP), and all dollar amounts referred to herein are in Canadian dollars.

As previously reported, the grant of a federal trust charter to Equity Transfer & Trust Company ("ETT"), the Corporation's wholly-owned subsidiary, on June 1, 2006 necessitated a change in ETT's fiscal year-end to December 31 in order to comply with the legislation and regulations applicable to federally regulated financial institutions. In order to simplify accounting procedures, Grey Horse also changed its fiscal year to match that of ETT, which shortened the Corporation's fiscal year, commencing July 1, 2006, to a six-month period ending December 31, 2006. Beginning January 2007, the Corporation's fiscal year will commence in January and end in December.

Forward-Looking Statements

This MD&A contains forward-looking statements that are based on the Corporation's expectations, estimates and projections regarding its business and the economic environment in which it operates. These statements are not guarantees of future performance and involve risks and uncertainties that are difficult to control or predict. Therefore, actual outcomes and results may differ materially from those expressed in these forward-looking statements and readers should not place undue reliance on such statements. Statements speak only as of the date on which they are made.

Date of MD&A

This MD&A is dated February 28, 2007.

Overall Performance

Description of the Business

Grey Horse is a Canadian financial services company serving the corporate and institutional market. Formerly AFL Capital Ventures Inc., GHC was incorporated in September 2001 and carried on business as a Capital Pool Company ("CPC") until 2004 when it completed its qualifying transaction as mandated by the regulations governing CPCs. The Corporation began trading on the TSX Venture Exchange ("TSXV") in April 2004 before graduating to the Toronto Stock Exchange ("TSX") in March 2006. The Corporation's stock symbol is GHC.

Grey Horse operates three wholly-owned operating subsidiaries. Its corporate structure is as follows:

To view the figure of the Corporate Structure, please click on the following link: http://www.ccnmatthews.com/docs/ghccorp0228.pdf

Equity Transfer & Trust Company provides transfer agent and corporate trust services to public issuers in North American capital markets (TSX, TSXV, NASDAQ, AMEX). At year-end, the entity served approximately five hundred (500) public issuer clients. Founded in 1990, ETT offers transfer agency services to reporting issuers by maintaining lists of registered shareholders and by supporting public market activities such as transfers of securities, mailings to shareholders, dividend distributions and issuances of shares from treasury. ETT also acts as subscription agent, exchange agent, escrow agent and scrutineer at shareholder meetings. On June 1, 2006, ETT was continued as a federal trust company and added corporate trust services to its suite of products. ETT is registered to operate as a transfer agent and trust company in the provinces of Ontario, Alberta and British Columbia. The registration for the latter two provinces was obtained at the end of calendar 2006.

In January 2007, the Corporation announced two important initiatives: the acquisition of 100% of the issued and outstanding shares of Calgary-based Global Corporate Compliance Inc. ("GCC") and the launch of Equity Foreign Exchange Services Inc. ("EFX"). The acquisition of GCC, which provides corporate secretary and regulatory compliance services to approximately 170 publicly traded issuers across Canada, facilitates the Corporation's entry into the Alberta market and complements ETT's service offering. EFX, which provides competitively priced foreign exchange services, will seek to address the foreign exchange needs of ETT clients. Its Drill FX™ product is tailored to ETT's resource-based clients. In the cases of GCC and EFX, the Corporation has retained experienced managers to lead the respective operations.

Capital Market Fundamentals

The issuer market was healthy in 2006 as strong commodity prices propelled a number of new listings. Information released by the Toronto Stock Exchange indicates there were 349 new listings in Canada for calendar 2006. The TSX garnered 170 new listings (including graduations from the TSXV) while the TSXV registered 179 new listings, and ETT estimates to have won 16% and 18% of these respectively.

There are important regulatory and commercial considerations for entities wanting to enter the transfer agency industry. On the regulatory front, pursuant to a bulletin issued by the TSXV in December 2005, an entity applying to be an acceptable transfer agent under TSXV policies must be a trust company in good standing under applicable Canadian provincial or federal legislation. Further, TSX regulations require all TSX listed companies to retain transfer agents that effect transfers and maintain registration facilities in the City of Toronto. On the commercial front, a new entrant must build a substantial client base in short order generating sufficient revenue to attract and retain employees from a limited talent pool, and to afford financial district office space, specialized computer systems, and insurance coverage.

The Canadian transfer agency industry is divided into two tiers:

- two large national transfer agents serving roughly 80% of Canadian public issuers and focused on serving large-cap TSX companies, and;

- several regional transfer agents (in B.C., Alberta and Ontario) serving small- and mid-cap issuers.

