Grey Horse Corporation
TSX : GHC

Grey Horse Corporation

August 09, 2007 17:37 ET

Grey Horse Reports Strong Second Quarter Results

Revenue increases 74%, Net income increases 414%, Diluted EPS increases 360% 10th consecutive profitable quarter

TORONTO, ONTARIO--(Marketwire - Aug. 9, 2007) - 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 three months ended June 30, 2007.

Financial Highlights

The following unaudited information was determined in accordance with Canadian Generally Accepted Accounting Principles, except for EBITDA and EBITDA margin, which are non-GAAP measures of information that should not be construed as an alternative to net earnings and may not be comparable to similar measures presented by other issuers as there is no standardized meaning prescribed by GAAP:



---------------------------------------------------------------------------
3 months ended June 30 6 months ended June 30
---------------------------------------------------------------------------
2007 2006 2007 2006
---------------------------------------------------------------------------
Unaudited Unaudited Unaudited Unaudited
---------------------------------------------------------------------------
Revenue $ 6,503,762 $ 3,738,051 $ 10,008,441 $ 6,037,105
---------------------------------------------------------------------------
Revenue growth 74% N/A 66% N/A
---------------------------------------------------------------------------
EBITDA $ 2,555,064 $ 1,200,771 $ 3,647,595 $ 2,030,100
---------------------------------------------------------------------------
EBITDA Margin 39% 32% 36% 34%
---------------------------------------------------------------------------
Net income and
comprehensive
income $ 1,488,261 $ 289,384 $ 2,074,470 $ 619,167
---------------------------------------------------------------------------
Net income and
comprehensive
income - growth 414% N/A 235% N/A
---------------------------------------------------------------------------
Earnings per share,
basic $ 0.24 $ 0.06 $ 0.33 $ 0.16
---------------------------------------------------------------------------
Earnings per share,
diluted $ 0.23 $ 0.05 $ 0.32 $ 0.12
---------------------------------------------------------------------------
Earnings per share,
diluted growth 360% N/A 167% N/A
---------------------------------------------------------------------------
Return on Equity
(annualized) 46% 17% 33% 19%
---------------------------------------------------------------------------
Cash and cash
equivalents, end
of period $ 7,754,054 $ 3,622,440 $ 7,754,054 $ 3,622,440
---------------------------------------------------------------------------
Note: As discussed in the Corporation's MD&A (pp 7-8), the comparative
figures for the three months and six months ended June 30, 2006 do not
fully reflect Grey Horse's April-June 2006 recapitalization, which
eliminated all funded debt and increased the number of common shares
outstanding.


Grey Horse's consolidated revenue for the three-month period ended June 30, 2007 increased by $2.8 million or 74% over the same period in 2006. Transfer agent services accounted for 16% of the growth, corporate trust services contributed 58% of the growth, and foreign exchange services contributed 21% of the growth. Consolidated revenue includes $1.8M related to margin income and foreign exchange transactions (the majority from several large transactions) for which no comparable transactions occurred in the prior year.

For the six-month period ended June 30, 2006, Grey Horse's consolidated revenue increased by $4.0 million or 66% over the same period in 2006. Transfer agent services accounted for 20% of the growth; corporate trust services contributed 59% of the growth; and foreign exchange services contributed 15% of the growth. Consolidated revenue includes $2.5M related to margin income and foreign exchange transactions (the majority from several large transactions) for which no comparable transactions occurred in the prior year.

For the three month period ended June 30, 2007, Grey Horse's EBITDA increased by $1.4M or 113% over the previous year, and the Corporation's EBITDA margin increased by 7 percentage points to 39%. For the six month period ended June 30, 2007, Grey Horse's EBITDA increased $1.6M or 80% over the previous year and the Corporation's EBITDA margin increased 2 percentage points to 36%. The increase in EBITDA and in EBITDA margin reflects the benefits associated with the higher margin corporate trust and foreign exchange activities.

