Grey Horse Corporation

Grey Horse Corporation

February 27, 2008 17:00 ET

Grey Horse Reports Strong 2007 Results

Revenue increased 57%, Net income 139% and Diluted EPS 104%

TORONTO, ONTARIO--(Marketwire - Feb. 27, 2008) - Grey Horse Corporation (TSX:GHC) ("Grey Horse" or "the Corporation"), a Canadian financial services company serving the corporate and institutional market, reported today strong financial results for the year and three months ended December 31, 2007.

Financial Highlights

The following information was determined in accordance with Canadian Generally Accepted Accounting Principles, except for EBITDA (Earnings Before Income Taxes, Depreciation and Amortization) and Return on Equity (Net income divided by the average of opening and closing shareholders' equity), which do not have any standardized meaning prescribed by Canadian GAAP and may not be comparable to similar measures presented by other issuers. However, the Corporation believes that these are viewed by financial analysts and investors as key measures of certain aspects of its performance. They should not be considered as an alternative to cash flows from operating activities nor to any other measures of performance presented in accordance with Canadian GAAP.



--------------------------------------------------
($000, except per 3 months ended Dec. 31 12 months ended Dec. 31
share amounts) 2007 2006 2007 2006
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Revenue $ 4,055 $ 2,825 $ 17,639 $ 11,257
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Revenue Growth 44% 73% 57% 64%
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EBITDA $ 1,053 $ 603 $ 5,641 $ 3,294
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Net income and
comprehensive income $ 630 $ 377 $ 3,196 $ 1,338
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Net income & comprehensive
income growth 67% 95% 139% 42%
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Earnings per share, basic $ 0.09 $ 0.06 $ 0.50 $ 0.27
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Earnings per share, diluted $ 0.09 $ 0.06 $ 0.47 $ 0.23
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Diluted earnings per
share growth 50% 20% 104% 5%
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Return on equity
(annualized) 14% 14% 22% 19%
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Cash and cash equivalents
at year end $ 12,278 $ 5,205 $ 12,278 $ 5,205
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Management is very pleased with the Corporation's performance in 2007. Its core transfer agent business continued to grow and to build on its established strengths. The Corporation made significant progress on its strategic objective of diversifying its overall operations, shown in particular by the enhanced contribution of its corporate trust business. However, aspects of the Corporation's diversified operations are inherently more variable than the core business, and it will take more time to gauge the ultimate success of this objective. Lastly, the Corporation added numerous senior staff, to strengthen its operations and to support anticipated continued growth, and is focusing on other key aspects of its infrastructure.

Led by the continued strength of its transfer agent business and by its success in building additional service lines, notably corporate trust services, Grey Horse increased its annual consolidated revenue by $6.4 million or 57% from 2006. On a cautionary note, this total includes large volume transactions related to margin income and to foreign exchange generating $2.1 million that may not reoccur on a consistent basis. Net income increased by $1.9 million or 139% reflecting the overall growth in operations and the elimination of debt from its capital structure in June 2006. Basic earnings per share increased 23 cents or 85% to 50 cents per share and Diluted earnings per share increased by 24 cents or 104% to 47 cents per share. EBITDA increased $2.3 million over the year prior and Return on Equity was 22% for the period. The Corporation's consolidated revenue and net income for the 2007 fourth quarter increased 44% and 67% respectively over the same three-month period in the previous year.

Grey Horse President and CEO Kevin Reed said, "Our management team and Board are pleased to report strong financial performance in 2007. Once again, we surpassed our medium-term objective of 25% annual growth in revenues and 30% growth in net income, as we increased our client base and our offering of financial services. We look forward to creating additional value for shareholders in 2008, by steadily growing our capital base and maximizing returns from its deployment."

Paul G. Smith, Grey Horse's Executive Vice President and Chief Financial Officer remarked, "We diversified our sources of income significantly in 2007 and strengthened our internal resources to manage further anticipated growth. We also doubled cash flow from operations, thereby significantly strengthening our balance sheet."

A conference call will be held on Thursday, February 28, 2008 at 9AM Eastern Standard Time to discuss Grey Horse's fourth-quarter and year-end results and ask questions. Participants can listen to the call by dialling 416-641-6136 or 866-223-7781. Grey Horse's complete Consolidated Financial Statements and Management's Discussion and Analysis for the financial year ended December 31, 2007 can be found in the Company's filings on SEDAR at www.sedar.com and on the Corporation's website at www.greyhorsecorp.com

Subsequent Event

Subsequent to year end, Grey Horse initiated a Normal Course Issuer Bid allowing the Corporation to buy back up to 5% of its total outstanding common shares for cancellation up to January 2009. As of February 26, 84,900 shares have been purchased for cancellation, representing 1.3% of common shares outstanding when the Bid commenced.

About Grey Horse

Through its wholly owned subsidiaries, Grey Horse provides transfer agent, corporate trust, corporate secretary, foreign exchange and limited market dealer services to corporations in North American capital markets. Learn more at www.greyhorsecorp.com.

Certain information included in this press release may be forward-looking and 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 CORPORATION

Management's Discussion and Analysis (MD&A)

Year Ended December 31, 2007

This MD&A has been prepared with reference to National Instrument 51-102 "Continuous Disclosure Obligations" of the Canadian Securities Administrators ("NI 51-102"), and should be read in conjunction with the Corporation's audited consolidated financial statements and notes for the fiscal period ended December 31, 2007. Except as otherwise indicated, all financial information in this MD&A is determined in accordance with Canadian Generally Accepted Accounting Principles (GAAP), and all dollar amounts referred to herein are in Canadian dollars. The information in this MD&A is current to February 26, 2008.

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. The key risks that could cause actual outcomes and results to differ from those expressed in the forward-looking statements are listed on page 10.

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.

Where forward-looking information is set out in this MD&A, the Corporation will also set out the material risk factors or assumptions used to develop the forward-looking information. Forward-looking information will be updated as required pursuant to the requirements of NI 51-102.

Overall Performance

Management is very pleased with the Corporation's performance in 2007. The Corporation achieved strong results, easily exceeding its previously disclosed objectives for revenue and net income. Its core transfer agent business continued to grow and to build on its established strengths. The Corporation made significant progress on its strategic objective of diversifying its overall operations, shown in particular by the enhanced contribution of its corporate trust business. However, aspects of the Corporation's diversified operations are inherently more variable than the core business, and it will take more time to gauge the ultimate success of this objective. Lastly, the Corporation added numerous senior staff, to strengthen its operations and to support anticipated continued growth, and is focusing on other key aspects of its infrastructure.