With a client base principally located in Ontario, ETT specialises in serving small-cap and mid-cap issuers across Canada. In serving these market segments, ETT believes that quality of service and an attention to pricing allows it to differentiate itself from the large national transfer agents. With the grant of a federal trust charter, ETT added corporate trust services to its offering and is further able to address client needs, especially in the mid-cap issuer market.

Grey Horse management estimates the North American transfer agency market to be $1 billion annually with the Canadian market representing $150 million. The corporate and institutional trust sector is large and growing; in annual revenues, it is estimated at over $500 million in Canada and $10 billion in the United States.

Benefits of obtaining a Federal Trust Charter

Effective June 1, 2006, ETT was granted letters patent by the Minister of Finance and received an order to commence and carry-on business from the Office of the Superintendent of Financial Institutions (OSFI) to operate as a federal trust company under the Trust and Loan Companies Act (Canada). The granting of a federal trust charter represents a salient milestone in ETT's development allowing it to extend its transfer agency services across Canada and to further diversify its sources of revenue by adding corporate trust services to its suite of products. Such corporate trust services include ETT's acting as indenture trustee and registrar for debt instruments such as bonds, debentures and notes, acting as trustee for income trusts, and providing issuer trustee or indenture trustee services for asset-backed securitizations including mortgages, credit card receivables, lease receivables and other bundled assets or instruments.

In order to meet federal regulatory requirements, Grey Horse recapitalised its balance sheet during the April 2006 to June 2006 period by completing a private placement for funds sufficient to retire or convert all funded debt and to provide additional working capital for future growth. The retirement of its funded debt eliminated some $800,000 in annual interest expense and amortisation, and significantly reduced the Corporation's overall financial risk.

Corporate Objective and Strategy

Grey Horse's objective is to enhance its profitability and market position as a Canadian financial services company serving the corporate and institutional market. Through the end of December 2008, management targets annual increases in revenues and net income of approximately 25% and 30% respectively.

One element of the Corporation's corporate strategy is to maintain the focus on organic growth via the continued acquisition of new clients and roll-out of additional products and services. With ETT as the foundation providing transfer agent and corporate trust services, the Corporation recently extended its geographic reach with the acquisition of GCC and widened its suite of products with the launch of EFX. Over the course of calendar 2007, Grey Horse will evaluate the merits of launching a custodial services offering for the institutional market.

The second element of the Corporation's corporate strategy is to seek out acquisitions that complement Grey Horse's business model. This may involve acquiring regional transfer agents in Canada and the United States, but could also include acquisitions that contribute to the Corporation's overall objectives.

Change of Auditors

On October 3, 2006, BDO Dunwoody LLP was appointed auditors of the Corporation replacing Manning Elliott, Chartered Accountants, which had been the auditors since June 2003. Management determined that it would be more efficient and beneficial to have the Corporation's auditors located in the same city as its head office. Accordingly and at the Corporation's request, Manning Elliot, Chartered Accountants resigned as the Corporation's auditors in favour of BDO Dunwoody LLP.

Subsequent Events

As described earlier in this MD&A, the Corporation acquired GCC and launched EFX in January 2007.

Selected Annual Information

The following table sets out Grey Horse's financial performance for the last three fiscal periods and for the comparable twelve-month periods ended December 31, 2006 and 2005.