Management views its corporate trust and foreign exchange revenues as a tangible and encouraging sign of a diversification of its activities and recognizes that these financial services represent significant areas of growth, which the Corporation will continue to pursue. However, such revenues are variable by nature, may be subject to the impact of large transactions and fluctuations in capital market activities and, therefore, may not occur on a consistent basis. The Corporation will also continue to invest in the necessary human resources and information systems to better meet the needs of a growing client base and portfolio of services.

The growth in EBITDA margin for the quarter and the elimination in Q2 2006 of $4.7 million of funded debt, together with its related interest charges and amortization of deferred financing costs, resulted in net income increasing over 400% in the second quarter 2007 over the same quarter a year prior. For the six months ended June 30, 2007, net income is over 200% higher than for the same period a year earlier. Diluted earnings per share were 23 cents for the quarter and 32 cents for the six-months ended June 2007. These represent 18 cent and 20 cent increases respectively over the same periods one year prior.

Grey Horse President and CEO Kevin Reed said, "We are very pleased with the significant increase in earnings in the second quarter of this year, typically ETT's busiest of the fiscal year, reflecting both the growth in the number of transfer agent clients and the strong financial contribution of our corporate trust and foreign exchange activities."

Paul G. Smith, Grey Horse's Executive Vice President and Chief Financial Officer commented, "The Corporation's cash position continues to grow steadily allowing us to make the necessary investment in additional human resources and management support systems to meet the needs of our increasing customer base, and to pursue other strategic growth initiatives."

A conference call will be held on Monday, August 13, 2007 at 10:00 AM Eastern Daylight Saving Time to discuss these second quarter and six-month results at June 30, 2007. Participants can dial in at 416-641-6111 or 866-226-1798 and state "Grey Horse Corporation" as the verbal passcode when prompted by the conference operator.

About Grey Horse

Through its wholly owned subsidiaries - Equity Transfer & Trust Company, Global Corporate Compliance Inc., Equity Foreign Exchange Services Inc. - Grey Horse provides transfer agent, corporate trust, corporate secretary and foreign exchange 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.

Management's Discussion and Analysis (MD&A) - Second Quarter Ended June 30, 2007

This MD&A for the three-month period ended June 30, 2007 ("second quarter 2007") provides an overview of the financial performance and condition of Grey Horse Corporation ("Grey Horse" or "GHC" or the "Corporation"). The objective of the MD&A is to present readers with a view of GHC through the eyes of management by discussing 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 unaudited consolidated financial statements for the second quarter 2007 and audited consolidated statements 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 are in Canadian dollars.

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 GHC's fiscal year commencing July 1, 2006 to a six-month period ending December 31, 2006. From 2007 onward, the Corporation's fiscal year commences in January and ends 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 August 9, 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., Grey Horse 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 ("TSE") in March 2006 with the stock symbol GHC.

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

http://www.ccnmatthews.com/docs/ghc0809.jpg

Equity Transfer & Trust Company ("ETT") provides transfer agent and corporate trust services to issuers in North American capital markets. Providing transfer agent services since its founding in 1990, ETT maintains lists of clients' registered shareholders and supports clients' public market activities such as issuances of shares from treasury, mailings to shareholders, dividend distributions and transfers of securities. ETT also acts as scrutineer at shareholder meetings and as subscription agent, exchange agent and escrow agent under exchange and securities commission mandated escrows. Since 2006, as a result of obtaining its federal trust status, ETT also offers corporate trust services, which include acting as trustee for debt instruments, income trusts and asset-backed securities, and acting as agent for depositary agreements and voluntary escrow arrangements.

ETT is an accepted transfer and escrow agent for companies listed on the TSE and the TSXV. With offices in Toronto and Calgary, ETT is licensed to operate as a trust company in the provinces of Ontario, Alberta, British Columbia and Saskatchewan(1) and is qualified to act as transfer agent for corporations governed by the laws of those provinces. The Corporation is also registered as a transfer agent with the Securities and Exchange Commission ("SEC") in the United States of America.

