JKA JK Acquisition Corp

This information in this document is not complete and may be changed.

 

PRELIMINARY DRAFT, DATED NOVEMBER 19, 2007 — SUBJECT TO COMPLETION

 

JK ACQUISITION CORP.

4400 Post Oak Parkway, Suite 2530

Houston, Texas 77027

 

JK ACQUISITION CORP.

4400 Post Oak Parkway, Suite 2530

Houston, Texas 77027

 

THE ELECTION OF FIVE NEW DIRECTORS; (IV)  FOR ADOPTION OF THE 2007 EQUITY INCENTIVE PLAN; AND (V) IF NECESSARY, FOR THE ADJOURNMENT OF THE SPECIAL MEETING.

 

SEE THE SECTION TITLED “RISK FACTORS” BEGINNING ON PAGE 45 FOR A DISCUSSION OF VARIOUS FACTORS THAT YOU SHOULD CONSIDER IN CONNECTION WITH THE MERGER WITH MULTI-SHOT, LLC SINCE, UPON THE MERGER WITH MULTI-SHOT, LLC, THE OPERATIONS AND ASSETS OF JKA WILL LARGELY BE THOSE OF MULTI-SHOT, LLC.

 

CONDITIONAL NATURE OF PROPOSALS AND
SPECIAL VOTING PROVISIONS

 

Each of Proposals One, Two and Three are conditioned upon the approval of the other respective proposals. In the event one or more of Proposals One, Two or Three does not receive the necessary vote to approve that proposal, then JKA will not complete any of the transactions identified in any of the proposals, including Proposal Four. In the event that Proposals One, Two and Three are approved, but Proposal Four is not approved, then we will complete the transactions identified in Proposals One, Two and Three, but not Proposal Four. Thus, Proposal Four is conditioned upon approval of Proposals One, Two and Three. In the event the Proposals are rejected and none of the transactions are undertaken, JKA will likely look for another suitable acquisition target.

 

If we need to consider and vote upon the proposal to adjourn the special meeting to a later date or dates to permit further solicitation of proxies in the event there are insufficient votes at the time of the special meeting to approve the merger agreement with Multi-Shot, the amendment to JKA’s certificate of incorporation or the election of directors, then we will submit Proposal Five for stockholder approval at the special meeting. Adoption of Proposal Five is not conditioned upon the adoption of Proposal One, Two, Three or Four.

 

In addition, each JKA stockholder who holds shares of common stock issued in JKA’s initial public offering or purchased following such offering in the open market has the right to vote against the merger proposal and, at the same time, demand that JKA convert such stockholder’s shares into cash equal to a pro rata portion of the proceeds in the trust account, including interest, in which a substantial portion of the net proceeds of JKA’s initial public offering were and remain deposited, which as of September 30, 2007 was equal to $79,721,079, or $6.03 per share. If the holders of 2,711,667 or more shares of common stock issued in JKA’s initial public offering, an amount equal to 20% or more of the total number of shares issued in the initial public offering and private placement prior to the initial public offering, vote against the merger and demand conversion of their shares into a pro rata portion of the trust account, then JKA will not be able to consummate the merger. If the merger proposal is approved and the merger is consummated, each stockholder that voted against the proposal and elected to convert shares of stock to cash will be entitled to receive a cash payment of the pro rata portion of the trust account upon surrender of stock certificates representing the shares voted against the merger proposal. A stockholder that votes against the merger and elects to convert their shares to cash is not required to tender their shares at or before the special meeting. If the merger is not completed for any reason, no shares will be converted to cash, even if you so elect.

 

JKA’s initial stockholders, including all of its directors and officers and their affiliates, who purchased or received shares of common stock prior to JKA’s initial public offering, presently own an aggregate of approximately 19.93% of the outstanding shares of JKA common stock. All of these stockholders have agreed to vote the shares acquired prior to the public offering in accordance with the vote of the majority in interest of all other JKA stockholders voting on the merger proposal.

 

Under the Delaware General Corporation Law, the holders of JKA common stock do not have any right of dissent and appraisal with respect to any of the proposals.

 

RECORD DATE; WHO IS ENTITLED TO VOTE

 

We have fixed the close of business on [          ], 2007, as the “record date” for determining JKA stockholders entitled to notice of and to attend and vote at the special meeting. As of the close of business on [          ], there were 16,516,667 shares of our common stock outstanding and entitled to vote. Each share of our common stock is entitled to one vote per share at the special meeting. Holders of warrants are not entitled to vote at the special meeting.

 

As of September 30, 2007, the JKA officers and directors, either directly or beneficially, owned and were entitled to vote 3,291,667 shares, or approximately 19.93% of JKA’s outstanding common stock. In connection with the initial public offering, JKA and Ferris Baker Watts Incorporated entered into agreements with the JKA’s officers and directors pursuant to which the JKA officers and directors agreed to vote the shares owned by them immediately prior to the initial public offering, including any shares purchased in the private placement immediately prior to the initial public offering, either for or against the adoption of the merger proposal in the same manner that the majority of the shares issued in the initial public offering are voted on such proposal. They have also indicated that they

intend to vote their shares “FOR” all other proposals being presented at the special meeting, including, if necessary, the adjournment proposal.

 

QUORUM

 

The presence, in person or by proxy, of a majority of all the shares of common stock entitled to vote will constitute a quorum at the special meeting.

 

REQUIRED VOTE AND EFFECT OF
ABSTENTIONS, BROKER NON-VOTES AND FAILURES TO VOTE

 

Proposal One:   As provided for in our Amended and Restated Certificate of Incorporation, as amended, to be approved Proposal One requires (i) the affirmative vote of a majority of the shares of JKA common stock issued in the initial public offering as voted at the Special Meeting; and (ii) holders of less than 20% of the aggregate shares of JKA’s common stock that were issued in JKA’s initial public offering and the private placement immediately prior to the initial public offering vote against the merger and demand conversion of their shares to cash. Abstentions, since it is not an affirmative vote in favor of the proposal, will have the same effect as a vote against Proposal One. Broker non-votes (which may occur if you fail to give voting instructions to your broker or bank) and failure to vote or return your proxy will not count as a vote for or against Proposal One. Both abstentions and broker non-votes are counted for purposes of determining the presence of a quorum. Broker non-votes, abstentions and failures to vote will not constitute an election to convert a shareholder’s shares into cash.

 

Proposal Two:   The affirmative vote of a majority of the shares of JKA’s common stock issued and outstanding as of the Record Date is required to approve the amendment to JKA’s Amended and Restated Certificate of Incorporation, as amended. Abstentions, broker non-votes and failure to vote or return your proxy have the same effect as a vote against Proposal Two. Both abstentions and broker non-votes are counted for purposes of determining the presence of a quorum.

 

Proposal Three:   The affirmative vote of a plurality of the shares of JKA’s common stock represented in person or by proxy and entitled to vote at a meeting at which a quorum is present is required to elect the five nominated directors. Abstentions, broker non-votes and failure to vote or return your proxy could result in the lack of a quorum but will not affect the election of directors if a quorum is otherwise present.

 

Proposal Four:   The affirmative vote of a majority of the shares of JKA’s common stock represented in person or by proxy and entitled to vote at a meeting at which a quorum is present is required to approve the 2007 equity incentive plan. Abstentions are counted for the purpose of determining whether a quorum is present and will have the effect of a vote against the 2007 equity incentive plan. Broker non-votes and failure to vote or return your proxy could result in the lack of a quorum but will not have any effect on the approval of the equity incentive plan if a quorum is otherwise present because they will not be counted towards the vote total for Proposal Four.

 

Proposal Five:   The affirmative vote of a majority of the shares of JKA’s common stock represented in person or by proxy and entitled to vote at a meeting at which a quorum is present is required to approve the adjournment proposal. Abstentions are counted for the purpose of determining whether a quorum is present and will have the effect of a vote against the adjournment proposal. Broker non-votes and failure to vote or return your proxy could result in the lack of a quorum but will not have any effect on the approval of the adjournment proposal if a quorum is otherwise present because they will not be counted towards the vote total for Proposal Five.

 

RECOMMENDATION BY THE DIRECTORS

 

After careful consideration of the terms and conditions of the proposed merger with Multi-Shot, LLC, the amendment to the certificate of incorporation, the nomination to elect five new directors, and the adoption of the 2007 equity incentive plan, the Board of JKA has determined that such proposals and the transactions contemplated thereby are fair to and in the best interests of JKA and its stockholders, and the proposed transaction met the requirements of the JKA’s initial public offering, including the 80% net asset requirement. In connection with the merger proposal, the Board of JKA has received an opinion from RBC Capital Markets Corporation (“RBC”), that as of the date of its opinion, and based on conditions that existed as of that date and subject to the assumptions, limitations and qualifications contained in its opinion and based upon such other matters as RBC considered relevant, (i) the consideration to be paid by JKA pursuant to the merger agreement is fair, from a financial point of view, to JKA and (ii) the fair market value of Multi-Shot, LLC is equal to at least 80% of the net asset value of JKA. The Board of JKA unanimously recommends that you vote or give instruction to vote (i) “FOR” the proposal to merge with Multi-Shot, LLC pursuant to the merger agreement; (ii) “FOR” the proposal to approve an amendment to the certificate of incorporation to change JKA’s corporate name; (iii) “FOR” the proposal to elect five new directors; (iv) “FOR” the proposal to adopt the 2007 equity incentive plan; and (v), if necessary, “FOR” the proposal to adjourn the meeting to a later date or dates to permit further solicitation and vote of proxies in the event there are insufficient votes at the time of the special meeting to adopt the merger proposal, the certificate amendment proposal or, the nomination proposal; all as described in Proposals One, Two, Three, Four and Five, respectively.

 

PERSONS SOLICITING YOUR VOTE AND
COSTS OF SOLICITATION

 

We are soliciting the enclosed proxy on behalf of the Board. JKA will pay all costs of preparing, assembling and mailing the proxy materials. In addition to mailing the proxy materials, the officers and other employees of JKA may solicit proxies by telephone or fax without receiving any additional compensation for their services. We have requested brokers, banks and other fiduciaries to forward proxy materials to the beneficial owners of JKA common stock. We have retained Morrow & Co., LLC to aid in the solicitation of proxies. We will pay Morrow & Co. a fee of $17,500 plus reimbursement for certain costs and out-of-pocket expenses incurred by them in connection with their services.

 

TABLE OF CONTENTS

 

 

QUESTIONS AND ANSWERS ABOUT THE PROPOSALS

 

Who may vote?

 

Shareholders holding shares of JKA common stock of record as of [          ], 2007 are entitled to notice of and to attend the special meeting and to vote on the proposals. As of the record date there were 16,516,667 shares of JKA common stock outstanding. An alphabetical list of the shareholders showing the number of shares that they are entitled to vote will be available at the offices of JKA for the ten days prior to the special meeting and will be available at the time and place of the special meeting.

 

What is being voted on?