----------------------------------------------------------------
Six month Twelve Twelve Twelve-month Twelve-
fiscal year months months fiscal month (1)
ended Dec. ended Dec. ended Dec. year fiscal
31, 2006 31, 2006 31, 2005 ended June year ended
30, 2006 June 30, 2005
---------------------------------------------------------------------------
Audited Unaudited Unaudited Audited Audited
---------------------------------------------------------------------------
Revenue $ 5,222,067 $ 11,257,300 $ 6,861,859 $ 9,167,236 $ 4,236,608
---------------------------------------------------------------------------
Selling,
general and
administr-
ative exp
(SGA) 3,940,712 7,932,785 4,562,942 5,919,211 3,121,343
---------------------------------------------------------------------------
EBITDA (2) 1,281,355 3,324,515 2,298,917 3,248,025 1,115,265
---------------------------------------------------------------------------
Other
expenses 234,570 1,264,184 1,185,834 1,605,114 718,177
---------------------------------------------------------------------------
Income
before
income
taxes 1,046,785 2,060,331 1,113,083 1,642,911 397,088
---------------------------------------------------------------------------
Taxes
(Current
and
Future) 327,427 721,806 169,134 652,541 (89,028)
---------------------------------------------------------------------------
Net
income (3) 719,358 1,338,525 943,949 990,370 486,116
---------------------------------------------------------------------------
Net income
per share,
basic 0.12 0.27 0.30 0.28 0.18
---------------------------------------------------------------------------
Net income
per share,
diluted 0.11 0.23 0.23 0.19 0.13
---------------------------------------------------------------------------
Cash and
cash
equivalents,
end of
period 5,205,258 5,205,258 921,216 3,662,440 53,132
---------------------------------------------------------------------------
Assets 13,713,998 13,713,998 8,847,141 12,562,649 8,232,946
---------------------------------------------------------------------------
Long-term
liabilities
(4) 435,728 435,728 4,960,706 391,044 4,990,027
---------------------------------------------------------------------------
Dividends 0 0 0 0 0
---------------------------------------------------------------------------
(1) Results for June 30, 2005 (fiscal 2005) include only seven months of
ETT's operating results; previously, GHC operated as a Capital Pool
Company and did not generate any significant revenue
(2) EBITDA (Earnings Before Income Taxes, Depreciation and Amortisation)
is presented as additional information because management believes that
it is a useful measure for certain investors to evaluate operating cash
flow and historical ability to meet debt service and capital
expenditure requirements. EBITDA is not a measure of financial
performance under Canadian GAAP and should not be considered as an
alternative to cash flows from operating activities, a measure of
liquidity or an alternative to net income as indicators of the
Corporation's operating performance or any other measures of
performance derived in accordance with Canadian GAAP.
(3) December 2006 include items not expected to reoccur, totalling
approximately $230,000 ($148,000 after tax), and relate to the
Corporation's move into new office space and to a severance payment
to a former officer of ETT.
(4) Long-term liabilities shown at December 31, 2006 relate to Future
Income Taxes only


Grey Horse revenue for the six-month fiscal period ended December 31, 2006 is not comparable with the Corporation's previous twelve-month fiscal year ended June 30, 2006 other than to underscore the significant growth ETT has continued to enjoy over that 18-month period. For the 6-month period ending December 2006, revenue grew 67% over the same 6-month period the year prior. For the 12-months ended June 2006, revenue increased 47% over the previous 12-month period ended June 2005. (The percentage increase in revenue during this latter period takes into account several months of ETT's results prior to GHC's acquisition of ETT in December 2004.) As additional information, the 12-months ended December 2006 saw revenue increase by 64% over the 12-month period ended December 2005. The increase in revenue is attributable to ETT's growing client base, to an increase in the average revenue per client and to new service lines (e.g. corporate trust services and the news wire service offered through a channel partnership with CCNMatthews).

Grey Horse's financial condition and exposure to financial risk improved significantly over the twelve months ended December 31, 2006 with the retirement of all funded debt in the quarter ended June 30, 2006, such that the ratio of long-term debt to equity declined to zero. Also and since the acquisition of ETT, the Corporation has enacted a more stringent policy on the management and collection of accounts receivable, which has significantly improved ETT's accounts receivable turnover. The raising of additional equity and the elimination of debt obligations and debt service costs during the April 2006 to June 2006 period, combined with the improvement in operating results, led to a substantial increase in the Corporation's consolidated cash position from approximately $920,000 at December 2005 to $5.2 million at December 2006.

Results of Operations

As mentioned earlier in this MD&A, the Corporation has adopted a fiscal period based on a calendar year commencing January 2007. In order to assist the reader of this MD&A in evaluating the performance of the Corporation over time, and potentially in the future, the table below presents Grey Horse's reported figures for the twelve-month periods ending December 2006 and December 2005, and presents them again on a "normalised" basis as if the Corporation's April 2006 to June 2006 recapitalisation had occurred on January 1, 2005. Under the normalised set of figures, net income in both years would have been greater than under the reported figures. The December 2006 net income, for example, would have been some $1.9 million instead of the reported $1.3 million.