Key Performance Measures

(Relative to the twelve months ended December 31, 2006 (unaudited) - see opening commentary under Results of Operations on page 5)

Revenue increased $6.4 million, or 57%, primarily reflecting the continuing strength of the Corporation's transfer agent business and its success in building additional service lines. This total includes large volume transactions related to margin income and to foreign exchange generating $2.1M that may not reoccur on a consistent basis.

- Revenue growth is an important gauge of the Corporation's success in acquiring new clients and in diversifying Grey Horse's sources of revenue from what, for years, was made up solely of transfer agent services. Management has previously stated its target of achieving 25% annual growth in revenues to the end of 2008.(1)

Net income increased $1.9 million or 139%, reflecting the overall growth in the Corporation's operations and the elimination of debt from Grey Horse's capital structure.

Basic earnings per share increased by 23 cents or 85% to 50 cents per share. Diluted earnings per share increased by 24 cents or 104% to 47 cents per share.

- Net income and earnings per share are key measures of the Corporation's ability to build shareholder value. Management has previously stated its target of achieving 30% annual growth in net income to the end of 2008.(2)

Earnings before income taxes, depreciation and amortization (EBITDA) increased $2.3 million or 71%.(3)

- Grey Horse no longer has significant charges related to interest and amortization that would cause EBITDA to be significantly different from earnings before taxes; however, EBITDA is a measure commonly tracked by financial analysts and investors. It is also used as an indication of the Corporation's ability to invest in property, plant and equipment, and to raise and service debt.

Return on Equity increased from 19% to 22%.

- Return on Equity is a further measure commonly tracked by financial analysts and investors as a key indicator of the Corporation's efficient use of its capital resources.(4)

The Corporation's performance for the year is discussed in detail starting on page 5.

Description of the Business

Grey Horse is a Canadian financial services Corporation serving the corporate and institutional market. The Corporation's stock symbol is GHC.

The Corporation was incorporated in September 2001 as a Capital Pool Corporation ("CPC"). It began trading on the TSX Venture Exchange ("TSXV") in April 2004, completed its qualifying transaction in December 2004 and graduated to the Toronto Stock Exchange ("TSX") in March 2006.

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

(1) This objective represents a goal held by management in running the business and is not intended to represent prospective results of operations based on assumptions about future economic conditions and courses of action.

(2) This objective represents a goal held by management in running the business and is not intended to represent prospective results of operations based on assumptions about future economic conditions and courses of action.

(3) EBITDA (Earnings Before Income Taxes, Depreciation and Amortisation) and Return on Equity (Net income divided by the average of opening and closing shareholders' equity) do not have any standardized meaning prescribed by Canadian GAAP and may not be comparable to similar measures presented by other issuers. However, as stated above, the Corporation believes that these are viewed by financial analysts and investors as key measures of certain aspects of its performance. They should not be considered as an alternative to cash flows from operating activities nor to any other measures of performance presented in accordance with Canadian GAAP.

(4) Please refer to previous footnote for a discussion on ROE. The 22% figure is calculated as follows: Reported Net Income for the period of $3.2M divided by the average of reported shareholders' equity at December 31, 2006, of $11.5M and at December 31, 2007 of $17.9M.

Description of the Business

Grey Horse is a Canadian financial services Corporation serving the corporate and institutional market. The Corporation's stock symbol is GHC.

The Corporation was incorporated in September 2001 as a Capital Pool Corporation ("CPC"). It began trading on the TSX Venture Exchange ("TSXV") in April 2004, completed its qualifying transaction in December 2004 and graduated to the Toronto Stock Exchange ("TSX") in March 2006.

Grey Horse operates four wholly owned operating subsidiaries. Its corporate structure is as follows: (please view the following link)

http://media3.marketwire.com/docs/grey.jpg



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Business basics Operational Overview Key Characteristics
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Equity Transfer & Trust ETT is the bedrock of Regulatory
Company ("ETT") (founded the GHC group of
1990; acquired by Grey companies. TSX regulations require
Horse in 2004; continued all TSX listed companies
as a federal trust to retain transfer
company in 2006) In respect of its agents that effect
registrar and transfer transfers and maintain
agent services offered registration facilities
ETT is an accepted to issuer clients, ETT in the City of Toronto.
transfer and escrow maintains registers of
agent for companies registered shareholders
listed on the TSX and and supports public Pursuant to a bulletin
the TSXV. With offices market activities such issued by the TSXV in
in Toronto, Calgary and as issuances of shares December 2005, an entity
Vancouver, ETT is from treasury, mailings applying to become an
licensed to operate as a to shareholders, acceptable transfer
trust corporation in the dividend distributions agent under TSXV
provinces of Ontario, and transfers of policies must be a trust
Alberta, British securities. ETT also corporation in good
Columbia and acts as scrutineer at standing under
Saskatchewan and is shareholder meetings and applicable Canadian
qualified to act as as subscription agent, provincial or federal
transfer agent for exchange agent and legislation.
corporations governed by escrow agent under
the laws of those exchange and securities
provinces. ETT is also commission mandated Commercial
registered as a transfer escrows.
agent with the A new entrant into this
Securities and Exchange business must build a
Commission ("SEC") and Corporate trust services substantial client base
has been accepted as a offered by ETT include in short order that will
qualified transfer agent acting as trustee for generate sufficient
and registrar with the debt instruments, as revenue to attract and
New York Stock Exchange depositary for takeover retain employees from a
("NYSE"). offers, as warrant limited talent pool and
agent, as subscription to afford financial
receipt agent and as district office space,
Effective June 1, 2006, agent for voluntary specialized computer
ETT was granted letters escrow arrangements. systems, and insurance
patent by the Minister coverage.
of Finance and received
an order from the Office While some of ETT's
of the Superintendent of clients are private Competitive
Financial Institutions issuers, the majority
(OSFI) to commence and are listed on North ETT believes that
carry on business as a American capital markets quality of service,
federal trust company such as the TSX, TSXV, attention to pricing and
under the Trust and Loan NYSE, NASDAQ and AMEX value-added services
Companies Act (Canada). allow it to
This allowed ETT to differentiate itself
extend its transfer from competitors and
agent franchise across deepen the business
Canada and to add relationship with
corporate trust services existing clients. The
to its suite of value-added services
services. that ETT currently
offers include
discounted press
releases, free and
unlimited access to a
SEDAR search engine and
services designed to
assist clients in
meeting regulatory
compliance obligations
such as a Whistleblower
service and the
Headstart product, a
tool for documenting and
maintaining Internal
Controls over Financial
Reporting.
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Global Corporate GCC provides corporate GCC extends Grey Horse's
Compliance Inc. ("GCC") secretary and regulatory geographic reach to
(acquired 2007), based compliance services to Western Canada and
in Calgary. approximately 170 complements ETT's
publicly traded issuers service offering.
across Canada.
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Equity Foreign Exchange Provides competitively Complements ETT's service
Services Inc. ("EFX") priced foreign exchange offering.
(launched 2007) services to ETT clients.
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Equity Securities Inc. Registered as a limited Complements ETT's
("ESI") (launched 2007) market dealer ("LMD") service offering.
under the Securities Act
(Ontario), assists ETT
clients in obtaining
equity and debt
financing.
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Vision and Strategy