 

There are four proposals on which you are being asked to vote. The first proposal is to approve the merger with Multi-Shot, LLC (“Multi-Shot”) pursuant to the merger agreement whereby Multi-Shot will be merged with and into Multi-Shot, Inc., a newly-formed, wholly-owned subsidiary of JKA. As consideration for such merger and as further described herein, the members of Multi-Shot, LLC will receive cash, JKA common stock and other equity consideration with an aggregate value of $197,500,000 (subject to adjustment for any outstanding indebtedness of Multi-Shot, LLC at the time of the merger and other closing date balance sheet adjustments) in exchange for all of the membership interests of Multi-Shot, LLC. We refer to this proposal as the merger proposal or Proposal One. The second proposal is to approve an amendment to JKA’s certificate of incorporation increasing the authorized shares of JKA common stock from 50,000,000 to 150,000,000, presuming the consummation of the merger, to change JKA’s name to “MS Energy Services, Inc.” (referred to herein as “MSE”) and to remove certain provisions that will not be applicable to JKA following the consummation of the merger with Multi-Shot, LLC. We refer to this proposal as the amendment proposal or Proposal Two. The third proposal is to elect Allen Neel, Ron Nixon, K. Rick Turner, James O. Jacoby, Jr., and Kim Eubanks to the Board as required by the merger agreement. We refer to this as the director election proposal or Proposal Three. The fourth proposal is to approve the adoption of the 2007 equity incentive plan, or the Plan, pursuant to which 420,000 shares of common stock will be reserved for issuance in accordance with the terms of the Plan. We refer to this as the equity incentive plan proposal or Proposal Four. It is important for you to note that each of Proposal One, Two and Three is conditioned upon the approval of the other, but not Proposal Four. In the event the merger proposal, the amendment proposal or the director election proposal does not receive the necessary votes to approve such proposal, then JKA will not consummate any of these proposals, including the incentive plan proposal regardless of whether Proposal Four receives the necessary votes to approve such proposal. However, in the event, the merger proposal, the amendment proposal and the director election proposal does each receive the necessary votes to approve such proposal, but the incentive plan proposal does not receive the necessary votes to approve such proposal, then JKA will consummate the merger, amendment and director proposals, but not the incentive plan proposal.

 

Why is JKA proposing the merger, amendment to JKA’s certificate of incorporation, election of five new directors and the adoption of the Plan?

 

JKA is a blank-check company formed specifically as a vehicle for the acquisition of or merger with a business whose fair market value is equal to at least 80% of the net assets of JKA. In the course of JKA’s search for a business combination partner, JKA was introduced to Multi-Shot, LLC, a company the Board of JKA believes has growth potential. The Board is attracted to Multi-Shot because of its industry, growth prospects and management team, among other factors. As a result, JKA believes that the merger with Multi-Shot will provide JKA stockholders with an opportunity to participate in a company with growth potential in the directional drilling segment of the energy production service industry.

 

Under the terms of its certificate of incorporation, JKA is required to submit the terms of a proposed business combination transaction to its stockholders for approval. JKA has negotiated the terms of a business combination with Multi-Shot that are set forth in the merger agreement. As a result, JKA is now submitting the transaction to its stockholders for their approval.

Multi-Shot provides directional drilling services to oil and gas exploration companies, primarily in North America. Multi-Shot’s business operations have grown substantially since 2004 through organic growth. The following table shows the growth on Multi-Shot’s revenues since 2004:

 

 

Multi-Shot’s business and financial results are more fully described in “Management’s Discussion and Analysis of Financial Condition and Results of Operations of Multi-Shot, LLC” on page 58 and “Information About Multi-Shot” on page 78.

 

Oil and gas drilling activity in the U.S. has increased in recent years. According to drilling rig data published by Baker Hughes Incorporated, the number of onshore drilling rigs in the U.S. increased by 488, from December 2004 through December 2006. This increase in drilling rigs and drilling activity has led to increased demand for directional drilling services, particularly with respect to unconventional natural gas wells which are well-suited for directional drilling. The number of directional drilling rigs increased by 463% from March 2002 to November 2006 according to Baker Hughes. During the same period, the U.S. land rig count grew by 127%. The Board expects that if market conditions, including the price for natural gas and onshore directional drilling activity, remain stable, the demand for Multi-Shot’s services will remain strong.

 

The Board also believes that JKA will have an experienced management team in place to operate and oversee the direction of JKA following the merger. The management team of JKA after the merger is described in “Directors and Management of JKA Following the Merger with Multi-Shot, LLC” on page 108.

 

The amendment to the certificate of incorporation is being undertaken to increase the number of shares of common stock currently authorized, and upon completion of the merger, management also desires the name of the business to reflect its operations, and to remove certain provisions only applicable to us prior to our completion of a business combination. The adoption of the director election proposal is being undertaken because the Board deems it beneficial for the combined company going forward following the merger and because the election of certain new directors is required by the terms of the merger agreement. The adoption of the Plan is being undertaken because the Board deems it beneficial for the combined company going forward following the merger.

 

What vote is required in order to approve the merger proposal?

 

The approval of the merger with Multi-Shot will require the affirmative vote of a majority of the shares of JKA’s common stock that were issued in our initial public offering voted at the Special Meeting (in person or by proxy). In addition, each JKA stockholder who holds shares of common stock issued in JKA’s initial public offering or purchased following such offering in the open market has the right to vote against the merger proposal and, at the same time, demand that JKA convert such stockholder’s shares into cash equal to a pro rata portion of the trust account in which a substantial portion of the net proceeds of JKA’s initial public offering were and remain deposited. These shares will be converted into cash only if the merger is completed. Based on the amount of cash held in the trust account as of September 30, 2007, $79,721,079, without taking into account any interest accrued after such date, stockholders who vote against the merger proposal and elect to convert such stockholder’s shares as described above will be entitled to convert each share of common stock that it holds into approximately $6.03 per share. However, if the holders of 2,711,667 or more shares of common stock issued in JKA’s initial public offering (an amount equal to 20% or more of the total number of shares issued in the initial public offering and the private placement immediately prior to the initial public offering), vote against the merger and demand conversion of their shares into a pro rata portion of the trust account, then JKA will not be able to consummate the merger. JKA’s initial stockholders, including all of its directors and officers, who purchased or received shares of common stock prior to JKA’s initial public offering, presently, together with their affiliates, own an aggregate of approximately 19.93% of the outstanding shares of JKA common stock. All of these persons have agreed to vote all of these shares which

were acquired prior to the public offering in accordance with the vote of the majority in interest of all other JKA stockholders voting on the merger proposal.

 

No party to the merger agreement or any of their respective representatives or agents has had, directly or indirectly, any contact with a current or potential shareholder with the purpose of altering an intended vote against the transaction. Other than in connection with the solicitation of proxies as described herein, no party to the merger agreement intends to contact a shareholder with the purpose of altering an intended vote against the transaction. In addition, no party to the merger agreement intends to purchase any shares held by a shareholder with the purpose of altering an intended vote against the transaction.

 

What vote is required in order to approve the amendment to the certificate of incorporation?

 

The approval of the amendment to the certificate of incorporation will require the affirmative vote of a majority of the shares of JKA’s common stock issued and outstanding as of the Record Date. The officers and directors at JKA intend to vote all of their shares of common stock in favor of this proposal.

 

What vote is required in order to approve the election of the new directors?

 

The approval of the election of the five new directors will require the affirmative vote of a plurality of the shares of JKA’s common sock represented in person or by proxy at the Special Meeting. The five persons receiving the greatest number of votes, though less than a majority, will be elected. The officers and directors at JKA intend to vote all of their shares of common stock in favor of the nominees listed in these proxy materials.

 

What vote is required in order to approve the equity incentive plan proposal?

 

The approval of the Plan will require the affirmative vote of a majority of the shares of JKA’s common stock present in person or by proxy at the special meeting. The officers and directors at JKA intend to vote all of their shares of common stock in favor of this proposal.

 

If I am not going to attend the JKA special meeting of stockholders in person, should I return my proxy card instead?

 

Yes. After carefully reading and considering the information contained in this proxy statement, please complete and sign your proxy card. Then return the enclosed proxy card in the return envelope provided herewith as soon as possible, so that your shares may be represented at the JKA special meeting and your vote can be recorded. If you return your proxy but do not indicate your vote on the proxy card, it will be voted FOR the merger proposal, FOR the amendment proposal, FOR the election of the director nominees listed in these proxy materials, FOR the equity incentive plan, and, if necessary, FOR the adjournment proposal.

 

What will happen if I abstain from voting or fail to vote?

 

An abstention, since it is not an affirmative vote in favor of a respective proposal but adds to the number of shares present in person or by proxy, (i) will have the same effect as a vote against the merger proposal but will not have the effect of converting your shares into a pro rata portion of the trust account in which a substantial portion of the net proceeds of JKA’s initial public offering are held, (ii) will have the same effect as a vote against the amendment to the certificate of incorporation proposal, (iii) will have the same effect as a vote against the election of directors and (iv) will have the same effect as a vote against the equity incentive plan.

 

Broker non-votes and the failure to return your proxy card will have the same effect as an abstention with respect to the amendment proposal, but will have no effect with respect to the merger proposal, election of directors or approval of the equity incentive plan because they will not be counted towards the vote totals for such proposals.

 

What do I do if I want to change my vote?

 

If you wish to change your vote, please send a later-dated, signed proxy card to James P. Wilson at JKA prior to the date of the special meeting or attend the special meeting and vote in person. You also may revoke your proxy by

sending a notice of revocation to James P. Wilson at the address of JKA’s corporate headquarters, provided such revocation is received prior to the special meeting.

 

If my shares are held in “street name” by my broker, will my broker vote my shares for me?

 

No. Your broker can vote your shares only if you provide instructions on how you wish your broker to vote. If your shares are held by your broker as your nominee (that is, in “street name”), you will need to obtain a proxy form from the institution that holds your shares and follow the instructions included on that form regarding how to instruct your broker to vote your shares. If you do not give instructions to your broker, your broker can vote your shares with respect to “discretionary” items, but not with respect to “non-discretionary” items. Discretionary items are proposals considered routine under the rules of the American Stock Exchange on which your broker may vote shares held in street name in the absence of your voting instructions. On non-discretionary items for which you do not give your broker instructions, the shares will be treated as broker non-votes. The adjournment proposal is the only discretionary item being proposed at the special meeting.

 

Will I receive anything in the merger?

 

If the merger is completed and you vote your shares for the merger proposal, you will continue to hold the JKA securities that you currently own. If the merger is completed but you have voted your shares against the merger proposal and have elected a cash conversion instead, your JKA shares will be cancelled and you will receive cash equal to a pro rata portion of the trust account, which, as of September 30, 2007, was equal to approximately $6.03 per share. Because JKA is acquiring all of the outstanding securities of Multi-Shot, LLC, the members of Multi-Shot, LLC will receive shares of JKA common stock and warrants to purchase shares of JKA common stock in exchange for their membership interests of Multi-Shot, LLC.

 

How is JKA paying for the merger?

 

At closing, the initial merger consideration for all the issued and outstanding membership interests of Multi-Shot is expected to be approximately $197,500,000, consisting of the following:

 

 

In addition to the initial consideration for the merger set forth above, JKA has agreed to the following:

 

 

 

Parent Warrants.   The Parent Warrants may only be exercised if a Contingent Award is determined to be due to the holder pursuant to the merger agreement. Parent Warrants may be exercised for shares of JKA common stock on a cashless exercise basis (“Contingent Award Shares”) or for replacement warrants to purchase JKA common stock for a cash exercise price between $5.00 and $6.25 per share (“Cash Exercise Warrants”). The Parent Warrants are intended to compensate the members of Multi-Shot for the dilution that will result from exercises of the

currently outstanding warrants to purchase JKA common stock, including the warrants issued in connection with JKA’s initial public offering.