------------------------------------------------------------
Normalised (1) Normalised (1)
Twelve months Twelve months Twelve months Twelve months
ended ended ended ended
Dec. 31, 2006 Dec. 31, 2005 Dec. 31, 2006 Dec. 31, 2005
---------------------------------------------------------------------------
Unaudited Unaudited Unaudited Unaudited
---------------------------------------------------------------------------
Revenue $ 11,257,300 $ 6,861,859 $ 11,257,300 $ 6,861,859
---------------------------------------------------------------------------
Selling, general
and
administrative
expenses 7,932,785 4,562,942 7,932,785 4,562,942
---------------------------------------------------------------------------
EBITDA 3,324,515 2,298,917 3,324,515 2,298,917
---------------------------------------------------------------------------
Other expenses 1,264,184 1,185,834 284,781 359,469
---------------------------------------------------------------------------
Income before
income taxes 2,060,331 1,113,083 3,039,734 1,939,448
---------------------------------------------------------------------------
Income taxes (2) 721,806 169,134 1,097,344 700,141
---------------------------------------------------------------------------
Net income 1,338,525 943,949 1,942,390 1,239,307
---------------------------------------------------------------------------
(1) Excludes amortisation of deferred financing costs and interest on
long-term debt that were eliminated with the retirement of all funded
debt during April 2006 to June 2006. Normalised figures are for
information only and are not in accordance with Canadian GAAP.
(2) Normalised figures assume a combined federal and provincial taxation
rate of 36.1%.


Six months ended December 31, 2006

Consolidated revenue and Net Income for the six-month fiscal period ended December 31, 2006, derived substantially from Grey Horse's wholly-owned subsidiary, ETT, increased 67% and 94% respectively over the same six-month period ended December 31, 2005. (The reasons related to the increase in revenues were discussed earlier in this MD&A.) Over the comparative periods, SG&A expenses have risen faster than the growth in revenues as a result of investments in human resources and in management information systems to better meet the needs of a growing client base. Such investments in human resources and in information, accounting and control systems will continue over the foreseeable future. Also, the figures for July 2006 to December 2006 include items not expected to reoccur, totalling approximately $230,000 ($148,000 after tax), and relate to the Corporation's move into new office space and to a severance payment to a former officer of ETT.

Earnings per share, basic, at December 31, 2006 remained substantially unchanged compared with the six-month period the year prior as a result of the Corporation's recapitalisation from April 2006 to June 2006, which increased the number of common shares outstanding and eliminated the Corporation's funded debt.



------------------------------
Six months Six months
Dec. 31, 2006 Dec. 31, 2005
---------------------------------------------------------------------------
Audited Unaudited
---------------------------------------------------------------------------
Revenue $ 5,222,067 $ 3,132,003
---------------------------------------------------------------------------
Selling, general and administrative expenses 3,940,712 1,927,138
---------------------------------------------------------------------------
EBITDA 1,281,355 1,204,865
---------------------------------------------------------------------------
Other expenses 234,570 575,500
---------------------------------------------------------------------------
Income before income taxes 1,046,785 629,365
---------------------------------------------------------------------------
Taxes (Current and Future) 327,427 258,162
---------------------------------------------------------------------------
Net income 719,358 371,203
---------------------------------------------------------------------------
Net income per share, basic 0.12 0.12
---------------------------------------------------------------------------
Net income per share, diluted 0.11 0.09
---------------------------------------------------------------------------
Cash and cash equivalents, end of period 5,205,258 921,216
---------------------------------------------------------------------------
Assets 13,713,998 8,847,141
---------------------------------------------------------------------------
Long-term liabilities (1) 435,728 4,960,706
---------------------------------------------------------------------------
Dividends 0 0
---------------------------------------------------------------------------
Annualized Return on Equity 13% 30%
---------------------------------------------------------------------------
(1) Long-term liabilities shown at December 31, 2006 relate to Future
Income Taxes only



Summary of Quarterly Results

The following tables set out financial performance highlights for the past
eight quarters.

-----------------------------------------------------------------
Second Quarter First Quarter Fourth Quarter Third Quarter
Dec. 31, 2006 Sept. 30, 2006 June 30, 2006 Mar. 31, 2006
---------------------------------------------------------------------------
Unaudited Unaudited Unaudited Undaudited
---------------------------------------------------------------------------
Revenue $ 2,825,194 $ 2,396,873 $ 3,747,530 $ 2,287,703
---------------------------------------------------------------------------
Selling,
general
and
administ-
rative
expenses 2,214,331 1,726,381 2,539,246 1,452,827
---------------------------------------------------------------------------
EBITDA 610,863 670,492 1,208,284 834,876
---------------------------------------------------------------------------
Other
expenses 116,426 118,144 715,049 314,565
---------------------------------------------------------------------------
Income
before
income
taxes 494,437 552,348 493,235 520,311
---------------------------------------------------------------------------
Taxes,
current
and
future 117,756 209,671 203,851 190,528
---------------------------------------------------------------------------
Net income 376,681 342,677 289,384 329,783
---------------------------------------------------------------------------
Net income
per share,
basic 0.06 0.06 0.06 0.10
---------------------------------------------------------------------------
Net income
per share,
diluted 0.06 0.05 0.05 0.07
---------------------------------------------------------------------------
Cash & cash
equivalents,
end of
period 5,205,258 4,166,065 3,662,440 1,287,557
---------------------------------------------------------------------------
Assets 13,713,998 12,520,957 12,562,649 9,692,350
---------------------------------------------------------------------------
Long-term
liabilities 435,728 391,515 391,044 4,857,706
---------------------------------------------------------------------------
Dividends 0 0 0 0
---------------------------------------------------------------------------