Grey Horse's vision is to enhance its profitability and market position as a Canadian financial services Corporation serving the corporate and institutional market. This vision is measured through two key financial objectives and is supported by two key strategies.



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Financial Objective(5) Progress in 2007
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Grey Horse targets annual increases Grey Horse achieved an increase
in revenues and net income of in revenue of 57% and an
approximately 25% and 30% respectively increase in net income of 139%.
to the end of 2008.
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Strategy Progress in 2007
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(1) To maintain the focus on organic Grey Horse continued to
growth by continually acquiring new successfully develop its
clients and rolling out additional transfer agent business.
products and services to existing
clients. Grey Horse continued to
diversify its service offerings
by launching EFX and ESI.
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(2) To seek out acquisitions in the Grey Horse acquired GCC and
financial services industry that successfully integrated it
complement Grey Horse's business. into its other operations.
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(5) These objectives represent management's goals for running the business and are not intended to represent prospective results of operations based on assumptions about future economic conditions and courses of action.

Results of Operations

(all amounts in this section are in $ 000s unless otherwise stated)

When ETT was granted a federal trust charter in 2006, it became necessary to change its year end from June 30 to December 31 in order to comply with legislation and regulations applicable to federally regulated financial institutions. To simplify accounting procedures, Grey Horse also changed its fiscal year to match that of ETT. This shortened GHC's fiscal year commencing July 1, 2006 to a six-month period ending December 31, 2006.

Because of this change in year end, Grey Horse's results for the year ended December 31, 2007, based on a full twelve months, are not readily comparable to those for the most recent fiscal period. Consequently, to provide a fuller perspective on its performance this year, Grey Horse has compiled additional comparative information showing the results for the twelve months to December 31, 2006. Unless otherwise stated, the discussion below is based on a comparison against that twelve month period. Although this was not an officially reported period, it has been compiled from the Corporation's previously issued annual and interim financial statements.



Revenue
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Year ended Twelve Year on Year Six months Year
December 31, months Change ended ended
Type of 2007 ended December June 30,
Financial December 31, 2006 2006
Service 31, 2006
---------------------------------------------------------------------------
Transfer agent 11,971 10,532 1,439 4,587 9,077
Corporate trust 4,184 725 3,459 635 90
Corporate
compliance 511 0 511 0 0
Foreign
exchange 622 0 622 0 0
Limited market
dealer 351 0 351 0 0
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Total Grey
Horse 17,639 11,257 6,382 5,222 9,167
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The following factors explain the changes in revenue from year to year:

Transfer agent - increase of $1,439 or 14%

The growth was driven largely by continued success in adding additional clients while retaining the existing client base, and by generating higher average revenue per client. This category also includes revenue from value added services offered to clients through arrangements with other service providers. The largest of these is a news wire service offered through a partnership with Marketwire Inc.

Grey Horse believes that the characteristics of its transfer agent business discussed above in Description of the Business offer competitive advantages in the marketplace. While Grey Horse's business is experiencing solid growth, the current volatility in the capital markets makes it difficult to anticipate how this trend will continue.

Corporate trust - increase of $3,459 or 477%

The corporate trust business started operations in June 2006 and therefore period-on-period comparisons are not meaningful. Nevertheless, revenues, made up of fee based services and margin income on funds held on behalf of clients, have grown rapidly and reflect the Corporation's success in establishing itself in the market as a competent alternative provider of trust services.

Management is also pleased to report its success during the year in obtaining several large volume transactions that contributed $1.6M in margin income. While the Corporation believes the trust business is well placed to continue growing, it is difficult to form specific expectations or targets for the future.

Corporate compliance - increase of $511 (no revenue in 2006)

This was the first year for the corporate compliance business (GCC). In addition to its specific revenues, GCC has been strategically valuable in developing Grey Horse's presence in Western Canada in particular for ETT's transfer agent business in the Calgary market. While the Corporation believes that this business has a well-earned reputation in its industry, it is difficult to form specific expectations or targets about its future.

Foreign exchange - increase of $622 (no revenue in 2006)

This was also the first year for the foreign exchange services business (EFX), which is a solid initial performance, although skewed by a large volume transaction that contributed $0.5M. The Corporation believes the foreign exchange business is well placed to continue growing, but acknowledges the challenge in entering this market, which when coupled with the current volatility in capital markets, makes it difficult to form specific expectations or targets for the future.

Limited market dealer - increase of $351 (no revenue in 2006)

This business commenced operations only in September 2007, and management views this as a good performance in a short amount of time.



Selling, general and administrative expenses
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Year ended Twelve Year on Year Six months Year
December 31, months Change ended ended
2007 ended December June 30,
December 31, 2006 2006
31, 2006
---------------------------------------------------------------------------
Recoverable
operating
expenses 3,197 2,781 416 1,075 2,230
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Staffing costs 5,203 2,461 2,742 1,281 1,968
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Rent 552 325 227 176 297
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Other selling,
general and
administration 3,046 2,397 649 1,424 1,444
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Total selling,
general and
administrative
expenses 11,998 7,963 4,035 3,956 5,940
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Recoverable operating expenses - increase of $416 or 15%

This category consists of expenses incurred primarily in providing transfer agent services. In the main, it consists of costs of stationery, mailing, courier services and the Company's cost of value added services, which are recovered from transfer agent clients.

Staffing costs - increase of $2,742 or 111%

The Corporation increased its number of staff by almost 68% during the year to strengthen its operations, to support the growth in operations and its various new lines of business and to plan for anticipated continued growth. This includes a number of senior staff in key strategic positions. The Corporation does not anticipate that this expense category will continue to grow at the same pace during 2008.