 

Redemption Warrants.   The Redemption Warrants are issued in conjunction with Redemption Liability Shares if the amount paid by JKA to its stockholders from the trust fund in connection with exercises of the conversion rights of JKA stockholders exceeds $3,000,000. The Redemption Warrants (and the Redemption Liability Shares) are intended to compensate the members of Multi-Shot for reduction of the trust fund in excess of $3,000,000 as a result of conversions by JKA stockholders since such reduction in the trust fund will result in less available cash from the trust fund for working capital requirements of JKA following the merger. To the extent that Redemption Liability Shares and Redemption Warrants are issued, the members of Multi-Shot will receive increased consideration pursuant to the merger. Under the scenario of maximum conversion, we estimate the merger consideration would be increased by $1,934,063 as a result of the issuance of the Redemption Liability Shares and Redemption Warrants. Like the Parent Warrants, the Redemption Warrants may only be exercised if a Contingent Award is determined to be due to the holder and may be exercised for Contingent Award Shares or Cash Exercise Warrants.

 

Contingent Awards.   The Contingent Awards are intended to provide a mechanism to compensate members of Multi-Shot for dilution resulting from exercises of currently outstanding warrants to purchase JKA common stock (“Index Warrants”). There are 27,166,668 Index Warrants currently outstanding, including 666,668 warrants held by Messrs. Wilson and Spickelmier and 26,500,000 warrants issued in JKA’s initial public offering and held by public warrant holders. If any Index Warrants are exercised during any of the periods ending on three measurement dates (each is referred to as a “Determination Period”), June 30, 2008, June 30, 2009 and April 30, 2010, Parent Warrants and Redemption Warrants may be exercised for Contingent Award Shares on a cashless exercise basis or, in some circumstances, Cash Exercise Warrants that are issued in replacement of the exercised Parent Warrants or Redemption Warrants. The amount of Contingent Award Shares is calculated by a cashless exercise formula contained in Section 2.06(d) of them merger agreement that considers three factors: (i) the number of Index Warrants exercised during the Determination Period, (ii) the trading price of JKA common stock at the time of each exercise and (iii) the weighted average exercise price of the Index Warrants exercised during the Determination Period, which will range from $5.00 to $6.25 per share. A detailed example calculation of such cashless exercise is set forth on page 16. Cash Exercise Warrants may be exercised for a number of shares of JKA common stock equal based on the number of Index Warrants exercised during the Determination Period. The cash exercise price of Cash Exercise Warrants is also based on the exercise price of the Index Warrants exercised during such Determination Period, which will range from $5.00 to $6.25 per share.

 

If Third-Party Indebtedness is less than or equal to $60,000,000, then JKA will pay to the Multi-Shot members the amount of such difference in additional shares of JKA common stock and Parent Warrants. If Third-Party Indebtedness is greater than $60,000,000, then the Multi-Shot members will pay to JKA the amount of such difference. The payment by the Multi-Shot members to JKA will be satisfied by payment from the Escrow Shares (as defined the merger agreement).

 

A portion of the cash currently being held in the trust fund established in connection with JKA’s initial public offering will be used to (i) pay the transaction-related expenses of JKA, (ii) pay the $20,000,000 cash portion of the initial merger consideration, and (iii) repay $15,000,000 in subordinated indebtedness incurred by Multi-Shot in the private recapitalization, (such subordinated indebtedness was provided by SG-Directional, LLC), and additional portions of the cash being held in the trust fund may be used to repay all, or a portion of the $45,000,000 of the other assumed Third Party Indebtedness. As of September 30, 2007 we have accounts payable and accrued liabilities of $584,090 and advances of $500,000. Such amounts will be repaid with cash currently held in trust if the merger is completed. As of September 30, 2007 we have cash in trust of $79,721,079. After consideration of the accounts payable, accrued expenses and advances as of September 30, 2007 and after consideration of the cash merger consideration ($20,000,000), repayment of subordinated debt ($15,000,000) and deferred non-accountable expenses due to underwriters ($1,552,500), we estimate that $42,084,489 will be available to the company assuming maximum conversion and $26,148,245 will be available to the company assuming minimum conversion.

 

If the merger is approved and the holders of less than 2,711,667 shares of common stock issued in JKA’s initial public offering, an amount equal to less than 20% or more of the total number of shares issued in the initial public

offering and private placement prior to the initial public offering, vote against the merger and demand conversion of their shares into a pro rata portion of the trust account, then JKA will use its trust funds to pay for such conversions.

 

Do I have conversion rights in connection with the merger?

 

If you hold shares of common stock issued in JKA’s initial public offering that you acquired prior to the record date, then you have the right to vote against the merger proposal and demand that JKA convert your shares of common stock into a pro rata portion of the trust account in which a substantial portion of the net proceeds of JKA’s initial public offering are held. These rights to vote against the merger and demand conversion of the shares into a pro rata portion of the trust account are sometimes referred to herein as conversion rights. An amount equal to the total estimated amount of this potential obligation is reflected on the financial statements of JKA contained herein as “Common Stock Subject to Redemption.”

 

If I have conversion rights, how do I exercise them?

 

If you wish to exercise your conversion rights, you must vote against the merger and, at the same time, demand that JKA convert your shares into cash. You are not required to tender your shares of common stock at or before the special meeting if you vote against the merger and demand that JKA convert your shares into cash. If, notwithstanding your vote, the merger is completed, then you will be entitled to receive a pro rata share of the trust account in which a substantial portion of the net proceeds of JKA’s initial public offering are held, including any interest earned thereon through the date of the special meeting. Based on the amount of cash held in the trust account as of September 30, 2007, $79,721,079, without taking into account any interest accrued after such date, you will be entitled to convert each share of common stock that you hold into approximately $6.03 per share. If you exercise your conversion rights, then you will be exchanging your shares of JKA common stock for cash and will no longer own these shares of common stock. You will only be entitled to receive cash for these shares if you continue to hold these shares through the closing date of the merger and then tender your stock certificate to JKA. Prior to exercising your conversion rights, JKA stockholders should verify the market price of JKA’s common stock as they may receive higher proceeds from the sale of their common stock in the public market than from exercising their conversion rights. JKA’s shares of common stock are listed on the American Stock Exchange under the symbol “JKA.” If you convert your shares of common stock and continue to hold warrants to purchase JKA common stock, you will retain the right to exercise the warrants received as part of the units purchased in the initial public offering or in the after-market in accordance with the terms thereof. If the merger is not completed, then your shares will not be converted to cash at this time, even if you so elected.

 

No party to the merger agreement or any of their respective representatives or agents has had, directly or indirectly, any contact with a current or potential shareholder with the purpose of altering an intended conversion election. Other than in connection with the solicitation of proxies as described herein, no party to the merger agreement intends to contact a shareholder with the purpose of altering an intended conversion election. In addition, no party to the merger agreement intends to purchase any shares held by a shareholder with the purpose of altering an intended conversion election.

 

What happens to the funds deposited in the trust account after completion of the merger?

 

Upon completion of the merger, any funds remaining in the trust account after payment of amounts, if any, to stockholders exercising their conversion rights will become operating capital of JKA. The amount of the trust fund ($79,721,079 as of September 30, 2007) will be used as working capital of JKA after the merger.

 

Who will manage JKA upon completion of the merger with Multi-Shot, LLC?

 

Upon completion of the merger, JKA will be managed by Allen Neel — Chief Executive Officer and President. Furthermore, upon completion of the merger, Multi-Shot, Inc. will be managed by Allen Neel — Chief Executive Officer and President, David Cudd — Vice President and Paul Culbreth — Vice President, each of whom currently hold the same respective positions at Multi-Shot, LLC. It is anticipated that the Board will consist of up to seven members. We expect the Board of JKA following the consummation of the merger, will consist of Allen Neel, Ron Nixon, K. Rick Turner, James O. Jacoby, Jr. and Kim Eubanks.

 

Immediately after the consummation of the merger, assuming that no JKA stockholders exercise any of the stockholders’ conversion rights and no outstanding warrants or options are exercised, the selling members of Multi-Shot, LLC will own approximately 60.75% of the outstanding JKA common stock, the present public stockholders of JKA (or their transferees) will own approximately 37.18% of the outstanding JKA common stock and the present officers and directors of JKA (or their transferees) will own approximately 2.07% of the outstanding JKA common stock. As a result, a change of control of JKA will occur upon consummation of the merger.

 

What potential management conflicts exist if the proposal is approved?

 

At the close of business on the record date, James P. Wilson, Keith D. Spickelmier, Herbert C. Williamson and Michael H. McConnell, who together comprise all of JKA’s current directors and officers, beneficially owned 3,291,667 shares of JKA common stock, or 19.9% of the outstanding shares of JKA common stock. 2,958,333 of these shares were purchased prior to JKA’s initial public offering for an aggregate purchase price of $31,250 (approximately $0.01 per share). In addition, Mr. Wilson purchased 183,334 units and Mr. Spickelmier purchased 150,000 units in a private placement immediately prior to the initial public offering for an aggregate purchase price of $2,000,004 ($6.00 per unit). Each unit consisted of one common share and two warrants. Collectively, the 3,625,001 shares of JKA common stock held by the officers and directors have a market value of approximately $21,460,000 based on JKA’s common stock price of $5.92 per share as of September 28, 2007 (without taking into account any discount that may be associated with the restrictions on transfer of these shares).

 

The 666,668 warrants included in the units purchased by Mr. Wilson and Mr. Spickelmier have a value of approximately $247,000 based upon the warrant price of $0.37 per warrant as of September 28, 2007 (without taking into account any discount that may be associated with the restrictions on transfer of these warrants). JKA’s officers and directors will not receive any value associated with their common shares or warrant ownership in the event that a business combination is not consummated.

 

Under the terms of the merger agreement, Messrs. Wilson, Spickelmier, Williamson and McConnell have agreed to the cancellation of 2,458,334 shares of JKA common stock they currently own. Our officers and directors will receive no compensation for the cancellation of the 2,458,334 shares.

 

Our officers and directors will also transfer 92,522 of their remaining shares to Gibbs & Bruns, L.L.P. upon the consummation of the merger with Multi-Shot pursuant to the terms of the Settlement Agreement. Gibbs & Bruns is the law firm that represented JKA in connection with the litigation against Multi-Shot. The transfer of 92,522 shares from our directors and officers to Gibbs & Bruns represents a portion of the compensation payable to Gibbs & Bruns for services rendered. The shares transferred to Gibbs & Bruns remain subject to the escrow provisions and transfer restrictions imposed on our officers and directors.

 

As a result of the cancellation of shares and transfer to Gibbs & Bruns, Messrs. Wilson, Spickelmier, Williamson and McConnell will own a total of 740,741 shares of JKA common stock (including the 333,334 shares included in the units separately acquired by Mr. Wilson and Mr. Spickelmier immediately prior to JKA’s initial public offering) upon the consummation of the merger. These 740,741 shares had a market value of approximately $4,385,000 based on JKA’s common stock price of $5.92 per share as of September 28, 2007 (without taking into account any discount that may be associated with certain restrictions on transfer these shares). Additionally, the 666,668 warrants included in the units purchased separately by Mr. Wilson and Mr. Spickelmier have a value of approximately $247,000 based upon the warrant price of $0.37 per warrant as of September 28, 2007 (without taking into account any discount that may be associated with the restrictions on transfer of these warrants).

