1166220--9/26/2007--JL_HALSEY

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Risks Related to Our Business and Industry Our business is substantially dependent on the market for email marketing. Seasonal trends may cause our quarterly operating results to fluctuate, which may adversely affect the market price of our common stock. If businesses and consumers fail to accept online direct marketing as a means to attract and retain new customers, demand for our services may not develop and the price of our stock could decline. Our results depend on consumer use of email and the Internet. If consumers do not continue to use email and the Internet, demand for our services may not develop and the price of our stock could decline. The growth of the email marketing market depends on the continued growth and effectiveness of anti-spam products. The online direct marketing industry is highly competitive, and if we are unable to compete effectively, the demand for, or the prices of, our services may decline. If we fail to respond to rapidly changing technology or evolving industry standards, our products and services may become obsolete or less competitive. If we fail to market new features and migrate customers to new versions of our system, our products and services may become obsolete or less competitive. We face significant threats from new entrants to our business. The majority of our hosted services are sold pursuant to short-term subscription agreements, and if our customers elect not to renew these agreements, our revenues may decrease. Defects in our products could diminish demand for our products and services and cause us to lose customers. If the delivery of our email messages is limited or blocked, then the amount we may be able to charge clients for producing and sending their campaigns may be reduced and clients may discontinue their use of our services. Our facilities and systems are vulnerable to natural disasters and other unexpected events and any of these events could result in an interruption of our ability to execute clients online direct marketing campaigns. System failures could reduce the attractiveness of our service offerings. A rapid expansion of our network and systems could cause our network or systems to fail or cause our network to lose data. If we are unable to safeguard the confidential information in our data warehouse, our reputation may be harmed and we may be exposed to liability If we are unable to protect our intellectual property or if third parties develop superior intellectual property, third parties could use our intellectual property without our consent and prevent us from using their technology. We rely upon third parties for technology that is critical to our products, and if we are unable to continue to use this technology and future technology, our ability to sell or continue to support subscriptions to our products and services would be limited and our operating results could be harmed. If a third party asserts that we are infringing its intellectual property, whether successful or not, it could subject us to costly and time-consuming litigation or expensive licenses, and our business may be adversely affected. Activities of clients could damage our reputation or give rise to legal claims against us. Regulation of, and uncertainties regarding the application of existing laws and regulations to, online direct marketing and the Internet could prohibit, limit or increase the cost of our business. We have acquired all of our operating businesses since May 2005, and we may continue to expand through acquisitions of, or investments in, other companies or through business relationships, all of which may divert our management s attention, resulting in additional dilution to our stockholders and consumption of resources that are necessary to sustain our business. Failure to properly manage and sustain our expansion efforts could strain our management and other resources. Because competition for our target employees is intense, we may not be able to attract and retain the highly skilled employees we need to support our planned growth. Any failure to adequately expand our direct sales force will impede our growth. If we fail to develop our brands cost-effectively, our business may be adversely affected. Widespread blocking or erasing of cookies or limitations on our ability to use cookies may impede our ability to collect information with our technology and reduce the value of that data. We may not realize expected benefits from our acquisitions. Exposure to risks associated with our international operations could unfavorably affect our performance. We may need to raise additional capital to achieve our business objectives, which could result in dilution to existing investors or increase our debt obligations. Restrictions in the agreements with our lenders may inhibit our ability to grow. Risks related to us and Investment in our Common Stock Internet-related stock prices are especially volatile, and this volatility may depress our stock price or cause it to fluctuate significantly. Our executive officers and directors have control over our affairs. We are a small company without securities analyst coverage at the present time and there is limited trading of our stock. The stock transfer restrictions implemented in the merger of NAHC, Inc. and J. L. Halsey Corporation may delay or prevent takeover bids by third parties and may delay or frustrate any attempt by stockholders to replace or remove the current management. We may not be able to realize the benefits of our NOL carryforwards. There are uncertainties related to legacy assets and liabilities. Provisions in our certificate of incorporation and bylaws might discourage, delay or prevent a change of control of us or changes in our management and, therefore, depress the trading price of our common stock.

Full 10-K form ▸

1166220--9/26/2007--JL_HALSEY_CORP