The granting of its federal trust charter in June 2006 represents a milestone in ETT's history. In addition to the significance associated with becoming a federally regulated financial institution, the trust charter allows ETT to extend its transfer agent franchise across Canada and to add corporate trust services to its suite of services. In January 2007, the Corporation announced two important initiatives: the acquisition of 100% of the issued and outstanding shares of 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, extends Grey Horse's geographic reach to Western Canada and complements ETT's service offering. EFX provides competitively priced foreign exchange services; its Drill FX™ product is tailored to ETT's resource-based clients. For both GCC and EFX, the Corporation has retained experienced managers to lead the respective operations.

Equity Securities Inc. ("ESI"), a wholly-owned subsidiary of Grey Horse, was incorporated on June 11, 2007 pursuant to the Canada Business Corporations Act for the purpose of applying for registration as a limited market dealer (an "LMD") under the Securities Act (Ontario). Subject to regulatory approval, ESI will be able to provide certain services to clients of Grey Horse and other issuers in accordance with ESI's registration as an LMD. If the application is successful, ESI's proposed activities as an LMD would further broaden the portfolio of financial services that Grey Horse and its related companies are able to offer. As of the date hereof, ESI's application for registration is on-going; however, there can be no assurance that such registration will be obtained.

Capital Market Fundamentals

The majority of ETT's clients are listed on exchanges owned and operated by the TSX Group Inc. ("TSX Group") with some clients also inter-listed on other exchanges around the world. At June 30, 2007, TSX Group reported having 3,896 issuers on its two principal exchanges (1,623 issuers on the TSE and 2,273 issuers on the TSXV.) ETT estimates its market share to be approximately 10% of total TSX Group listed issuers.

There are important regulatory and commercial considerations for entities wanting to enter the transfer agent industry. From a regulatory perspective, certain provinces have statutes or regulations requiring corporations to use federally or provincially regulated trust companies as transfer agents. Moreover, a bulletin issued by the TSXV in December 2005 obliges an entity applying to be an acceptable transfer agent under TSXV policies to be a trust company in good standing under applicable Canadian provincial or federal legislation. TSE regulations require all TSE listed companies to retain transfer agents that effect transfers and maintain registration facilities in the city of Toronto. Finally, a transfer agent, such as ETT, with clients inter-listed in the United States must also be registered with the SEC. From a commercial perspective, a new entrant must build a client base within a market of relatively few customers (e.g. there are only some 4,000 listed companies in Canada) and attract employees from a limited talent pool. The potential market entrant must also procure specialized computer systems and insurance coverage.

The Canadian transfer agent industry is divided into two tiers:

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

- Several regional transfer agents serving small- and mid-cap issuers.

With clients primarily based in Ontario, ETT specializes in serving small-cap and mid-cap issuers across Canada. In attracting and retaining clients, ETT believes that quality of service, attention to pricing and value-added services allow it to differentiate itself from competitors and deepen the business relationship with existing clients. The value-added services that ETT currently offers(2) 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 powerful tool for the documentation and maintenance of Internal Controls over Financial Reporting. Moreover, ETT corporate trust services and EFX foreign exchange services provide added breadth to address client needs, especially in the mid-cap issuer market and GCC's services provide added tools for the needs of small-cap clients.

Grey Horse management estimates the North American transfer agent market to be $1 billion annually with the Canadian market representing $150 million. The corporate and institutional trust sector is estimated to be more than $500 million in annual revenues in Canada and $10 billion in the United States.

Corporate Objective, Strategy and Financial Targets

Grey Horse's objective is to increase shareholder value by enhancing its profitability and market position as a Canadian financial services company serving the corporate and institutional market. The Corporation's strategy focuses on internal growth by seeking additional clients for its service segments (i.e. Transfer Agent & Corporate Trust; Foreign Exchange; and Corporate Secretarial and Regulatory Compliance) and through the rollout of additional services to its existing client base. With ETT as the foundation providing transfer agent and corporate trust services, Grey Horse recently extended its geographic reach to Western Canada with the opening of an ETT Calgary office and with the acquisition of GCC, and widened its suite of services with the launch of EFX. Over the course of 2007, the Corporation will evaluate the merits of opening offices in other Canadian cities and of launching a custodial services offering for the institutional market. Grey Horse also continues to seek and evaluate potential acquisitions that complement its 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.