 

Mr. Wilson and Mr. Spickelmier have agreed to indemnify JKA with respect to the due diligence, accounting, legal and other expenses of JKA in connection with the merger in the event the merger or another business combination is not consummated before April 10, 2008. If the merger is completed before April 10, 2008, this indemnity will terminate. As of September 30, 2007 we estimate JKA had unpaid accounts payable or accrued liabilities of $584,090 that we believe could be covered by Mr. Wilson’s and Mr. Spickelmier’s indemnity agreement. As of September 30, 2007, JKA had approximately $90,492 in cash. Mr. Wilson and Mr. Spickelmier have advanced JKA a total of $500,000 to provide working capital (as described in JKA’s Current Reports on Form 8-K filed May 24, 2007, June 15, 2007, August 8, 2007 and September 6, 2007). None of the $500,000 advances are included in the $584,090 of accounts payable and accrued liabilities as of September 30, 2007. These

advances will be repaid upon the closing of the merger. If the merger or another business combination is not consummated by April 10, 2008, these advances will not be repaid. As a result of the advances and the indemnification obligations, we estimate that Mr. Wilson and Mr. Spickelmier will be out of pocket approximately $1.1 million if the merger or another business combination is not consummated by April 10, 2008.

 

Upon consummation of the merger, certain members of management and the board of directors will own Parent Warrants and may own Redemption Warrants. The Parent Warrants and Redemption Warrants are only exercisable to the extent that holders of JKA’s currently outstanding public warrants exercise their warrants. Management and the board of directors determine if Contingent Awards are paid under the merger agreement to holders of the Parent Warrants and Redemption Warrants. The Parent Warrants, Redemption Warrants and Contingent Awards are discussed more fully under “Warrants and Contingent Awards” on page 14.

 

JKA has no right to redeem the public warrants unless JKA’s common stock trades at or above $8.50 per share on each of 20 trading days within any 30 trading day period. JKA has no plans to attempt to redeem the warrants in an effort to trigger Contingent Awards. JKA may evaluate various corporate finance alternatives that involve voluntary warrant redemptions or a reduction in the exercise price of the warrants to accelerate the exercise of the public warrants. Management and the board of directors would evaluate any such corporate finance alternatives regarding the public warrants on behalf of JKA.

 

No current member of management of JKA or any of their affiliates has any relationship with Multi-Shot, LLC, Catalyst, or SG-Directional, LLC or any of their respective affiliates.

 

What happens if the merger is not consummated?

 

If the merger is not consummated, JKA’s certificate of incorporation will not be amended, the additional directors will not be elected and the equity incentive plan will not be adopted. JKA will continue to search for a business to acquire. However, JKA will be liquidated if (i) it does not consummate a business combination by October 10, 2007 or, (ii) if a letter of intent, agreement in principle or definitive agreement is executed, but not consummated, by October 10, 2007, then by April 10, 2008. In the event the merger is not consummated, JKA will continue to search for another suitable acquisition target. In the event of a liquidation, the net proceeds of JKA’s initial public offering held in the trust account, plus any interest earned thereon, will be distributed on a pro rata basis to the holders of JKA’s common stock that acquired their shares in the initial public offering or in the open market.

 

Mr. Wilson and Mr. Spickelmier have agreed to indemnify JKA related to certain expenses in the event a merger is not consummated within a specified time frame. If a merger is completed within the specified time frame such indemnity will cease. As of September 30, 2007 we estimate JKA had unpaid accounts payable or accrued liabilities of $584,090 that we believe could be covered by Mr. Wilson’s and Mr. Spickelmier’s indemnity agreement. As of September 30, 2007, JKA had approximately $90,492 in cash. Mr. Wilson and Mr. Spickelmier have advanced JKA a total of $500,000 (as described in JKA’s current reports on Form 8-K filed May 24, 2007, June 15, 2007, August 8, 2007 and September 6, 2007). None of the $500,000 advances are included in the $584,090 of accounts payable and accrued liabilities as of September 30, 2007. Such advances would be repaid upon the closing of the merger. If a merger is not consummated by April 10, 2008, these advances would not be repaid.

 

When do you expect the proposals to be completed?

 

It is currently anticipated that the transactions and actions contemplated discussed in the proposals will be completed as promptly as practicable following the JKA special meeting of stockholders to be held on [          ], 2007, unless JKA and Multi-Shot, LLC agree to another date after the special meeting.

 

Who can help answer my questions?

 

If you have questions about any of the proposals, you may write or call JK Acquisition Corp. at 4400 Post Oak Parkway, Suite 2530, Houston, Texas 77027, (713) 978-7557, Attention: James P. Wilson.

 

PROPOSAL ONE

 

THE MERGER PROPOSAL

 

SUMMARY

 

This summary of the merger and the principal terms of the Second Amended and Restated Agreement and Plan of Merger, dated August 27, 2007, by and among: JKA; Multi-Shot, Inc.; Multi-Shot, LLC; and each of Catalyst and SG-Directional, LLC, as members’ representative; and the members of Multi-Shot, LLC, is subject to, and is qualified in its entirety by reference to, the Second Amended and Restated Agreement and Plan of Merger, a copy of which is attached as Annex A, and the more comprehensive discussion found beginning on page 13 in these proxy materials.

 

 

 

 

MULTI-SHOT, LLC

 

Description of Business

 

Multi-Shot, LLC provides directional drilling services with an established presence in most major onshore oil & natural gas producing basins in the U.S. Since inception of its predecessor business in 1980, the company has developed into a leading independent service provider that employs a skilled and experienced labor force. (see page 84 for description of experience of labor force). Multi-Shot provides downhole drilling motors and labor which assist in drilling oil or gas wells directionally as opposed to the standard vertical drilling of wells. In connection with these services, Multi-Shot also provides downhole surveying and measurement while drilling services. These

services provide information on the location of the wellbore as it is being drilled directionally and other critical feedback from the wellbore. Multi-Shot owns and operates specialized equipment used in directional drilling and directional surveying and maintains a diversified customer base that includes large, U.S. based independent exploration and production companies. Furthermore, Multi-Shot, LLC has a veteran management team focused on creating opportunities for continued growth. The principal executive office of Multi-Shot, LLC is located at 2507 North Frazier, Suite 215, Conroe, Texas 77303, (936) 441-6655, which will be JKA’s headquarters after the merger.

 

Private Recapitalization of Multi-Shot, LLC

 

In late January 2007, principals of Catalyst contacted The Stephens Group, a private equity firm, regarding their potential interest in a possible transaction with Multi-Shot. The Stephens Group manages, but does not own, a new entity named SG Directional, LLC (“SG-Directional”) that was organized to consider this investment. No officers of JKA, Multi-Shot or any Multi-Shot members had any relationship with The Stephens Group, SG-Directional or any of its affiliates prior to the completion of the private recapitalization. Through a series of negotiations between Multi-Shot and SG-Directional, a recapitalization and purchase agreement was executed by and among SG-Directional, Multi-Shot, its members and Catalyst. The recapitalization was completed on April 2, 2007. Through the private recapitalization, SG-Directional acquired 61.4% of the membership interests of Multi-Shot directly from certain of the members of Multi-Shot for $45.0 million. Additionally, SG-Directional provided a subordinated debt loan to Multi-Shot in the amount of $15 million. The implied gross enterprise value related to the recapitalization was $122.3 million. The implied net enterprise value on the recapitalization date was $73.3 million. The difference between the gross enterprise value and net enterprise value represents the debt level at the date of the recapitalization, which totaled $49.4 million. See further discussion on page 62. Neither SG-Directional nor any of its affiliates received any fees (other than interest earned on the subordinated debt investment) or other compensation as a result of the private recapitalization. SG-Directional will have its subordinated debt loan to Multi-Shot repaid (along with any unpaid and accrued interest) through the proceeds of the JKA trust account at the merger date. SG-Directional will receive an estimated $12.3 million in cash consideration at the closing of the merger, and will receive JKA equity consideration as a member of Multi-Shot. The private recapitalization does not effect the proposed merger between Multi-Shot and JKA, other than SG-Directional is now the majority member of Multi-Shot.

 

Market Price of and Dividend Policy on Multi-Shot, LLC Interests

 

There is no established public market for ownership interests in Multi-Shot. The ownership interests in Multi-Shot are currently owned by (i) four (4) individuals that are part of management or managers of Multi-Shot and (ii) six (6) investment limited partnerships or limited liability companies. Multi-Shot has not paid any dividends or distributed any amounts to its members in the previous two years and does not have any equity compensation plans, other than amounts distributed to its Members with respect to (i) the private recapitalization transaction with SG-Directional, LLC as described on page 61 and (ii) federal income taxes and interests awarded pursuant to incentive plans that terminate upon the closing of the merger. Neither the income tax distribution to Multi-Shot’s members in early 2007 nor the distribution to Multi-Shot’s members in connection with the private recapitalization impacted or will impact the merger consideration.

 

LITIGATION AND SETTLEMENT AGREEMENT

 

On July 9, 2007, Multi-Shot verbally notified JKA that if JKA was unable to obtain stockholder approval of the transactions contemplated by the Previous Merger Agreement prior to July 31, 2007, then Multi-Shot would exercise its termination rights on July 31, 2007 or soon thereafter pursuant to Section 9.01(a) of the Previous Merger Agreement. Based on the then current status of JKA’s proxy materials on Schedule 14A related to the Previous Merger Agreement, as well as certain terms and provisions in the Previous Merger Agreement and JKA’s bylaws, as amended, JKA did not believe that it would obtain the necessary stockholder approval of the transactions contemplated by Previous Merger Agreement prior to July 31, 2007. It was JKA’s position that any inability to obtain the necessary stockholder approval prior to July 31, 2007 was the result of wrongful acts and omissions by Multi-Shot. Multi-Shot disagreed with this assessment.

 

On July 16, 2007, JKA filed suit in the state district court of Harris County, Texas against Multi-Shot and twelve other named defendants. JKA was seeking injunctive relief and other damages related to various claims of

breach of contract in connection with the First Amended and Restated Agreement and Plan of Merger dated February 14, 2007 (“Previous Merger Agreement”). On July 17, 2007 a temporary restraining order was issued by the court that prohibited Multi-Shot and twelve other named defendants from selling, transferring, encumbering, diluting, or otherwise disposing of any asset of or interest in Multi-Shot other than in the usual course of business. On August 27, 2007, a Settlement Agreement between the parties to the suit was executed simultaneously with the merger agreement. The merger agreement includes substantially different terms than the Previous Merger Agreement, including the following:

 

 

Additionally, Multi-Shot acquired certain operating assets of Ulterra MWD, L.P. (“Ulterra”) effective July 1, 2007. The aggregate purchase price of the Ulterra assets was $10,000,000 in cash with an earnout provision that provides for additional payments to Ulterra based on the future economic performance of the Ulterra assets. The acquisition of the Ulterra assets is more fully described under “Asset Acquisition of Ulterra MWD, L.P.” on page 63. The Ulterra asset acquisition was not contemplated in the Previous Merger Agreement merger consideration.

 

The Board met on August 26, 2007 and authorized the execution of the Settlement Agreement and the merger agreement. The Board believes the terms of the Settlement Agreement are favorable to the JKA stockholders. The Settlement Agreement ends the litigation process and enables JKA to complete the merger with Multi-Shot. The Board reviewed the terms of the merger agreement and analyzed the RBC fairness opinion and the results of operations of Multi-Shot, LLC since February 14, 2007. As more fully described in “Reasons For The Merger” beginning on page 24, the Board concluded that the merger with Multi-Shot is in the best interests of JKA’s stockholders.