-----------------------------------------------------------------
Second Quarter First Quarter Fourth Quarter Third Quarter
Dec. 31, 2005 Sept. 30, 2005 June 30, 2005 Mar. 31, 2005
---------------------------------------------------------------------------
Unaudited Unaudited Unaudited Undaudited
---------------------------------------------------------------------------
Revenue $ 1,635,338 $ 1,496,665 $ 2,352,393 $ 1,377,463
---------------------------------------------------------------------------
Selling,
general
and
administ-
rative
expenses 1,014,010 913,128 1,714,437 921,367
---------------------------------------------------------------------------
EBITDA 621,328 583,537 637,956 456,096
---------------------------------------------------------------------------
Other
expenses 287,512 287,988 297,556 312,778
---------------------------------------------------------------------------
Income
before
income
taxes 333,816 295,549 340,400 143,318
---------------------------------------------------------------------------
Taxes,
current
and
future (1) 140,859 117,303 (89,028) 0
---------------------------------------------------------------------------
Net income 192,957 178,246 429,428 143,318
---------------------------------------------------------------------------
Net income
per share,
basic 0.06 0.06 0.14 0.05
---------------------------------------------------------------------------
Net income
per share,
diluted 0.05 0.05 0.09 0.04
---------------------------------------------------------------------------
Cash & cash
equivalents,
end of period 921,216 600,493 53,132 89,384
---------------------------------------------------------------------------
Assets 8,847,141 8,553,202 8,232,946 7,102,176
---------------------------------------------------------------------------
Long-term
liabilities 4,960,706 5,043,669 4,990,027 5,279,185
---------------------------------------------------------------------------
Dividends 0 0 0 0
---------------------------------------------------------------------------
(1) The earnings attained during the Third Quarter ended March 31, 2005
were not considered by management to result in Grey Horse being more
likely than not to benefit from all of its future income tax assets
arising from various temporary differences. Accordingly, the
Corporation only recognized the benefit of those future income tax
assets required to offset the Third Quarter tax provision. During the
Fourth Quarter ended June 30, 2005, Grey Horse recognized and recorded
the benefit related to all of the remaining future income tax assets
as management considered it more likely than not that these benefits
would be realised.


Liquidity

Management believes that Grey Horse has sufficient capital reserves to maintain its current operations and to service its contractual obligations over the next twelve months.

As at December 31, 2006, Grey Horse's working capital was $5,136,357 ($4,358,387 at fiscal year end June 30, 2006), and cash and cash equivalents were $5,205,258 ($3,662,440 at June 30, 2006).

As part of the regulatory requirements of its trust status, ETT must maintain certain capital adequacy ratios with which it was in compliance at December 31, 2006. Complying with some or all of these ratios required that approximately $2.4 million remain within the entity at period end.

The Bank of Montreal provides Grey Horse and Equity with an operating line of credit of up to $750,000 subject to certain terms and conditions. As at December 31, 2006, no amount was outstanding against the line of credit.

The following table summarizes Grey Horse's contractual obligations.



-----------------------------------------------------
Payments due, by period
-----------------------------------------------------
Total less 1-3 years 4-5 years After 5
than 1 2008- 2010- years
year 2007 2009 2011 2012-2017
---------------------------------------------------------------------------
Office space lease
agreements $ 4,636,205 $ 523,149 $ 1,062,106 $ 1,062,106 $ 1,988,844
---------------------------------------------------------------------------
Long-term debt 0 0 0 0 0
---------------------------------------------------------------------------
Total contractual
obligations $ 4,636,205 $ 523,149 $ 1,062,106 $ 1,062,106 $ 1,988,844
---------------------------------------------------------------------------


Capital Resources

Grey Horse may require further capital from time to time to pursue strategic initiatives; however, the company considers current resources sufficient to execute its business plan.