Financially, Grey Horse seeks to maximize earnings and cash flow from expanding operations and market share while considering attractively priced acquisition opportunities as they arise. The Corporation views the following financial metrics as key measures of its performance and will consider others as its operations evolve:

- Revenue growth

- EBITDA and EBITDA Margin

- Earnings and Earnings per Share growth

Grey Horse considers revenue growth to be an important gauge of its success in acquiring new clients and in diversifying its sources of revenue from what, for years, was made up solely of transfer agent services. With the structural changes brought to the Corporation over the last several months, revenues are now available from several sources, including transfer agent,(3) corporate trust, corporate secretarial and regulatory compliance, and foreign exchange. As described in the following table, these new sources of revenue bring with them greater variability, which may affect the growth pattern in Grey Horse's overall revenues in future.



---------------------------------------------------------------------------
Type of financial service Commentary on revenue variability
---------------------------------------------------------------------------
Transfer agent Seasonal and relatively stable; will grow with
an increasing client base, but will be affected
by fluctuations in the economic cycle
---------------------------------------------------------------------------
Corporate trust Highly variable; will fluctuate with capital
market activities
---------------------------------------------------------------------------
Corporate compliance Relatively stable; tied to regulatory
requirements
---------------------------------------------------------------------------
Foreign exchange Highly variable; will fluctuate with capital
market activities
---------------------------------------------------------------------------


Grey Horse's transfer agent services are well established. Its growing corporate trust and nascent foreign exchange services, together with ETT's value-added services, represent initial and promising, but as yet unproven, sources of diversification of revenues. Over the past two years, the Corporation's consolidated annual revenue has more than doubled. Initially, this growth was derived from an increase in the ETT client base and from an increase in the level of activity per client. That remains the case today, but over the last two quarters, management is pleased to report that ETT's corporate trust and foreign exchange services contributed significantly toward the growth in revenue. In recent MD&As, GHC management has stated its target of 25% annual growth in revenues through to the end of 2008, which the Corporation has met to date and will continue to strive to achieve.

EBITDA, a non-GAAP measure, is defined as earnings before interest, taxes, depreciation and amortization. While Grey Horse no longer has significant charges related to interest and amortization that would cause EBITDA to be significantly different from Earnings Before Taxes (EBT), the Corporation acknowledges that EBITDA is a measure 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. If the Corporation's rate of growth continues as it has in the past two years, Grey Horse may need to invest in additional processes and personnel to meet the needs of a growing client base and of a diversified portfolio of services, all in anticipation of generating additional future revenue, and the resulting effect may lead to a decline in EBITDA and in EBITDA as a percentage of revenue ("EBITDA margin") when compared with prior periods. Any potential decline in EBITDA margin, however, may be offset or enhanced by the higher EBITDA margin provided by corporate trust and foreign exchange revenues, which are also more variable in nature than transfer agent revenues.

The long-term growth rate of earnings and of earnings per share is another important financial target in building shareholder value. In recent MD&As, Grey Horse management has stated its target of 30% annual growth in net earnings through to the end of 2008, which the Corporation has exceeded to date and will continue to strive to achieve. The Corporation will focus on generating cash and on effectively utilizing the cash flow generated by operations, which, in turn, may be invested in capital additions to take advantage of internal growth opportunities and in acquisitions that are accretive to earnings. As to earnings per share ("EPS"), Grey Horse is mindful that earnings, EPS and shareholder value creation are closely related; however, in the short- to medium-term, the Corporation's growth in earnings and in EPS may differ as a result of the April-June 2006 recapitalization, which eliminated all funded debt and increased the number of common shares outstanding.

Results of Operations

Second quarter ended June 30, 2007

During the second quarter, Grey Horse continued to build its service offerings, human resources and management information systems. Specifically, the Corporation continued to integrate the acquisition of GCC and to market EFX services to ETT clients. At the end of the second quarter 2007, ETT, the Corporation's principal subsidiary, served 463 transfer agent clients. In a seasonal industry, the second quarter is ETT's busiest of the fiscal year as a result of the large number of annual general meetings held by its clients. The financial performance highlights of the Corporation's second quarter and of the first half of 2007 are as follows.