Rent - increase of $227 or 70%

This reflects the opening of two new offices, in Calgary in the spring of 2007 and in Vancouver in December 2007. The Corporation also anticipates adding additional office space in Toronto during 2008.

Other selling, general and administrative expenses - increase of $649 or 27%

Other expenses include those costs associated with technology, insurance, professional services, marketing and general administrative matters. The increase in this category of expense, largely related to the needs of a rapidly growing organisation, while significant on its own is well below the increase in revenues for the year.

Net income and earnings per share

Net income increased $1.9 million or 139%, reflecting the overall growth in operations and the elimination of debt from Grey Horse's capital structure.

Basic earnings per share increased by 23 cents or 85%. Diluted earnings per share increased by 24 cents or 104%. During the year, the Corporation issued 483,607 additional shares following the exercise of stock options and warrants.

Financial Condition and Liquidity

(all amounts in this section are in $ 000s unless otherwise stated)



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Year ended Twelve Year on Year Six months Year
December 31, months Change ended ended
2007 ended December June 30,
December 31, 2006 2006
31, 2006
---------------------------------------------------------------------------
Cash flow
from
operating
activities 5,009 2,466 2,543 1,763 1,941
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Cash flow
from
investing
activities (855) (776) (79) (487) (617)
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Cash flow
from
financing
activities 2,919 2,594 325 267 2,285
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Working
capital 11,054 5,136 5,918 5,136 4,358
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Cash and
cash
equivalents 12,278 5,205 7,073 5,205 3,662
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Cash flows

Cash flow from operating activities - increase of $2,543 or 103%

This reflects the Corporation's strong performance during the year and the active management of its working capital, in particular demonstrating a low tolerance for delinquent accounts.

Cash flow from investing activities - decrease of $79 or 10%

This represents investments in infrastructure to support the new businesses and overall growth described above; in particular in information technology, furniture and fixtures and in leasehold improvements. This category also includes $172 related to the acquisition of GCC at the beginning of the year.

Cash flow from financing activities - increase of $325 or 13%

This reflects cash from issuing shares following the exercise of 405,107 warrants at a price of $7.00 per share for proceeds of $2,836, and of the exercise of 78,500 options for proceeds of $84.

Working capital - increase of $5,918 or 115%

The factors discussed above, including in particular the factors discussed under cash flow from operations and under cash flow from financing activities, resulted in the improvement in working capital.

Cash and cash equivalents - increase of $7,073 or 136%

The Corporation views cash as a source of safety during turbulent markets and as a source of flexibility in pursuing its key strategy of seeking out favourable acquisition opportunities. The Corporation is also mindful of its regulatory requirements related to ETT (see Regulatory requirements below).

Normal Course Issuer Bid

To ensure that it balances the above-discussed factors against maximizing shareholder value, the Corporation initiated a normal course issuer bid subsequent to the year end. As of the date of this MD&A, 84,900 shares have been repurchased for cancellation thus far representing 1.3% of the outstanding common shares when the bid commenced.

The following is a summary of the material information contained in the notice of intention for a normal course issuer bid in respect of its Common Shares (Notice) filed by the Corporation on January 17, 2008. Purchases pursuant to the Notice commenced on January 21, 2008 and will not continue beyond January 20, 2009. The Notice enables the Corporation to acquire up to 333,761 Common Shares for cancellation representing 5% of the 6,675,225 Common Shares issued and outstanding as at January 7, 2008. All purchases are made through the facilities and in accordance with the requirements of the Toronto Stock Exchange (Exchange) at the then prevailing market price. The daily purchase restriction will be 1,401 shares or such larger block purchases that may be authorized pursuant to Exchange policies in respect of normal course issuer bids. All shares purchased under the normal course issuer bid will be cancelled.

This is the first normal course issuer bid undertaken by the Corporation. The Corporation made this normal course issuer bid because it believes that, from time to time, the market price of its Common Shares may not fully reflect the underlying value of its business and its future business prospects. The Corporation believes that, in such circumstances, the outstanding Common Shares represented an attractive investment for the Corporation, since a portion of the company's excess cash generated on an annual basis can be invested for an attractive risk adjusted return on capital through the issuer bid.

Security holders may obtain a copy of the Notice, without charge, by contacting the Corporation.

Capital resources

Overall, the Corporation believes that current resources are sufficient to execute its business plan. It may however require further capital from time to time to pursue strategic initiatives.

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, 2007, no amount was outstanding against the line of credit.

Contractual obligations

The following table summarizes Grey Horse's contractual obligations. The Corporation does not anticipate any difficulty in meeting these obligations from its current and future resources.



-----------------------------------------------------------------
Payments due, by period
-----------------------------------------------------------------
Total less than 1 year 1-3 years 4-5 years After 5 years
2008 2009-2010 2011-2012 2013-2017
---------------------------------------------------------------------------
Office
space
lease
agreements 6,097 747 1,570 1,409 2,371
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Long-term
debt 0 0 0 0 0
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Total
contractual
obligations 6,097 747 1,570 1,409 2,371
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Regulatory requirements

As part of the regulatory requirements of its trust status, ETT must maintain certain capital adequacy ratios, which are regularly reviewed by the Office of the Superintendent of Financial Institutions (OSFI). At December 31, 2007, ETT was in compliance with all of the required ratios. This included maintaining tangible assets (i.e. total assets not including intangibles or goodwill) sufficient to meet a minimum regulatory capital balance of $3 million. At December 31, 2007, ETT exceeded this minimum by $4.5 million.

Selected Annual Information

(all amounts in this section are in $ 000s unless otherwise stated)

The following table sets out Grey Horse's financial performance for the last three fiscal periods. Also, for easier comparison with the current financial year, and as discussed throughout the narrative above, results are presented for the twelve months ended December 31, 2006.