 

SECOND AMENDED AND RESTATED AGREEMENT AND PLAN OF MERGER

 

The following summary of the material provisions of the Second Amended and Restated Agreement and Plan of Merger, or merger agreement, is qualified by reference to the complete text of the merger agreement, a copy of which is attached as Annex A to this proxy statement. All stockholders are encouraged to read the merger agreement in its entirety for a more complete description of the terms and conditions of the merger.

 

Structure of the Merger

 

At the effective time of the merger, Multi-Shot, LLC will be merged with and into Multi-Shot, Inc., a newly-formed, wholly-owned subsidiary of JKA, and Multi-Shot, Inc. will continue as the operating company and a wholly-owned subsidiary of JKA. JKA will be renamed MS Energy Services, Inc.

 

Initial Merger Consideration

 

At closing, the initial merger consideration for all the issued and outstanding membership interests of Multi-Shot is expected to be approximately $197,500,000, consisting of the following:

 

 

 

Initial Merger Consideration issued to Multi-Shot Members:

 

 

 

 

Additional Consideration

 

In addition to the initial consideration for the merger set forth above, JKA has agreed to the following:

 

 

Warrants and Contingent Awards

 

Parent Warrants.   The Parent Warrants may only be exercised if a Contingent Award is determined to be due to the holder pursuant to the merger agreement. The Parent Warrants may be exercised for shares of JKA common stock on a cashless exercise basis (“Contingent Award Shares”) or for replacement warrants to purchase JKA common stock for a cash exercise price between $5.00 and $6.25 per share (“Cash Exercise Warrants”). The Parent Warrants are intended to compensate the members of Multi-Shot for the dilution that will result from exercises of the currently outstanding warrants to purchase JKA common stock, including the warrants issued in connection with JKA’s initial public offering.

 

Redemption Warrants.   The Redemption Warrants are issued in conjunction with Redemption Liability Shares if the amount paid by JKA to its stockholders from the trust fund in connection with exercises of the conversion rights of JKA stockholders exceeds $3,000,000. The Redemption Warrants (and the Redemption Liability Shares) are intended to compensate the members of Multi-Shot for reduction of the trust fund in excess of

$3,000,000 as a result of conversions by JKA stockholders since such reduction in the trust fund will result in less available cash from the trust fund for working capital requirements of JKA following the merger. To the extent that Redemption Liability Shares and Redemption Warrants are issued, the members of Multi-Shot will receive increased consideration pursuant to the merger. Under the scenario of maximum conversion, we estimate the merger consideration would be increased by $1,288,455 as a result of the issuance of the Redemption Liability Shares and Redemption Warrants. Like the Parent Warrants, the Redemption Warrants may only be exercised if a Contingent Award is determined to be due to the holder and may be exercised for Contingent Award Shares or Cash Exercise Warrants.

 

Contingent Awards.   The Contingent Awards are intended to provide a mechanism to compensate members of Multi-Shot for dilution resulting from exercises of currently outstanding warrants to purchase JKA common stock (“Index Warrants’’). There are 27,166,668 Index Warrants currently outstanding, including 666,668 warrants held by Messrs. Wilson and Spickelmier and 26,500,000 warrants issued in JKA’s initial public offering and held by public warrant holders. Contingent Awards are calculated at the end of three periods (each is referred to as a “Determination Period”):

 

 

If any Index Warrants are exercised during any Determination Period, Parent Warrants and Redemption Warrants may be exercised for either:

 

 

The Chief Financial Officer will be responsible for preparing the Contingent Award calculation to be approved by the Board of Directors. The Chief Financial Officer will not own, directly or indirectly, any of the Parent Warrants subject to the Contingent Award, however certain board members or their affiliates may own Parent Warrants subject to the Contingent Award. See page 6, “What potential management conflicts exist if the proposal is approved.”

 

An example of a Contingent Award calculation is described below:

 

Contingent Award Calculation — Example (Cashless Exercise)

 

(Based on the following assumptions: (i) 1,000,000 warrants exercised by public stockholders in the determination period, (ii) weighted average stock price of $7.00 per share for such warrant exercises by public stockholders in such determination period and (iii) weighted average exercise price of $5.00 per share)

 

 

The Contingent Awards were designed to provide the members of Multi-Shot with a partial anti-dilutive measure based on the exercise of warrants by JKA public warrant holders. To the extent that the Contingent Award results in additional common shares issued to the Parent Warrant holders and Redemption Warrant holders or the exercise of Cash Exercise Warrants results in the issuance of additional common shares, other JKA common shareholders will suffer dilution. The magnitude of the potential dilution will be dependent upon the ultimate number of Contingent Award Shares, if any, issued subject to the Contingent Award calculation or the shares issued as a result of the exercise of Cash Exercise Warrants.

 

The Parent Warrants and Redemption Warrants are not the same warrants which were registered by JKA in connection with its initial public offering. The form of Parent Warrant and Redemption Warrant to be issued to the Members is attached as Annex C. . The Parent Warrants and Redemption Warrants may be exercised only pursuant to Contingent Awards as determined based upon the exercise of public warrants by JKA stockholders. The holders of such warrants shall not be required to provide any additional consideration upon the exercise of a Parent Warrant or a Redemption Warrant unless the holder elects to replace Parent Warrants or Redemption Warrants with a Cash Exercise Warrant. Holders of Cash Exercise Warrants will be required to tender a cash exercise price to exercise a Cash Exercise Warrant.

 

All Parent Shares, Parent Warrants, Cash Exercise Warrants Redemption Warrants and JKA common stock issued pursuant to the exercise of any Parent Warrant, Cash Exercise Warrant or Redemption Warrant in connection with the Merger will be subject to (i) a registration rights agreement, which is attached to this proxy statement as Annex D, and (ii) all such equity securities issued to the continuing members of Multi-Shot (which excludes equity securities issued to SG-Directional, LLC), an escrow agreement, which is attached to this proxy statement as Annex E.

Effect of Redemption Liability Shares and Redemption Warrants

 

The Members will also be eligible to receive Redemption Liability Shares and Redemption Warrants if the cash consideration paid by JKA to its stockholders with respect to such stockholders exercising their conversion rights exceeds $3,000,000. The Redemption Liability Shares and Redemption Warrants were designed to address a concern of Multi-Shot that the merged company would have more net debt than it had bargained for to fund stockholder conversions. To the extent that JKA shareholders convert shares representing cash payments of greater than $3,000,000, then JKA will have either less cash from the trust account or a higher debt level then contemplated in the merger negotiations with Multi-Shot. Therefore, Multi-Shot required additional shares as merger consideration in this event. To the extent that Redemption Liability Shares and Redemption Warrants are issued, the members of Multi-Shot will receive increased consideration pursuant to the merger. Under the scenario of maximum conversion, we estimate the merger consideration would be increased by $1,394,063 as a result of the issuance of the Redemption Liability Shares and Redemption Warrants. As a result, the issuance of Redemption Liability Shares and Redemption Warrants will have the effect of providing additional stability regarding the value of the consideration received by the members of Multi-Shot in light of the amount of cash from the trust fund available for working capital of JKA following the merger. The table below highlights and summarizes the results of the Redemption Liability Shares and Redemption Warrants formula under varying percentages of JKA stockholders exercising conversion rights. Note that 19.99% conversion represents the maximum allowable conversion.

 

See below for a step by step description of this calculation. The issuance of the Redemption Share Liability and Redemption Warrants would cause dilution to JKA shareholders, offset by the number of shares retired through conversion to cash.

 

 

Closing of the Merger

 

Subject to the provisions of the merger agreement, the closing of the merger will take place no later than January 31, 2008, or, as soon as practicable after all the conditions described below under “The Second Amended and Restated Agreement and Plan of Merger — Conditions to the Completion of the Merger” on page 21 have been satisfied, unless JKA and Multi-Shot, LLC agree to another time.

 

Representations and Warranties

 

The merger agreement contains customary representations and warranties of each of JKA, Multi-Shot and the members of Multi-Shot, as applicable, relating to, among other things:

 

 

 

The assertions embodied in the representations and warrants contained in the merger agreement are qualified by information in disclosure schedules to the merger agreement, which we consider nonpublic information. However, any material information contained in the schedules to the merger agreement has been appropriately disclosed in this proxy statement.

 

Knowledge, Materiality and Material Adverse Effect

 

Certain of the representations and warranties are qualified by knowledge of the party, materiality or to the extent a breach does not result in a material adverse effect. For the purposes of the merger agreement, knowledge means, with respect to any party to the merger agreement, actual or deemed knowledge of: (i) in the case of Multi-Shot, its managers, as well as Paul Culbreth, David Cudd, and Scott Bork, and (ii) in the case of JKA, James P. Wilson, Keith D. Spickelmier, Michael H. McConnell and Herbert C. Williamson, and such knowledge that would be imputed to such persons upon reasonable inquiry or due investigation. An individual will be deemed to have knowledge of a particular fact, circumstance, event or other matter if (i) such fact circumstance, event or other matter is reflected in one or more documents, written or electronic, that are or have been in such individual’s possession or that would reasonably be expected to be reviewed by an individual who has the duties and responsibilities of such individual in the customary performance of such duties and responsibilities, or (ii) such knowledge could be obtained from reasonable inquiry of those persons employed by an entity (as the case may be) charged with administrative or operational responsibility for such matter for such party by the person in the discharge of his duties and responsibilities with regards to those persons. For the purposes of the merger agreement, a material adverse effect on an entity means any event, change, violation, inaccuracy, circumstance or effect (regardless of whether or not such events, changes, violations, inaccuracies, circumstances or effects are inconsistent with the representations or warranties made by the entity in the merger agreement) that has, or could reasonably be expected to have, individually or in the aggregate, a material adverse effect on the business, operations, condition (financial or otherwise), assets (tangible or intangible), liabilities, employees, properties, prospects, capitalization or results of operations of an entity, except for any such events, changes, violations, inaccuracies, circumstances or effects resulting from or arising in connection with (i) any changes in general, political, global or other national or worldwide events or changes in economic or business conditions that do not disproportionately impact an entity as compared to other entities similar in size and scope as that of an entity and that are within its industry or (ii) any changes or events affecting the industry in which an entity operates that do not disproportionately impact an entity as compared to other entities similar in size and scope as that of an entity and that are within its industry.

 

Interim Covenants Relating to Conduct of Business

 

Each of JKA and Multi-Shot has agreed to continue to operate its business in the ordinary course prior to the closing of the merger, to use reasonable efforts to preserve current relationships with customers, employees and suppliers, and additional material covenants including that (i) each party shall obtain all necessary approvals, including stockholder and governmental approvals; (ii) each party shall protect confidential information and maintain the confidentiality of the other’s proprietary information; and (iii) until termination of the merger agreement (except as discussed below), not to solicit or accept an offer to enter into a competing transaction.