Off-Balance Sheet Arrangements

Grey Horse has no off-balance sheet arrangements.

Transactions with Related Parties

Transactions with related parties are described in Note 12 of the Corporation's Consolidated Financial Statements for the period ended December 31, 2006.

Fourth Quarter

The Corporation's consolidated revenue and Net Income for the three-month period ended December 31, 2006 increased 73% and 95% respectively over the same three-month period the year prior. The reasons for the increase in revenues and for the increase in SGA expenditures that have already been discussed in this MD&A apply to this period as well.

Proposed Transactions

There is no imminent decision by the board of directors of Grey Horse regarding any material transactions.

Critical Accounting Estimates

The preparation of financial statements in conformity with Canadian generally accepted accounting principles requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosures of contingent assets and liabilities at the date of the financial statements and the reported amounts of revenues and expenses during the year. Actual results may differ from those estimates. Significant estimates and assumptions include those related to the allowance for doubtful accounts, the recognition and measurement of future income tax assets and liabilities, the estimated useful lives of fixed assets, amortisation of intangibles, valuation of goodwill and intangibles and valuation of stock based compensation.

Changes in Accounting Policies

There were no significant changes to accounting policies during the most recent period. However, the Company has reviewed and adjusted the allocation of the purchase price related to its acquisition of ETT in December 2004, which resulted in a reclassification from intangibles to goodwill as described in Note 4 of the Corporation's Consolidated Financial Statements for the period ended December 31, 2006.

Financial and Other Instruments

The Corporation's financial instruments include cash, accounts receivable and accounts payable. In management's opinion the Corporation is not exposed to significant interest rate, currency exchange rate or credit risk arising from these financial instruments. The fair values of these financial instruments approximate their carrying values because of their nature. The Company is not exposed to derivative financial instruments.

Disclosure Controls and Procedures

Disclosure controls and procedures within Grey Horse are designed to provide reasonable assurance that all relevant information is identified to the Corporation's Disclosure Committee so as to ensure that appropriate and timely decisions are made regarding public disclosure.

An evaluation of the effectiveness of Grey Horse's disclosure controls and procedures, as defined under the rules of the Canadian Securities Administration (CSA), was conducted at December 31, 2006 by and under Grey Horse management, including the Chief Executive Officer and the Chief Financial Officer.

Based on this evaluation, the Chief Executive Officer and the Chief Financial Officer have concluded that Grey Horse's disclosure controls and procedures are effective.

Internal Controls over Financial Reporting

Internal controls over financial reporting ("ICFR") are designed to provide reasonable assurance regarding the reliability of Grey Horse's financial reporting and the preparation of financial statements in compliance with Canadian generally accepted accounting principles.

However, an effective internal control system, no matter how well designed, has inherent limitations - including the possibility of the circumvention or overriding of controls - and, therefore, can only provide a reasonable assurance as to financial statement preparation.

In 2006, Grey Horse completed an evaluation of the design effectiveness of the Corporation's internal controls over financial reporting using an industry accepted control framework. This process has identified opportunities to formalize the Corporation's control environment, and management continues to evaluate and enhance documentation, policies and procedures thereof. That said, there were no changes to the Corporation's internal controls over financial reporting during the period ended December 31, 2006 that materially affected, or are reasonably likely to materially affect, its internal controls over financial reporting.

Based on this evaluation, the Chief Executive Officer and the Chief Financial Officer have concluded that Grey Horse's internal controls over financial reporting are designed effectively.

Disclosure of Outstanding Share Data

Grey Horse shares trade on the Toronto Stock Exchange under the symbol GHC. The Corporation is authorized to issue an unlimited number of no par value common shares. On February 28, 2007, GHC had 6,191,618 shares outstanding; 405,108 warrants expiring in 2008, and 394,000 stock options with a weighted average exercise price of $1.54 expiring from 2009 to 2016.

Additional Information

Additional information relating to Grey Horse, including the Company's most recent Annual Information Form, is available on its website at www.greyhorsecapital.com and on the SEDAR website at www.sedar.com.

The Toronto Stock Exchange has neither approved nor disapproved the contents of this press release.

Contact Information

  • Grey Horse Capital Corporation
    Kevin Reed
    President & CEO
    (416) 361-0930
    or
    Grey Horse Capital Corporation
    Paul G. Smith
    EVP & CFO
    (416) 361-0930
    Website: www.greyhorsecapital.com