---------------------------------------------------------------------------
Year ended Twelve Year on Year Six months Year
December 31, months Change ended ended
2007 ended December June 30,
December 31, 2006 2006
31, 2006
---------------------------------------------------------------------------
Revenue 17,639 11,257 6,382 5,222 9,167
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Selling,
general and
administrative
expenses (SGA) 11,998 7,963 4,035 3,956 5,940
---------------------------------------------------------------------------
EBITDA 5,641 3,294 2,347 1,266 3,227
---------------------------------------------------------------------------
Other
expenses 521 1,234 (713) 220 1,585
---------------------------------------------------------------------------
Income
before
income taxes 5,121 2,060 3,061 1,047 1,643
---------------------------------------------------------------------------
Taxes
(Current and
Future) 1,924 722 1,202 327 653
---------------------------------------------------------------------------
Net income
and
comprehensive
income 3,197 1,338 1,859 719 990
---------------------------------------------------------------------------
Earnings per
share, basic 0.50 0.27 0.23 0.12 0.28
---------------------------------------------------------------------------
Earnings per
share,
diluted 0.47 0.23 0.24 0.11 0.19
---------------------------------------------------------------------------
Cash and
cash
equivalents,
end of
period 12,278 5,205 7,073 5,205 3,622
---------------------------------------------------------------------------
Assets 21,446 13,714 7,732 13,714 12,563
---------------------------------------------------------------------------
Long-term
liabilities 432 436 (4) 436 391
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Dividends - - - - -
---------------------------------------------------------------------------
Return on
Equity (ROE)
(annualized) 22% 19% 3% 13% 16%
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Segregated funds

Segregated funds, as disclosed in note 18 to the Corporation's audited financial statements for the fiscal periods ended December 31, 2007 and 2006, represent funds held in connection with various corporate trust services, as described on page 3. The Corporation held $94.0 million in such funds at the end of 2007 compared to $88.1 million at the end of 2006. As described above, the corporate trust business is highly variable and the volume of activity can vary significantly based on market conditions and on a small number of high value transactions. The Corporation earns margin income from administering these funds, which is included within corporate trust revenues.

Off-Balance Sheet Arrangements

Grey Horse has no off-balance sheet arrangements.

Risks

The following are the key risks relating to the Corporation and its business:

Operating Risk

The Corporation operates several lines of business each with its own inherent risks. By its nature, the transfer agent business is relatively stable and grows steadily in line with an increasing client base, but is affected by fluctuations in the economic cycle. Any significant downturn in capital markets or the economy as whole could affect financial results. The trust business comes primarily from entities that are already customers of the transfer agent business and therefore builds effectively on existing relationships. However, by its nature this is a more volatile operation than the core business. Revenues of the trust business, made up of fee driven services and of margin income on funds held on behalf of clients, can be skewed by a small number of large transactions, which in turn depend on fluctuations in capital market activities and other unpredictable factors. Foreign Exchange too is a volatile operation where revenue can be significantly skewed by a small number of transactions. Corporate compliance services are typically provided under short term contracts. There are also fewer barriers to entry than for the transfer agent business, and consequently much greater competition. Limited market dealer services are subject to a wide range of competition. The operation's success will depend on its ability to draw on the Corporation's relationship with existing clients, and on skilful marketing to draw new clients.

Operational Processes

The services provided by Grey Horse to its clients encompass a large volume of tasks and processes that demand a high degree of precision and timeliness. Grey Horse may be financially responsible to its clients for any financial losses resulting from errors or omissions by the Corporation in providing these services. The Corporation continues to enhance its managerial and operational resources and controls, including its data processing systems and software, to minimize such errors or omissions, and has insurance coverage in place to mitigate the risk of loss to the Corporation should they occur. However, the impact of such losses, and of the resulting harm to the Corporation's reputation, could have a material adverse effect on Grey Horse's financial results

Profits

Grey Horse's operating results have trended upwards in the last fiscal years, in some cases significantly. There can be no assurance as to the trend continuing in fiscal years thereafter. Factors responsible for revenue growth include an increase in Grey Horse's client base, an increase in the average revenue per client and new service lines that have been introduced. There can be no assurance that revenues generated to date will continue to be generated in the future.

Future Capital Needs

Grey Horse may need to raise funds through public or private debt financing in the event that Grey Horse incurs operating losses or requires substantial capital investment or in order for Grey Horse to respond to unanticipated competitive pressures or to take advantage of unanticipated opportunities. There can be no assurance that additional financing will be available on terms favorable to Grey Horse, or at all. If adequate funds are not available or are not available on acceptable terms, Grey Horse may not be able to maintain its federal trust charter or to take advantage of market opportunities or to respond to competitive pressures or continue to be viable. Such instability could have a material adverse effect on Grey Horse's business, financial condition and results of operations. If additional funds are raised through the issuance of shares from the treasury of Grey Horse, control of Grey Horse may change and shareholders may suffer additional dilution to their holdings.

Reliance on Key Personnel

Grey Horse's success will depend upon the continued service of its senior management team. Grey Horse's employees may voluntarily terminate their employment with Grey Horse at any time. The loss of services of key personnel could have a material adverse effect upon Grey Horse's business, financial condition and results of operations.

Increasing Competition

The markets in which Grey Horse will operate and intends to operate are competitive and can be influenced by the marketing and pricing decisions of larger industry participants, including companies that have greater market presence or greater financial, technical, operation, marketing, experience or other resources than Grey Horse. Increased competition by larger industry participants could have a material adverse effect on Grey Horse's business, results of operations and financial condition.

Risks Associated with Evolving Business Model

Grey Horse's business model continues to evolve. Grey Horse will seek to develop and promote new or complementary opportunities, services, products or transaction formats and expand the breadth and depth of its service and product offerings. There can be no assurance that Grey Horse will be able to expand its operations in a cost-effective or timely manner or that such efforts will create, maintain or increase overall market acceptance. Furthermore, in the event that customers do not favourably receive any new products or services launched by Grey Horse, this could damage Grey Horse's reputation and diminish the value of its brand name. Expansion of Grey Horse's operations in this manner would also require significant additional expenses and development, operations and other resources and could strain Grey Horse's management, financial and operational resources. The lack of market acceptance of such services or Grey Horse's inability to generate satisfactory revenues from such expanded products and services to offset their costs could have a material adverse effect on Grey Horse's business, results of operations, cash flow, financial condition and prospects.

Need to Manage Growth

The rapid growth of Grey Horse's business and its products and services has placed and is expected to continue to place significant demands on Grey Horse's managerial, operational and accounting resources. Demands on Grey Horse's operational and accounting information systems and controls, including its billing, accounts, accounts receivable and payable, tracking and other accounting systems, are expected to continue to grow rapidly with Grey Horse's expanding customer base. Inability to properly manage such growth could have a material adverse effect on Grey Horse's business, results of operations, cash flow, financial condition and prospects.