 

No Solicitations by JKA or Multi-Shot

 

Multi-Shot has suspended or terminated, and has the legal right to terminate or suspend, all negotiations and discussions of any acquisition, merger, consolidation or sale of all or substantially all of the assets or member interests of Multi-Shot with parties other than JKA. Furthermore, Multi-Shot has agreed, from the date of the merger agreement and until the termination of the merger agreement, not to, directly or indirectly through any officer, member, manager, employee, representative or agent, solicit, initiate, entertain or encourage any proposal or

offer from, or engage in any negotiations with any person other than JKA, or agree to, approve or recommend, any proposal for a competing transaction.

 

JKA is permitted to receive general inquiries from third parties concerning potential transactions that would be in substitution of or in addition to, the Merger as contemplated by the merger agreement, and to conduct preliminary dialogue related thereto. However, JKA may not negotiate, present, or propose terms with any third party with respect to any such transaction until the earlier of: (i) the closing of the merger, or (ii) the termination of the merger agreement pursuant to the terms provided therein.

 

Access to Information

 

During the period prior to the closing, each of JKA and Multi-Shot has agreed to give the other, its counsel, accountants and other representatives, reasonable access during normal business hours to the properties, books, records and personnel of the other to obtain all information concerning the business, including the status of product development efforts, properties, results of operations and personnel of the other, as such party may reasonably request.

 

Escrow and Indemnification

 

Upon the closing of the merger, all of the shares of JKA common stock and warrants issued to the original members of Multi-Shot (all members of Multi-Shot except for SG-Directional, LLC) will be transferred to an escrow agent to secure (i) any post-closing adjustment in the purchase price in JKA’s favor and (ii) the indemnification obligations of the members related to representations, warranties and other agreements. The escrow agreement shall provide that so long as a bona fide, good faith claim for indemnification has not been made by JKA, that (i) the entirety of the escrow fund remain with the escrow agent until December 31, 2008, (ii) after December 31, 2008, the escrow amount and that portion of escrow shares (and/or any proceeds or common stock of JKA received by virtue of the sale of JKA common stock, or the exercise of Parent Warrants and Redemption Warrants) in excess of $3,000,000 in value based on the escrow per share market value be released to the members as well as the entirety of the escrow warrants, and (iii) upon completion of thirty-six months after closing, the escrow account shall be closed and all remaining escrow shares and/or proceeds shall be released to the members. Pursuant to the terms and conditions of the merger agreement, none of the merger consideration payable to SG-Directional, LLC, as a member of Multi-Shot, LLC, will be held in escrow for indemnification purposes. Only merger consideration payable to the other members of Multi-Shot, LLC will be held in escrow for indemnification purposes.

 

The members of Multi-Shot, jointly and severally, have agreed to hold JKA and its representatives, successors and permitted assigns harmless from any damages, whether as a result of any third party or otherwise, and which arise from or in connection with any breach by the members or Multi-Shot of any representations, warranties, covenants or obligations under the merger agreement. Subject to certain exceptions, claims made against the members of Multi-Shot may be asserted only after the aggregate amount of all claims exceeds $500,000. Additionally, subject to certain exceptions, including fraud or willful misrepresentation or misconduct, the aggregate indemnification liability of the members will not exceed $10,000,000. Most of the representations and warranties of the parties under the merger agreement will survive the closing until December 31, 2008; however, certain representations and warranties will survive for longer periods, including, but not limited to, organization, qualification, charter documents, capitalization, authority, conflicts, environmental, taxes and required vote.

 

JKA has agreed to hold harmless the members and Multi-Shot for any breach of JKA’s representations, warranties or covenants under the merger agreement. Indemnification claims may be made against JKA only after the aggregate amount of claims exceeds $500,000. Subject to certain exceptions, including fraud or willful misrepresentation or misconduct, the aggregate indemnification liability of JKA will not exceed approximately $14,616,631. Most of the representations and warranties of the parties under the merger agreement will survive until December 31, 2008; however, certain representations and warranties will survive for longer periods, including but not limited to organization, qualification, charter documents, capitalization, authority, conflicts, SEC filings, board approval , issuance of shares and taxes.

 

Multi-Shot has not agreed to waive any recourse against the trust account in the event that the merger is not consummated and JKA breaches its agreement with Multi-Shot.

 

Fees and Expenses

 

Whether or not the merger is consummated, all fees and expenses incurred in connection with the merger including, without limitation, all legal, accounting, financial advisory, consulting and all other fees and expenses of third parties incurred by a party in connection with the negotiation and effectuation of the terms and conditions of the merger agreement and the transactions contemplated thereby, shall be the obligation of the respective party incurring such fees and expenses, except in such circumstances described in the merger agreement in which JKA may be liable to Multi-Shot for the expenses of Multi-Shot.

 

Public Announcements

 

The parties have agreed to cooperate in good faith to jointly prepare all press releases and public announcements pertaining to the merger agreement and the related transactions, and no party shall issue or otherwise make any public announcement or communication pertaining to the merger agreement or the merger without the prior consent of the other, except as required by any legal requirement or by the rules and regulations of, or pursuant to any agreement of, a stock exchange or trading system. Each party has agreed not to unreasonably withhold approval from the other with respect to any press release or public announcement.

 

Pre-Closing Confirmation

 

Not later than 48 hours prior to the closing:

 

 

Conditions to the Completion of the Merger

 

The obligations of JKA and Multi-Shot are subject to certain customary closing conditions, including the following:

 

 

Effect of Termination

 

In the event of termination, the merger agreement shall forthwith become void, there shall be no liability under the merger agreement on the part of JKA, Multi-Shot, Inc. or Multi-Shot or any of their respective officers, managers or directors, and all rights and obligations of each party hereto shall cease.

 

Furthermore, if the merger agreement is terminated:

 

 

Representatives

 

Multi-Shot has designated each of Catalyst and SG-Directional, LLC as its representatives with authority to make all decisions and determinations and to take all actions required or permitted under the merger agreement and the escrow agreement on behalf of the members of Multi-Shot. Ron Nixon, acting through Catalyst, and K. Rick Turner, acting through SG - Directional, will jointly act as the representatives of Multi-Shot. Any such action, decision or determination so made or taken shall be deemed the action, decision or determination of the members of Multi-Shot, and any notice, document, certificate or information required to be given to any member of Multi-Shot shall be deemed so given if given to the representative. As affiliates of such representatives are also members of Multi-Shot, it is possible that potential conflicts of interest may arise with respect to its obligations as representative and its interests pertaining to Multi-Shot member interests held by its affiliates.

 

EMPLOYMENT AGREEMENTS

 

A condition to JKA’s obligation to consummate the merger is that each of Allen Neel, David Cudd and Paul Culbreth enter into employment agreements with JKA, in form and substance reasonably acceptable to JKA and such persons. Messrs. Neel, Cudd and Culbreth are presently employed by Multi-Shot, LLC, and have employment agreements with Multi-Shot, LLC. Each of such persons has agreed in principle to enter into substantially identical employment agreements with JKA, which become effective only upon consummation of the merger. The following summary description of such employment agreements describes the material terms of such employment agreements and does not purport to describe all of the terms and conditions of the employment agreements. The current employment agreements of Messrs. Neel, Cudd and Culbreth are attached as Annexes J-L.

 

Scope and Term of Employment

 

The employment agreements will provide that, after the merger, Allen Neel will be employed as President and Chief Executive Officer of JKA and Multi-Shot, Inc. and David Cudd and Paul Culbreth as Vice-Presidents of Multi-Shot, Inc., Messrs. Neel, Cudd and Culbreth are collectively sometimes referred to as the employees. Other than these differences in offices (and other requirements under applicable laws), the employment agreements are substantially identical.

 

Compensation

 

Each employee:

 

subject to Board approval. Such Compensation Committee is an independent committee of the Board. Payment of the annual bonus (if any) will occur within 90 days after the close of the fiscal year, but in no event, prior to the delivery of the annual audited financial statements; and

 

Each of Messrs. Neel, Cudd and Culbreth may also receive long-term equity compensation in the form of restricted shares or stock options, all as determined by the Compensation Committee.

 

Fringe Benefits, Reimbursement of Expenses

 

Each employee will be entitled to, among other things:

 

 

ESCROW AGREEMENT

 

Pursuant to the merger agreement, on the closing date of the merger the parties involved in the merger will enter into an escrow agreement (referred to in this proxy statement as the “Escrow Agreement”) with the escrow agent to secure certain post-closing obligations of the selling members. The following description summarizes the material provisions of the escrow agreement. Stockholders should read carefully the Escrow Agreement, attached to this proxy statement as Annex E .

 

On the closing date of the merger, JKA will enter into an Escrow Agreement with the selling members, who will be represented by the selling members’ representative, and the escrow agent. On the closing date, we will deposit with the escrow agent 8,399,890 shares of our common stock and 11,008,503 warrants (plus any shares of common stock and warrants awarded with respect to the redemption liability adjustment under the terms of the merger agreement awarded to the members of Multi-Shot, excluding SG-Directional, LLC) to secure (i) any post-closing Multi-Shot balance sheet adjustments in the purchase price in our favor and (ii) certain indemnification obligations of the selling members under the merger agreement.

 

REGISTRATION RIGHTS AGREEMENT

 

Upon the closing of the merger pursuant to the merger agreement, JKA will enter into a registration rights agreement with the selling members who will be represented by the selling members’ representative. The following description of the registration rights agreement describes the material terms of the registration rights agreement but does not purport to describe all the terms of the agreement. The complete text of the registration rights agreement is attached as Annex D to this proxy statement and is incorporated by reference into this proxy statement. We encourage all stockholders to read the registration rights agreement in its entirety.

 

General

 

Pursuant to the merger agreement, the selling members will receive 21,759,259 shares of our common stock and 28,516,668  warrants to obtain shares of our common stock (plus shares of common stock and warrants awarded with respect to the redemption liability adjustment under the terms of the merger agreement) (collectively referred to in this proxy statement as the “registerable securities”). We agreed to provide the selling members certain registration rights in relation to the registerable securities.

 

Demand Registration Rights

 

At any time subsequent to six months after the effective time of the merger, The holders of a majority-in-interest of the registerable securities, acting through their representatives, Catalyst and SG - Directional, may make a written demand for registration under the Securities Act of all or part of their registerable securities. Additionally, if elected by a majority-in-interest of the demanding stockholders, the registration shall be made pursuant to an underwritten offering. We shall not be obligated to affect more than an aggregate of two demand registrations under the registration rights agreement.

 

Piggy-back Registration Rights

 

If at any time after the date of the registration rights agreement we propose to file a registration statement under the Securities Act of 1933, as amended, with respect to an offering of equity securities, either for our own account or for the account of any of our stockholders, then the selling members, acting through their representatives, shall have the right to include their shares of common stock in the registration statement, subject to specific limitations as set forth in the registration rights agreement.

 

Form S-3 Registration Rights

 

The selling members, acting through their representatives, shall have the right at any time on an unlimited number of occasions to require that we register any or all of their shares of our common stock on a “Form S-3” or any similar short-form registration which is available to us at the time. In addition to any other limitations set forth in the registration rights agreement, the aggregate offering to the public must be at least $0.5 million.