----------------------------------------------------
3 months ended June 30 6 months ended June 30
----------------------------------------------------
2007 2006 2007 2006
----------------------------------------------------
Unaudited Unaudited Unaudited Unaudited
---------------------------------------------------------------------------
Revenue $ 6,503,762 $ 3,738,051 $ 10,008,441 $ 6,037,105
---------------------------------------------------------------------------
Revenue growth 74% N/A 66% N/A
---------------------------------------------------------------------------
EBITDA $ 2,555,064 $ 1,200,771 $ 3,647,595 $ 2,030,100
---------------------------------------------------------------------------
EBITDA Margin 39% 32% 36% 34%
---------------------------------------------------------------------------
Net income and
comprehensive income $ 1,488,261 $ 289,384 $ 2,074,470 $ 619,167
---------------------------------------------------------------------------
Net income and
comprehensive income
- growth 414% N/A 235% N/A
---------------------------------------------------------------------------
Earnings per share,
basic $ 0.24 $ 0.06 $ 0.33 $ 0.16
---------------------------------------------------------------------------
Earnings per share,
diluted $ 0.23 $ 0.05 $ 0.32 $ 0.12
---------------------------------------------------------------------------
Earnings per share,
diluted - growth 360% N/A 167% N/A
---------------------------------------------------------------------------
Return on Equity
(annualized) 46% 17% 33% 19%
---------------------------------------------------------------------------
Cash and cash
equivalents, end
of period $ 7,754,054 $ 3,622,440 $ 7,754,054 $ 3,622,440
---------------------------------------------------------------------------


Grey Horse's consolidated revenue for the three-month period ended June 30, 2007 increased by $2.8 million or 74% over the same period in 2006. Transfer agent services accounted for 16% of the growth, corporate trust services contributed 58% of the growth, and foreign exchange services contributed 21% of the growth. Consolidated revenue includes $1.8M related to margin income and foreign exchange transactions (the majority from several large transactions) for which no comparable transactions occurred in the prior year.

Grey Horse's consolidated revenue for the six-month period ended June 30, 2007 increased by $4.0 million or 66% over the same period in 2006. Transfer agent services accounted for 20% of the growth, corporate trust services contributed 59% of the growth, and foreign exchange services contributed 15% of the growth. Consolidated revenue includes $2.5M related to margin income and foreign exchange transactions (the majority from several large transactions) for which no comparable transactions occurred in the prior year.

Management views its corporate trust and foreign exchange revenues as a tangible and encouraging sign of a diversification of its activities and recognizes that these financial services represent significant areas of growth, which the Corporation will continue to pursue. However, such revenues are variable by nature, may be subject to the impact of large transactions and fluctuations in capital market activities and, therefore, may not occur on a consistent basis. The Corporation will also continue to invest in the necessary human resources and information systems to better meet the needs of a growing client base and portfolio of services. The following table provides a breakdown of second quarter and six month 2007 revenues by type of service and lists their contribution to the growth in revenues as compared with the second quarter and the six-month period ended June 30, 2006.



---------------------------------------------------
Three months ended June 30, 2007
---------------------------------------------------------------------------
Q2 2007 Increase from Percentage Contribution
Type of Financial Revenues Q2 2006 increase from to total
Service ($ 000) ($ 000) Q2 2006 increase
---------------------------------------------------------------------------
Transfer agent $4,103 $455 12% 16%
---------------------------------------------------------------------------
Corporate trust $1,690 $1,600 1778% 58%
---------------------------------------------------------------------------
Corporate compliance $145 $145 N/A 5%
---------------------------------------------------------------------------
Foreign exchange $565 $565 N/A 21%
---------------------------------------------------------------------------
Total Grey Horse $6,503 $2,765 74% 100%
---------------------------------------------------------------------------