Personnel Resources

Grey Horse will be reliant upon its management personnel to anticipate and address consumer and broker demands in the investment industry. There can be no assurance that qualified management or technical personnel will be available to Grey Horse in the future. The success of the operations and activities of Grey Horse will depend to a significant extent on the efforts and abilities of its management and technical personnel. The loss of the services of any of its management or technical personnel could have a material adverse effect on Grey Horse's business, results of operations and financial conditions.

Potential Fluctuations in Quarterly Operating Results

Grey Horse may be exposed to fluctuations in quarterly operating results caused by many factors, including changes in the demand for its products and services, business fluctuations in financial market activities, foreign currency exchange rates and general economic conditions.

Government Regulation

The financial services industry is highly regulated, and future regulatory decisions could have a material adverse effect on Grey Horse's business, results of operations, cash flow, financial condition and prospects.

Equity Transfer & Trust Company is regulated as a Canadian financial institution by the Office of the Superintendent of Financial Institutions and as a transfer agent by the US Securities Exchange Commission. As such, the company is subject to regular supervisory reviews and required to file annual reports from independent auditors on its internal controls. The company is required to track and resolve any material issues which arise from these reviews or reports. Any failure to remedy material issues could have a material adverse effect on Grey Horse's business, results of operations and financial condition.

Risk of Future Terrorist Attacks or Related Disasters

The terrorist attacks of September 11, 2001, had an adverse impact on various regions of North America and on a wide range of industries. In the future, civil unrest, economic recession, war and additional acts of terrorism may adversely impact the North American and global economies and financial markets and could adversely affect Grey Horse's business, results of operations and financial condition.

Costs Associated with Compliance with Securities Laws

Grey Horse is a publicly traded corporation subject to all of the obligations of a reporting issuer under applicable securities laws and all of the obligations applicable to a listed Corporation under stock exchange rules. Direct and indirect costs associated with public Corporation status have escalated dramatically in recent years and regulatory initiatives under consideration may further increase the cost of being a public issuer in Canada and could have a material adverse effect on Grey Horse's business, results of operations and financial condition. If Grey Horse is unable to generate significant revenue from business operations, the cost of complying with the applicable regulatory requirements will represent a financial burden to Grey Horse and may have a material adverse effect on Grey Horse's business, results of operations and financial condition.

Stock Market Volatility

Stock markets have recently experienced extreme price and volume fluctuations. These fluctuations are often related to the operating performance of particular companies. The broad market fluctuations may adversely affect the market price of Grey Horse's common shares. When the market price of a Corporation's stock drops significantly, shareholders sometimes institute class action lawsuits against that Corporation. A lawsuit against Grey Horse, even if without merit, could cause it to incur substantial costs and could divert the time and attention of Grey Horse's management and other resources. Further, the revenues earned by Grey Horse are dependent on the buoyancy of the economy and the public financial markets, and the requirement for the maintenance and creation of small and mid-cap issuers. If financial market activity is low, an increase in transaction-based fees may be difficult to achieve. However, if the financial markets are active, fees based on market activity may increase.

Failure of Computer and Data Processing Systems and Software

Grey Horse is dependent upon the successful and uninterrupted functioning of its computer and data processing systems and software. The failure of these systems could interrupt operations or materially impact Grey Horse's ability to deliver its services. If sustained or repeated, a system failure could negatively affect the operating results of Grey Horse.

Grey Horse maintains confidential information regarding customers in their computer systems. This infrastructure may be subject to physical break-ins, computer viruses, programming errors, attacks by third parties or similar disruptive problems. A security breach of computer systems could disrupt operations, damage customer's reputations or result in liability.

Reputational Risk

Reputational risk is the potential that negative publicity, whether true or not regarding an institution's business practices, actions or inactions, will or may cause a decline in the institution's value, liquidity or customer base. An institution's reputation is a valuable business asset in its own right, essential to optimizing shareholder value, and as such is constantly at risk. Reputational risk cannot be managed in isolation from other forms of risk since all risks have an impact on reputation, which in turn can impact the brand, earnings and capital. All of the Corporation's risks must be managed effectively in order to safeguard the Corporation's reputation.

Ultimate responsibility for the Corporation's reputation lies with senior management and the Board of Directors and its committees, which examine reputational risk as part of their ongoing duties. In addition, every employee and representative of the Corporation has a responsibility to contribute in a positive way to the Corporation's reputation by ensuring that ethical practices are followed at all times. The Corporation also has specific policies and procedures that consider reputational risk and include the following:

- Anti-Money Laundering and Terrorist Financing

- Code of Conduct

- Disclosure Control

- Complaint Handling

- Related Party Transactions

- Receiving Concerns Regarding Financial, Internal Accounting Controls or Auditing Matters

- Insider Trading

Transactions with Related Parties

During the year ended December 31, 2007 the Corporation was charged $142,964 by a law firm, a partner of which is a director of the Corporation, and approximately $91,000 by directors or companies related to directors and officers for consulting and professional services and brokerage commissions on insurance premiums. At the year end $7,056 and $67,632 respectively remained outstanding relating to these charges. Transactions with related parties were conducted on terms that approximate market value and are measured at the exchange amounts. Further information is provided in note 15 to the Corporation's audited financial statements for the year ended December 31, 2007.

Proposed Transactions

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

Critical Accounting Estimates

The following are the Corporation's critical accounting estimates. For each, the following section describes i) the methodology used in determining the estimate; ii) the assumptions underlying the estimate; iii) any known trends, commitments, events or uncertainties that might materially affect the methodology or the assumptions described; and iv) whether or why the accounting estimate is reasonably likely to change from period to period and have a material impact on the financial presentation.

Allowance for Doubtful Accounts:

i) The Allowance for Doubtful Accounts is derived on a specific identification basis by evaluating the credit worthiness of each customer account receivable at the end of each reporting period; ii) The Corporation must make assumptions as to the ability of customers to pay and estimates of amounts considered collectible; iii) Given the seasonality of the Corporation's operating results, the estimate will fluctuate over a fiscal year; iv) Historical experience has shown that the percentage of accounts receivable deemed doubtful has not fluctuated materially from one quarter to the next.

Future Income Tax Assets and Liabilities:

i) As indicated in Note 2(j) of the Corporation's annual financial statements, future income taxes are calculated using the asset and liability method of accounting for temporary differences. A valuation allowance is recognized to the extent that the recoverability of future income tax assets is not considered more likely than not, which is based on expected cash flow and projected profitability; ii) The expected cash flows and projected profitability are based on various assumptions. The Corporation is required to make estimates and assumptions regarding its ability to generate taxable income and to implement tax planning strategies that will allow it to make use of losses and deductions; iii) The Corporation is currently profitable and expects to remain profitable so the estimate of the valuation allowance is not deemed critical at this time. Profitability is the main factor that would affect the estimate; iv) Based on current and expected future profitability, this estimate will likely not fluctuate from period to period.