 

Indemnification Related to Registration Rights

 

JKA has agreed to indemnify the selling members, in such capacity as a stockholder of JKA on a post-closing basis, from and against any expenses, losses, judgments, claims, damages or liabilities arising out of or based upon any untrue statement of a material fact, or any omission to state a material fact necessary to make statements in any registration statement filed with the SEC as required pursuant to the Registration Rights Agreement not misleading, or any violation by us of the Securities Act of 1933, as amended, except if such statement or omission was made by us in reliance upon and in conformity with information furnished to us in writing by a selling member for use in such registration statement. The indemnification in the Registration Rights Agreement does not extend to any actions the selling members may take as directors or officers of JKA following the merger. The selling members, in such capacity as a stockholder of JKA on a post-closing basis, have agreed to indemnify us from and against any expenses, losses, judgments, claims, damages or liabilities arising out of or based upon an untrue statement of a material fact contained in any registration statement filed with the SEC as required pursuant to the Registration Rights Agreement, or any omission to state a material fact necessary to make statement in such registration statement not misleading, if the statement or omission was made by us in reliance upon and in conformity with information furnished in writing to us by the selling members for use in such registration statement.

 

REASONS FOR THE MERGER

 

The Board has concluded that the merger with Multi-Shot is in the best interests of JKA’s stockholders.

 

Each member of the Board is experienced in evaluating merger and acquisition opportunities. In arriving at its determination to approve the merger agreement with Multi-Shot, the Board relied on information (including financial information) relating to Multi-Shot, the regulatory environment, the industry dynamics, the reports of outside due diligence consultants and the Board’s experience in building, managing and financing companies.

 

JKA retained Ernst & Young to perform detailed financial due diligence on Multi-Shot. Ernst & Young prepared a detailed written report stating its findings. Due to the size of the potential transaction and its complexity, management retained the Ernst & Young Transactional Advisory Services (“E&Y”) group to perform specific due diligence procedures. In general E&Y’s procedures were designed to focus on quality of earnings; quality of net assets; an understanding of the issues concerning accounting, processes, policies and financial management; quality of reported EBITDA; an understanding of the company’s historical cost structure, including key profitability

drivers; an understanding of historical working capital and capital expenditure trends and seasonality. Additionally, E&Y reviewed the year to date (at the time of their report) results and remaining budget for 2006 and projections for 2007 considering historical trends in revenues and expenses. JKA hired Hein & Associates to perform an audit of three years of Multi-Shot’s financials, which has been concluded. JKA retained Longnecker & Associates to perform a compensation survey to evaluate management compensation. Longnecker provided a written report. JKA also had various discussions with the investment banking community regarding the oil and gas service industry. JKA also had numerous discussions with members of the oil and gas industry regarding the industry and specifically regarding Multi-Shot. All of this information was considered by the Board in determining to pursue this merger.

 

During the due diligence process, the Board also discussed the option of obtaining a fairness opinion of the proposed merger between JKA and Multi-Shot. The Board decided to obtain such an opinion as a condition to closing the merger. The opinion was sought to confirm to the Board the consideration agreed upon was fair, from a financial point of view, to JKA and its shareholders. The opinion was also sought to provide guidance as to the fair market value of Multi-Shot to satisfy the condition that the fair market value of Multi-Shot is at least equal to 80% of the net asset value of JKA. The opinion was not required in any way by the terms of our initial public offering as a result of any conflict between management of JKA and Multi-Shot. JKA received the fairness opinion prior to entering into the merger agreement. The merger is conditioned on receipt of an acceptable fairness opinion. The fairness opinion was delivered on August 24, 2007 and is described below beginning on page 27.

 

The Board considered a wide variety of factors in connection with its evaluation of the merger. In light of the complexity of those factors, the Board did not consider it practicable to, nor did it attempt to, quantify or otherwise assign relative weights to the specific factors it considered in reaching its decision. In addition, individual members of the Board may have given different weight to different factors.

 

The analysis of the Board in reaching this conclusion is described in more detail below. In considering the merger, the Board gave considerable weight, but did not attempt to assign relative weight, to the following positive factors:

 

Multi-Shot’s successful record of growth and high potential for future growth

 

An important criteria to the Board in identifying an acquisition target was that the target company have strong existing operations, positive and growing EBITDA and possess the opportunity for organic growth through customer development, geographic development, and reinvestment in equipment, personnel and facilities. The Board believes that Multi-Shot possesses a high degree of name recognition and a positive reputation in the oil and gas service market place and the infrastructure for additional growth. JKA has confirmed Multi-Shot’s name recognition and reputation through its due diligence with financial and operational industry participants. Multi-Shot, through its predecessors, commenced business operations in 1980 and grew its business to approximately $74.0 million in revenue for the fiscal year ended December 31, 2006. For the prior two fiscal years ended, the revenues were approximately $38.1 million and $19.2 million, respectively. This record of consistent growth was impressive to the Board. The Board believes that Multi-Shot has the ability to continue this rapid rate of growth because Multi-Shot:

 

 

The experience of Multi-Shot’s management

 

Another important criteria to the Board in identifying an acquisition target was that the target company must have a seasoned management team with specialized knowledge of the markets within which it operates and the ability to

lead a growth company. Multi-Shot’s management is led by its President and CEO, Allen Neel, who has significant oil and gas service experience based upon his 26 years of experience in the industry, including the past 17 years with Multi-Shot and its predecessors. Mr. Paul Culbreth, Vice President of Operations, has 31 years experience in the drilling services industry, the last 19 of which with Multi-Shot and its predecessor entities. Mr. David Cudd, Vice President of Sales has 31 years experience in the oil and gas services industry, the last 8 years with Multi-Shot and its predecessors. Additionally, Multi-Shot’s 214 employees include 61 drillers as of December 31, 2006.

 

Diversification of Customer Base

 

Multi-Shot has a diversified customer base. For the fiscal year ended December 31, 2006, no customer accounted for more than 10% of Multi-Shot’s revenues. This reduces Multi-Shot’s exposure to events outside its control, including events specific to a particular customer and not the entire industry, such as mergers and acquisitions.

 

The terms of the Settlement Agreement and the Merger Agreement

 

The Board evaluated and considered the terms of the Settlement Agreement and the merger agreement. The Board discussed the terms of the Settlement Agreement with counsel. The Board compared the terms of the merger agreement to the terms of the Previous Merger Agreement. The Board reviewed and discussed the year to date operations of Multi-Shot, which further confirmed the Board’s view of the successful record of growth and high potential for future growth of Multi-Shot. Further, the Board concluded that the RBC opinion confirmed the Board’s valuation analysis. The Board concluded that the merger agreement and Settlement Agreement were in the best interests of JKA’s stockholders.

 

The Board also considered, but did not attempt to assign relative weight, to the following potentially negative factors:

 

Decline in commodity prices

 

The Board considered the fact that commodity prices for oil and natural gas may decline. A significant decline in oil and gas prices would likely reduce U.S. based drilling activity. Such a reduction in drilling activity could negatively affect Multi-Shot’s revenues. The Board believes that U.S. and worldwide energy demand will continue to grow over the long term. The Board factored in a short term decline in commodity oil and gas prices in structuring the proposed merger and believes MSE will be well-positioned to withstand a slow down in the industry.

 

The risk that its public stockholders would vote against the merger and exercise their conversion rights.

 

The Board considered the risk that the current public stockholders of JKA would vote against the merger and exercise their conversion rights, thereby depleting the amount of cash available to the combined company following the merger. Based on the estimated opening balance sheet under a range of assumed redemption levels, the Board deemed this risk to be less with regard to Multi-Shot than it would be for other target companies and believes that Multi-Shot will continue to be able to implement its business plan even if the maximum number of public stockholders exercised their conversion rights and the combined company received only 80% of the funds deposited in the trust account to complete the transaction.

 

Certain officers and directors of JKA may have different interests in the merger than the JKA stockholders.

 

The Board considered the fact that certain officers and directors of JKA may have interests in the merger that are different from, or are in addition to, the interests of JKA stockholders generally, including the matters described under “Interests of JKA Directors and Officers in the Merger” below. However, this fact would exist with respect to a merger with any target company.

 

The limitations on indemnification set forth in the merger agreement.

 

The Board considered the limitations on indemnification set forth in the merger agreement, see “The Second Amended and Restated Agreement and Plan of Merger — Escrow and Indemnification,” but determined that any definitive agreement with any target company would contain similar limitations.

 

After deliberation, the Board determined that these potentially negative factors were outweighed by the potential benefits of the merger, including the opportunity for JKA stockholders to share in Multi-Shot’s future possible growth and anticipated profitability.

 

FEDERAL INCOME TAX CONSEQUENCES

 

As the stockholders of JKA are not receiving any consideration or exchanging any of their outstanding securities in connection with the merger with Multi-Shot, and are simply being asked to vote on the matters, it is not expected that the stockholders will have any tax related issues as a result of voting on these matters. However, if you vote against the merger proposal and elect a cash conversion of your shares of JKA into your pro-rata portion of the trust account and as a result receive cash in exchange for your JKA shares, there may be certain adverse tax consequences. WE URGE YOU TO CONSULT YOUR OWN TAX ADVISORS REGARDING YOUR PARTICULAR TAX CONSEQUENCES.

 

CONSEQUENCES IF MERGER IS NOT APPROVED

 

If the merger proposal is not approved by the stockholders, JKA will not merge with Multi-Shot and JKA will continue to seek other potential business combinations. In addition, JKA would not consummate the other proposals discussed herein. In such an event there is no assurance that JKA will have the time, resources or capital available to find a suitable business combination partner before (i) the proceeds in the trust account are liquidated to holders of shares purchased in JKA’s initial public offering and (ii) JKA is dissolved pursuant to the trust agreement and in accordance with JKA’s certificate of incorporation.

 

REGULATORY MATTERS

 

The merger and the transactions contemplated by the merger agreement are not subject to any federal or state regulatory requirement or approval, except the Hart-Scott-Rodino Antitrust Improvements Act of 1976, and except for filings necessary to effectuate the transactions contemplated by the merger proposal and the amendment to the certificate of incorporation proposal with the Secretary of State of Delaware and the Secretary of State of Texas, as applicable, and filings with the American Stock Exchange.

 

FAIRNESS OPINION

 

Opinion of RBC

 

Pursuant to an engagement letter dated August 17, 2007, JKA retained RBC Capital Markets Corporation (which we refer to as “RBC”) to render an opinion to the Board as to (1) the fairness to JKA, from a financial point of view, as of the date of the opinion, of the consideration to be paid by JKA in connection with the merger, and (2) whether the fair market value of Multi-Shot, LLC is equal to at least 80% of the net asset value of JKA. RBC did not provide any other investment banking or advisory services related to this transaction.

 

On August 24, 2007, RBC delivered to the Board its oral opinion, subsequently confirmed in writing, that, as of the date of its opinion, based upon RBC’s experience as investment bankers and subject to the assumptions, limitations and qualifications contained in its opinion, and other matters RBC considers relevant, (1) the consideration to be paid by JKA pursuant to the merger agreement is fair, from a financial point of view, to JKA and (2) the fair market value of Multi-Shot, LLC is equal to at least 80% of the net asset value of JKA.

 

The full text of the written opinion of RBC is attached to this Proxy Statement as Annex F and incorporated into this proxy statement by reference. We urge you to read that opinion carefully and in its entirety for the assumptions made, procedures followed, other matters considered and limits of the review undertaken in arriving at that opinion.