---------------------------------------------------
Six months ended June 30, 2007
---------------------------------------------------------------------------
YTD 2007 Increase from Percentage Contribution
Type of Financial Revenues YTD 2006 increase from to total
Service ($ 000) ($ 000) YTD 2006 increase
---------------------------------------------------------------------------
Transfer agent $6,607 $781 13% 20%
---------------------------------------------------------------------------
Corporate trust $2,553 $2,343 1116% 59%
---------------------------------------------------------------------------
Corporate compliance $255 $255 N/A 6%
---------------------------------------------------------------------------
Foreign exchange $593 $593 N/A 15%
---------------------------------------------------------------------------
Total Grey Horse $10,008 $3,972 66% 100%
---------------------------------------------------------------------------


Grey Horse's EBITDA increased by $1.4M or 113% from the same period in the previous year, and the Corporation's EBITDA margin increased by 7 percentage points to 39%. For the six month period ended June 30, 2007, Grey Horse's EBITDA increased $1.6M or 80% over the previous year and the Corporation's EBITDA margin increased 2 percentage points to 36%. The increase in EBITDA and in EBITDA margin reflects the benefits associated with the higher margin corporate trust and foreign exchange activities.

The growth in EBITDA margin for the quarter and the elimination in Q2 2006 of $4.7 million of funded debt, together with its related interest charges and amortization of deferred financing costs, resulted in net income increasing over 400% in the second quarter 2007 over the same quarter a year prior. For the six months ended June 30, 2007, net income is over 200% higher than for the same period a year earlier. Diluted earnings per share were 23 cents for the quarter and 32 cents for the six-months ended June 2007. These represent 18 cent and 20 cent increases respectively over the same periods one year prior.

As stated, the Corporation's April-June 2006 recapitalization eliminated all funded debt and increased the number of common shares outstanding. The following tables present the Corporation's unaudited financial results for the three-month and six-month periods ending June 30, 2007 and June 30, 2006, and presents June 30, 2006 results on a "normalised" basis as if the Corporation's April-June 2006 recapitalisation had occurred on January 1, 2006. On a normalised basis, net income for the quarter ended June 30, 2006 would have been approximately $706,000 (or some $417,000 greater than the figure reported). For the six-month period ended June 30, 2006, net income would have been $1.2M (or some $600,000 greater than the figure reported).



--------------------------------------------------
Normalized (1)
3 months 3 months 3 months
Jun. 30, 2007 Jun. 30, 2006 Jun. 30, 2006
--------------------------------------------------
Unaudited Unaudited Unaudited
---------------------------------------------------------------------------
Revenue $ 6,503,762 $ 3,738,051 $ 3,738,051
---------------------------------------------------------------------------
Selling, general and
adminstrative expenses $ 3,948,698 $ 2,537,280 $ 2,537,280
---------------------------------------------------------------------------
EBITDA $ 2,555,064 $ 1,200,771 $ 1,200,771
---------------------------------------------------------------------------
Interest, amortization
expenses and loss on
foreign exchange $ 178,110 $ 707,535 $ 96,069
---------------------------------------------------------------------------
Income before income taxes $ 2,376,954 $ 493,236 $ 1,104,702
---------------------------------------------------------------------------
Taxes (current and future)(2) $ 888,693 $ 203,852 $ 398,797
---------------------------------------------------------------------------
Net income and comprehensive
income $ 1,488,261 $ 289,384 $ 705,905
---------------------------------------------------------------------------