Estimated Useful Lives of Fixed Assets:

i) As indicated in Note 2(f) of the Corporation's annual financial statements, assets are recorded at cost with the useful life estimated in order to derive a charge for amortization. There are four asset classes for which the corresponding amortization policy is as follows:



- Furniture: 20% declining balance basis
- Computer Equipment: 30% declining balance basis
- Computer Software: Straight line over 2 years
- Leasehold Improvements: Straight line over term of lease


ii) The Corporation estimates the useful life of each asset class; iii) The Corporation is comfortable with the assumptions related to the useful life of its assets and with the amortization policies chosen. As such, the Corporation does not consider there to be a material degree of uncertainty with these estimates, nor does it consider there to be trends and uncertainties that could materially affect the assumptions used in deriving its estimates; iv) These estimates are not likely to fluctuate from period to period as there is no indication that the useful lives of assets is materially different from those set by the Corporation's accounting policies.

Valuation and Amortization of Intangibles:

i) As indicated in Note 2(g) of the Corporation's annual financial statements, intangible assets consist of costs incurred to obtain a federal trust license and customer relationships acquired with the purchase of Equity Transfer Services Inc. (later continued as Equity Transfer & Trust Corporation) and with the purchase of Global Corporate Compliance Inc. The trust licence granted to Equity under the federal Trust and Loans Companies Act is considered to have an indefinite life and therefore not subject to amortization. The value of the customer relationships acquired with the purchase of Global Corporate Compliance was estimated by the Corporation. The value of the relationships acquired with the purchase of Equity Transfer Services remains material to the Corporation's financial results although less so than at the time of acquisition as a result of the Corporation's significant growth since then. Given the importance of this estimate, the Corporation procured the services of a certified business valuator to assist in deriving the value of the intangible assets and of the goodwill associated with this transaction. The estimated useful life of the customer relationships is monitored and compared to historical data to identify any changes in circumstances that could lead to impairment; ii) The most critical assumption for the valuation of customer relationships acquired with the purchase of Equity Transfer Services Inc. was the determination of the estimated useful life. The valuator reviewed the underlying economic attributes of the existing ETT customer base and determined these to have a remaining useful life of 15 years. His and the Corporation's rationale for the 15-year useful life and, therefore, for the related amortization period related to the length of time customers remain with ETT where, historically, average attrition has been lower than for other industries; iii) In subsequent annual reviews of impairment, should the life of the acquired customer relationships be deemed materially less from what is currently assumed, the resulting impact on the Corporation's financial statements would be material. However, reviews to date have indicated that the 15-year useful life assumption remains sound. The Corporation continues to value the trust license as an intangible asset with an indefinite life and there is no expectation that this asset will ever require a write-down in value; iv) The amortization of customer relationships is not expected to change from period to period as these amounts are amortized on a straight-line basis and there is no indication that the estimated useful lives require revision.

Valuation of Goodwill:

i) As discussed in Note 2(h) of the Corporation's annual financial statements, Goodwill is the residual amount that results when the purchase price of an acquired business exceeds the sum of the amounts allocated to the identifiable net assets acquired. Within the context of the acquisition of both Equity Transfer Services Inc. and of Global Corporate Compliance Inc., the Corporation undertook an exercise to determine the value of the intangible assets acquired after which goodwill was then derived. Given the importance of this estimate for the acquisition of Equity Transfer Services Inc., the Corporation procured the services of a chartered business valuator to assist in deriving both the intangible assets and the goodwill associated with this transaction. ii) Goodwill is not amortized but is tested for impairment annually or more frequently if events or changes in circumstances indicate the asset might be impaired. The impairment test is carried out in two steps. In the first step, the carrying amount of the reporting unit is compared with its fair value. When the fair value of a reporting unit exceeds its carrying amount, goodwill of the reporting unit is considered not to be impaired and the second step of the impairment test is unnecessary, which has been the case to date. The second step is carried out when the carrying amount of a reporting unit exceeds its fair value, in which case the implied fair value of the reporting unit's goodwill is compared with its carrying amount to measure the amount of the impairment loss, if any. The implied fair value of goodwill is determined in the same manner as the value of goodwill is determined in a business combination, using the fair value of the reporting unit as if it was the purchase price. iii) No trends, commitments, events or uncertainties are presently known that would lead the Corporation to believe there is a risk of Goodwill impairment; iv) The estimated value of Goodwill is not expected to change from period to period.

Accounting Changes

Changes during the year

Effective January 1, 2007, the Corporation has adopted the provisions of the new CICA Handbook Sections 3855 Financial Instruments - Recognition and Measurement, 1530 Comprehensive Income, 3251 Equity and 3861 Financial Instruments - Disclosure and Presentation. CICA 3855 describes the standards for recognizing and measuring financial assets, financial liabilities and non-financial derivatives. CICA 1530 and 3251 describe standards for reporting and disclosing comprehensive income, its components and related changes in equity. CICA 3861 is a disclosure standard.

As described further in note 3 to the audited financial statements for the year ended December 31, 2007, the Corporation's financial instruments are limited at present to cash, accounts receivable and accounts payable and therefore many of the more challenging issues associated with these standards do not apply. The Corporation had no held-to-maturity or available-for-sale financial assets during the year ended December 31, 2007. In management's opinion the Corporation is not exposed to significant interest rate, currency exchange rate or credit risk arising from its financial instruments. The Corporation is not exposed to derivative financial instruments, had no "other comprehensive income or loss" transactions during the year ended December 31, 2007 and no opening or closing balances of accumulated other comprehensive income or loss.

Anticipated changes

On January 1, 2008, the Corporation adopted three new CICA Handbook Sections - Section 1535, Capital Disclosures, Section 3862, Financial Instruments - Disclosures, and Section 3863, Financial Instruments - Presentation. CICA 1535 requires disclosing an entity's objectives, policies and processes for managing capital; information about what the entity regards as capital; whether the entity has complied with any capital requirements; and the consequences of not complying with these capital requirements. CICA 3862 and 3863 replace CICA 3861, Financial Instruments - Disclosure and Presentation and require enhanced financial instrument disclosures focusing on the nature and extent of risks arising from financial instruments and how the entity manages those risks.

Also on January 1, 2008, the Corporation adopted the amended provisions of CICA Handbook Section 1400, General Standards of Financial Statement Presentation. The amendments include new requirements for an entity's management to assess and disclose the entity's ability to continue as a going concern.

The Accounting Standards Board has also issued a new Section 3064, Goodwill and Intangible Assets, to replace current Section 3062, Goodwill and Other Intangible Assets. The new section establishes revised standards for recognizing, measuring, presenting and disclosing goodwill and intangible assets. CICA 3064 is effective for fiscal years beginning on or after October 1, 2008 and will be adopted by the Corporation for the year ending December 31, 2009.

In January 2008, the Canadian Accounting Standards Board (AcSB) announced a mandatory changeover from existing Canadian GAAP to International Financial Reporting Standards (IFRS) for fiscal years beginning on or after January 1, 2011. It is felt that a single set of accounting standards accepted and applied globally will benefit users of financial statements.

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 Corporation is not exposed to derivative financial instruments.

Summary of Quarterly Results

The following tables set out financial performance highlights for the past eight quarters (all amounts in this section are in $ 000s unless otherwise stated):



---------------------------------------
3 months 3 months 3 months 3 months
Dec. 31, Sep. 30, Jun. 30, Mar. 31,
2007 2007 2007 2007
----------------------------------------------------------------------------
Revenue 4,055 3,576 6,504 3,505
----------------------------------------------------------------------------
Selling, general and administrative
expenses 3,001 2,636 3,949 2,412
----------------------------------------------------------------------------
EBITDA 1,053 940 2,555 1,093
----------------------------------------------------------------------------
Interest, amortization expenses and
loss on foreign exchange 95 130 178 118
----------------------------------------------------------------------------
Income before income taxes 958 810 2,377 975
----------------------------------------------------------------------------
Taxes (current and future) 328 319 889 389
----------------------------------------------------------------------------
Net income and comprehensive income 630 492 1,488 586
----------------------------------------------------------------------------
Earnings per share, basic 0.09 0.08 0.24 0.09
----------------------------------------------------------------------------
Earnings per share, diluted 0.09 0.07 0.23 0.09
----------------------------------------------------------------------------
Cash and cash equivalents, end of
period 12,278 11,554 7,754 5,667
----------------------------------------------------------------------------
Assets 21,446 20,409 17,350 14,585
----------------------------------------------------------------------------
Long-term liabilities 432 454 453 455
----------------------------------------------------------------------------
Dividends - - - -
----------------------------------------------------------------------------


----------------------------------------
3 months 3 months 3 months 3 months
Dec. 31, Sep. 30, Jun. 30, Mar. 31,
2006 2006 2006 2006
----------------------------------------------------------------------------
Revenue 2,825 2,397 3,736 2,299
----------------------------------------------------------------------------
Selling, general and administrative
expenses 2,222 1,734 2,537 1,470
----------------------------------------------------------------------------
EBITDA 603 663 1,199 829
----------------------------------------------------------------------------
Interest, amortization expenses and
loss on foreign exchange 109 111 706 309
----------------------------------------------------------------------------
Income before income taxes 494 552 493 520
----------------------------------------------------------------------------
Taxes (current and future) 118 210 204 191
----------------------------------------------------------------------------
Net income and comprehensive income 377 343 289 330
----------------------------------------------------------------------------
Earnings per share, basic 0.06 0.06 0.06 0.10
----------------------------------------------------------------------------
Earnings per share, diluted 0.06 0.05 0.05 0.07
----------------------------------------------------------------------------
Cash and cash equivalents, end of
period 5,205 4,166 3,622 1,288
----------------------------------------------------------------------------
Assets 13,714 12,521 12,563 9,692
----------------------------------------------------------------------------
Long-term liabilities 436 392 391 4,858
----------------------------------------------------------------------------
Dividends - - - -
----------------------------------------------------------------------------


The only significant factor, in addition to those discussed earlier in this MD&A, causing variations over the quarters is the inherent seasonality of the transfer agent business. Most companies have fiscal year ends in December and therefore hold their annual general meetings between April and June, during Grey Horse's second quarter. Grey Horse earns a significant portion of its revenue from services provided in connection with such meetings and therefore tends to experience a peak of revenue in this quarter.

Fourth Quarter

Other than the commencement of the limited market dealer operations (see page 6) in September 2007, there were no particular fourth quarter events that affected the matters discussed in this MD&A. The Corporation's consolidated revenue and net income for the 2007 fourth quarter increased 44% and 73% respectively over the same three-month period in the previous year.

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, 2007 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 2007 management staff reviewed and updated the 2006 assessment which was based on the criteria for effective internal control over financial reporting described in COSO's Internal Control over Financial Reporting - Guidance for Smaller Public Companies. The design effectiveness assessment for the Entity Level Controls was based on whether or not controls met COSO criteria or COSO financial reporting objectives. Management expanded the scope of the Financial & Accounting Controls assessment to include key controls in Equity Foreign Exchange Services Inc.

In addition, management performed a review of Grey Horse's information technology controls using the COBIT framework. This review identified certain control weaknesses, which management feels were nonetheless mitigated via compensating controls. Moreover, management is taking further steps to address matters by assuming control of its IT operations from an external supplier and by enhancing all levels of controls over its technology infrastructure. Management expects to further strengthen the key elements of its information technology controls prior to December 2008.

Despite the matters noted above, the overall assessment supports the conclusion that the design of Grey Horse Corporation's system of internal control over financial reporting is effective. 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 26, 2008, GHC had 6,641,125 shares outstanding and 737,422 stock options with a weighted average exercise price of $4.94 expiring from 2009 to 2016.

Outlook

Management believes that the Corporation's performance during 2007 and the underlying business developments discussed in this MD&A provide a favourable outlook for 2008. However, some elements of the Corporation's business, as discussed, may be challenged by volatile and uncertain market conditions.

Management will continue to focus on its key strategies and to ensure that the Corporation's infrastructure is adequate for future growth. Having focused on increasing its senior staff resources in 2007, the Corporation expects to focus relatively more in 2008 on information technology.

Additional Information

Additional information relating to Grey Horse, including the Corporation'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 Corporation
    Kevin Reed
    President & CEO
    (416) 361-0930
    or
    Grey Horse Corporation
    Paul G. Smith
    EVP & CFO
    (416) 361-0930
    Website: www.greyhorsecorp.com