--------------------------------------------------
Normalized (1)
6 months 6 months 6 months
Jun. 30, 2007 Jun. 30, 2006 Jun. 30, 2006
--------------------------------------------------
Unaudited Unaudited Unaudited
---------------------------------------------------------------------------
Revenue $ 10,008,441 $ 6,037,105 $ 6,037,105
---------------------------------------------------------------------------
Selling, general and
adminstrative expenses $ 6,360,846 $ 4,007,005 $ 4,007,005
---------------------------------------------------------------------------
EBITDA $ 3,647,595 $ 2,030,100 $ 2,030,100
---------------------------------------------------------------------------
Interest, amortization
expenses and loss on
foreign exchange $ 295,692 $ 1,016,553 $ 196,853
---------------------------------------------------------------------------
Income before income taxes $ 3,351,903 $ 1,013,547 $ 1,833,247
---------------------------------------------------------------------------
Taxes (current and future)(2) $ 1,277,433 $ 394,380 $ 661,802
---------------------------------------------------------------------------
Net income and comprehensive
income $ 2,074,470 $ 619,167 $ 1,171,445
---------------------------------------------------------------------------
(1) Excludes amortization of deferred financing costs and interest on
long-term debt that were eliminated with the retirement of all funded
debt during April-June 2006. Normalized figures are for information
only and are not in accordance with Canadian GAAP.
(2) Normalized figures assume a combined federal and provincial taxation
rate of 36.1%.


Summary of Quarterly Results

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



--------------------------------------------------------------------------
3 months 3 months 3 months 3 months
Jun. 30, Mar. 31, Dec. 31, Sep. 30,
2007 2007 2006 2006
--------------------------------------------------------------------------
Revenue $ 6,503,762 $ 3,504,679 $ 2,825,194 $ 2,396,873
--------------------------------------------------------------------------
Selling,
general and
adminstrative
expenses $ 3,948,698 $ 2,412,147 $ 2,212,467 $ 1,733,783
--------------------------------------------------------------------------
EBITDA $ 2,555,064 $ 1,092,532 $ 612,727 $ 663,090
--------------------------------------------------------------------------
Interest,
amortization
expenses and
loss on foreign
exchange $ 178,110 $ 117,582 $ 118,290 $ 110,742
--------------------------------------------------------------------------
Income before
income taxes $ 2,376,954 $ 974,950 $ 494,437 $ 552,348
--------------------------------------------------------------------------
Taxes (current
and future) $ 888,693 $ 388,740 $ 117,756 $ 209,671
--------------------------------------------------------------------------
Net income and
comprehensive
income $ 1,488,261 $ 586,210 $ 376,681 $ 342,677
--------------------------------------------------------------------------
Earnings per
share, basic $ 0.24 $ 0.09 $ 0.06 $ 0.06
--------------------------------------------------------------------------
Earnings per
share, diluted $ 0.23 $ 0.09 $ 0.06 $ 0.05
--------------------------------------------------------------------------
Cash and cash
equivalents,
end of period $ 7,754,054 $ 5,667,456 $ 5,205,258 $ 4,166,065
--------------------------------------------------------------------------
Assets $ 17,350,438 $ 14,584,891 $ 13,713,998 $ 12,520,957
--------------------------------------------------------------------------
Long-term
liabilities $ 452,913 $ 454,944 $ 435,728 $ 391,515
--------------------------------------------------------------------------
Dividends $ - $ - $ - $ -
--------------------------------------------------------------------------



--------------------------------------------------------------------------
3 months 3 months 3 months 3 months
Jun. 30, Mar. 31, Dec. 31, Sep. 30,
2006 2006 2005 2005
--------------------------------------------------------------------------
Revenue $ 3,738,051 $ 2,299,054 $ 1,635,338 $ 1,496,665
--------------------------------------------------------------------------
Selling,
general and
adminstrative
expenses $ 2,537,280 $ 1,469,725 $ 1,016,754 $ 915,872
--------------------------------------------------------------------------
EBITDA $ 1,200,771 $ 829,329 $ 618,584 $ 580,793
--------------------------------------------------------------------------
Interest,
amortization
expenses and
loss on foreign
exchange $ 707,535 $ 309,018 $ 284,768 $ 285,244
--------------------------------------------------------------------------
Income before
income taxes $ 493,236 $ 520,311 $ 333,816 $ 295,549
--------------------------------------------------------------------------
Taxes (current
and future) $ 203,852 $ 190,528 $ 140,859 $ 117,303
--------------------------------------------------------------------------
Net income and
comprehensive
income $ 289,384 $ 329,783 $ 192,957 $ 178,246
--------------------------------------------------------------------------
Earnings per
share, basic $ 0.06 $ 0.10 $ 0.06 $ 0.06
--------------------------------------------------------------------------
Earnings per
share, diluted $ 0.05 $ 0.07 $ 0.05 $ 0.05
--------------------------------------------------------------------------
Cash and cash
equivalents,
end of period $ 3,622,440 $ 1,287,557 $ 921,216 $ 600,493
--------------------------------------------------------------------------
Assets $ 12,562,649 $ 9,692,350 $ 8,847,141 $ 8,553,202
--------------------------------------------------------------------------
Long-term
liabilities $ 391,044 $ 4,857,706 $ 4,960,706 $ 5,043,669
--------------------------------------------------------------------------
Dividends $ - $ - $ - $ -
--------------------------------------------------------------------------


Liquidity

Management believes that Grey Horse has sufficient liquidity and capital reserves to maintain its current operations and to service its contractual obligations over the next twelve months. At June 30, 2007, Grey Horse's working capital was $7,186,164 ($5,136,357 as at fiscal period end December 31, 2006). Cash was $7,754,054 ($5,205,258 as at December 31, 2006). The Bank of Montreal provides the Corporation with an operating line of credit of up to $750,000 subject to certain terms and conditions, and on June 30, 2007, no amount was outstanding.

The following table summarizes Grey Horse's contractual obligations:



----------------------------------------------------------
Payments due, by period
----------------------------------------------------------
Total less than 1-3 4-5 After
1 year years years 5 years
2008 2009-2010 2011-2012 2013-2017
---------------------------------------------------------------------------
Office space
lease
agreements $ 4,898,690 $ 595,740 $ 1,221,117 $ 1,169,732 $ 1,912,101
---------------------------------------------------------------------------
Long-term debt $ - $ - $ - $ - $ -
---------------------------------------------------------------------------
Total
contractual
obligations $ 4,898,690 $ 595,740 $ 1,221,117 $ 1,169,732 $ 1,912,101
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As part of the regulatory requirements surrounding its trust status, ETT must maintain certain capital adequacy ratios with which it was in compliance on June 30, 2007. Complying with some or all of these ratios required that approximately $2.3 million remain within the entity at the end of this period. At the start of 2007, the regulatory authority advised ETT of its intent to have all Canadian financial institutions adopt Basel II capital adequacy requirements as established by the Basel Committee on Banking Supervision. This requirement will become effective for ETT on January 1, 2008. The Corporation has evaluated the impact of this new regulatory framework and does not judge it to be significantly different from the regulatory regime under which it currently operates.

Capital Resources

Grey Horse may require further capital from time to time to pursue strategic initiatives; however, the Corporation 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 9 of Grey Horse's Consolidated Financial Statements for the period ended June 30, 2007.

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 GAAP 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

Effective January 1, 2007, the Company has adopted the provisions of new CICA Handbook Sections 3855 "Financial Instruments - Recognition and Measurement", 3861 "Financial Instruments - Disclosure and Presentation", 1530 "Comprehensive Income" and 3251 "Equity", as described further in Note 2 of Grey Horse's Interim Consolidated Financial Statements for the period ended June 30, 2007.

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, 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 reasonable assurance as to the completeness and accuracy of financial statements.

In 2006, Grey Horse completed an evaluation of the design effectiveness of the Corporation's ICFR using an industry accepted control framework. This process identified opportunities to formalize the Corporation's control environment, and management continues to evaluate and enhance documentation, policies and procedures thereof. There were no changes to the Corporation's internal controls over financial reporting during the period ended June 30, 2007 that materially affected, or are reasonably likely to materially affect, its ICFR.

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 common shares. On August 9, 2007, GHC had 6,366,606 shares outstanding; 307,619 warrants expiring in 2007, and 687,912 stock options with a weighted average exercise price of $4.55 expiring from 2012 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.

(1) The registrations for Alberta and British Columbia were obtained at the end of 2006 and the registration for Saskatchewan was obtained in April 2007.

(2) ETT's value added services are offered to clients in concert with other service providers. For example, its news wire service is offered via a partnership with Marketwire.

(3) Revenues derived from ETT value-added services are included in transfer agent services.

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