RBC’s opinion was directed to the Board in connection with the merger agreement, and is limited to only (1) the fairness to JKA, from a financial point of view, as of the date of the opinion, of the consideration to be paid by JKA pursuant to the merger agreement, and (2) whether the fair market value of Multi-Shot, LLC is equal to at least 80% of the net asset value of JKA. RBC’s opinion does not in any way address other terms or arrangements of the merger or the merger agreement, including, without limitation, the financial or other terms of any voting agreement, escrow agreement or employment agreement or the indemnification provisions of the merger agreement. Furthermore, RBC’s opinion does not address the merits of the underlying decisions by JKA to engage in the transactions contemplated by the merger agreement or the relative merits of the transactions contemplated by the merger agreement compared to any alternative business strategy or transaction in which JKA might engage. All advice and opinions (written and oral) rendered by RBC are intended for the use and benefit of the Board. RBC expresses no opinion and makes no recommendation to any JKA stockholder as to how such stockholder should vote with respect to the merger, the merger agreement or any other matter submitted to a vote of the JKA stockholders.

 

The consideration to be paid in the merger was determined in arm’s-length negotiations between JKA and Multi-Shot, LLC and not by RBC. RBC did not recommend the consideration to be paid in the merger. The consideration was determined in negotiations among the parties to the merger agreement, in which RBC did not advise the Board. No restrictions or limitations were imposed by the Board on RBC with respect to the investigations made or the procedures followed by RBC in rendering its opinion.

 

In rendering its opinion, RBC:

 

 

In arriving at its opinion, RBC performed the following analyses in addition to the review, inquiries, and analyses referred to above:

 

 

You should note that in rendering its opinion, RBC assumed and relied upon the accuracy and completeness of the financial, legal, tax, operating and other information provided to RBC by JKA and Multi-Shot, LLC (including, without limitation, the financial statements, the capitalization tables, and related notes thereto of JKA and Multi-Shot, LLC), and has not assumed responsibility for independently verifying and has not independently verified such information. For all forward-looking financial information with respect to JKA, RBC has relied upon the forecasts and estimates provided to RBC by JKA management. For all forward-looking financial information with respect to Multi-Shot, LLC, RBC has relied upon the forecasts and estimates provided to RBC by Multi-Shot, LLC management. RBC has assumed that all forecasts and estimates provided to it by JKA management or Multi-

Shot, LLC management represent the best currently available estimates and good faith judgments of such management as to the applicable entity’s financial performance, and RBC expresses no opinion as to any aspect of such forecasts or estimates.

 

Additionally, RBC did not perform an independent evaluation or appraisal of any of the assets or liabilities of JKA or Multi-Shot, LLC, and RBC has not been furnished with any such valuations or appraisals. RBC has not investigated, and makes no assumption regarding, any litigation or other claims affecting JKA, Multi-Shot, LLC, or any other person or entity. RBC’s opinion relates to Multi-Shot, LLC as a going concern and, accordingly, RBC expresses no opinion regarding the liquidation value of Multi-Shot, LLC.

 

RBC’s opinion speaks only as of the date of such opinion, is based on the conditions as they existed and information which RBC had been supplied as of the date of the opinion, and is without regard to any market, economic, financial, legal, or other circumstances or event of any kind or nature which may exist or occur after such date. RBC has not undertaken to reaffirm or revise its opinion or otherwise comment upon events occurring after the date of the opinion and RBC does not have an obligation to update, revise or reaffirm its opinion. RBC expressed no opinion as to the prices at which JKA common stock or warrants to purchase JKA common stock have traded or will trade following the announcement or consummation of the merger.

 

For purposes of its opinion, RBC assumed, in all respects material to its analysis, that all conditions to the consummation of the merger agreement will be satisfied without waiver thereof, that the representations and warranties of each party contained in the merger agreement are true and correct and that each party to the merger agreement and any documents ancillary thereto will perform all covenants and agreements required to be performed by it under the merger agreement and such document, without amendment thereto. RBC also assumed that the executed version of the Agreement will not differ, in any respect material to its opinion, from the draft of the merger agreement dated August 22, 2007 that RBC reviewed.

 

The following is a brief summary of the analyses performed by RBC in connection with its opinion. This summary is not intended to be an exhaustive description of the analyses performed by RBC but includes all material factors considered by RBC in rendering its opinion. RBC drew no specific conclusions from any individual analysis, but subjectively factored its observations from all of these analyses into its assessments.

 

Each analysis performed by RBC is a common methodology utilized in determining valuations. Although other valuation techniques may exist, RBC believes that the analyses described below, when taken as a whole, provide the most appropriate analyses for RBC to arrive at its opinion. Some of the information below is provided in a tabular format. To understand fully the summary of the financial analyses used by RBC, the tables must be read together with the text of each summary. The tables alone do not constitute a complete description of the financial analyses conducted by RBC in rendering its opinion.

 

Overview of Purchase Price Consideration

 

Pursuant to the merger agreement, the total consideration was determined based on the agreed upon enterprise value of $197.5 million, calculated as the sum of:

 

 

In rendering its opinion, RBC assumed that the merger consideration of $197.5 million would consist of $20.0 million in cash, $60.0 million in assumed third-party debt, and $117.5 million in JKA stock and warrants (including all Contingent Award Shares and Warrants) per the merger agreement.

 

Summary of Ranges

 

As described above, RBC utilized numerous methodologies, analyses and inquiries in rendering its opinion. The following is a summary of the ranges resulting from the principal analytical methods used by RBC in rendering its opinion. The summary should be read in conjunction with the full description of each of the analytical methods

provided elsewhere in this section, as well as the other assumptions, qualifications and limitations described in this section, and the opinion itself:

 

 

The assumed aggregate merger consideration for Multi-Shot, LLC of $197.5 was within each of the Precedent Transactions Analysis, the Comparable Public Company Analysis and the Discounted Cash Flow Analysis estimated transaction value ranges calculated by RBC. RBC believes, based upon its experience as a financial advisor, that the ranges stated in the above bulleted points are typical for transactions the size of the one proposed by the merger agreement given the assumptions utilized.

 

Precedent Transactions Analysis

 

RBC reviewed certain publicly available financial data and purchase prices paid or announced in 19 other comparable merger and acquisition transactions. RBC selected these precedent transactions based on (1) the recent period in which they were completed (all were completed since January 1, 2002), (2) the reported value of the precedent transaction (all were between $30.0 million and $500.0 million), and (3) the similarity of the target companies in certain respects to Multi-Shot, LLC, including their participation in the oil services industry, the similarity of the products and services they provide to those offered by Multi-Shot, LLC and their similar end markets and sizes. RBC did not deliberately exclude any identified companies that fell within the selection criteria discussed above.

 

 

 

RBC obtained the total transaction value of the relevant reported transaction involving the target company from publicly available sources, and calculated the total transaction value as a multiple of the target company’s EBITDA ⁽²⁾ , as disclosed in public documents, for the last twelve months ended on the last day of the period covered by the acquiring company’s Form 10-K, Form 10-Q, or Form 8-K from the SEC, or interim financial from SEDAR as applicable, last filed prior to the announcement of the relevant transaction, using information in such Form 10-K, Form 10-Q, or Form 8-K from the SEC, or interim financial from SEDAR, as applicable. RBC then determined the maximum, mean, median and minimum multiples of last twelve months EBITDA for the selected precedent transactions. RBC did not make any adjustments in its analysis to account for the differences in cost structure between the public and private target companies.

 

Based on its experience in analyzing energy industry companies and transactions and the precedent transactions analysis, RBC selected a range of EBITDA multiples of 4.9x to 6.9x for Multi-Shot, LLC. In selecting this representative valuation multiple range, RBC took into consideration both, the mean (5.9x) and median (5.5x) multiples provided by the precedent transactions analysis.

 

 

(2) EBITDA as defined as Net Income + Taxes + Net Interest Expense + Depreciation and Amortization

Utilizing the above mentioned EBITDA multiple range, RBC estimated a range of EBITDA multiples (4.9x and 6.9x) for Multi-Shot, LLC around the mean EBITDA (5.9x) multiple of the precedent transactions. RBC then estimated a range of transaction values for Multi-Shot, LLC by multiplying the endpoints of EBITDA multiple ranges (4.9x to 6.9x) by Multi-Shot, LLC’s projected 2007 last twelve months Adjusted EBITDA of approximately $29.5 million for the period ended November 30, 2007. Multi-Shot, LLC’s projected Adjusted EBITDA for the twelve months ended November 30, 2007 was calculated as follows:

 

 

 

 

RBC calculated ‘‘Adjusted EBITDA” for Multi-Shot, LLC in its analysis to arrive at a measurement that RBC believed, based upon its experience, was comparable to the EBITDA utilized in the selected precedent transactions. Although any adjustments to EBITDA necessarily require some subjective determinations, the adjustments made in calculating Adjusted EBITDA above were those that, in RBC’s experience, were appropriate to remove the effects of one-time or non-recurring events or expenses. The fees, commissions and bonuses represent cash distribution payments to management paid out based on the former private company structure and have been terminated as of the date of Multi-Shot, LLC private recapitalization in April 2007. Accordingly, the Adjusted EBITDA excludes one-time management fees as well as commissions and bonuses that Multi-Shot, LLC management does not anticipate will recur following the proposed merger. However, the adjusted EBITDA projections provided by Multi-Shot, LLC management and used by RBC include the future compensation arrangements for Multi-Shot, LLC personnel, including bonuses and commissions to be paid out going forward. These aforementioned adjustments, if not included, would materially alter the ranges calculated by RBC in its analyses; however, RBC believed, based on its experience and expertise, that the Adjusted EBITDA should be taken into account in this case in order to increase the comparability to normalized EBITDA figures used in the precedent transactions analysis. RBC used the projected 2007 Adjusted EBITDA for twelve months ended November 30, 2007 in its precedent transaction analysis as it represents the last twelve months EBITDA that is closest to the transactions date, which, in RBC’s view and based upon its expertise and experience, represents a method commonly used in the financial advisory industry in similar circumstances and an appropriate metric based on the precedent transactions selected. If RBC had used the actual last twelve months ended June 30, 2007 Adjusted EBITDA in its precedent transactions analysis instead of the projected Adjusted EBITDA for the twelve months ended November 30, 2007, then RBC’s analysis would not have taken into account Multi-Shot, LLC management’s projected growth of Multi-Shot, LLC between June 30, 2007 and November 30, 2007.

 

In calculating EBITDA and Adjusted EBITDA above, RBC did take into consideration the recapitalization of Multi-Shot, LLC that occurred on April 1, 2007. RBC decided to not utilize the recapitalization as a comparable transaction for the precedent transactions analysis described above because it was a private transaction and the terms were not publicly disclosed.

 

RBC noted that the assumed aggregate merger consideration for Multi-Shot, LLC of $197.5 million was within the estimated range of transaction values (approximately $145 million to $204 million) calculated by RBC based on comparable precedent transactions. The assumed aggregate merger consideration of $197.5 million for Multi-Shot,

LLC is comprised of $20 million in cash, $60 million in assumed third party debt, and $117.5 million in JKA stock and warrants.

 

In the precedent transactions analysis above, if RBC had utilized the actual last twelve months ended June 30, 2007 Adjusted EBITDA of $26.3 million instead of forecasted last twelve months ended November 30, 2007 Adjusted EBITDA of $29.5 million, RBC’s precedent transactions analysis would have generated a range of transaction values of approximately $129 million to $182 million. The assumed aggregate merger consideration for Multi-Shot, LLC of $197.5 million would fall outside of this range. However, if RBC had used the actual last twelve months ended June 30, 2007 Adjusted EBITDA in its precedent transactions analysis, than such analysis would not have taken into account Multi-Shot, LLC management’s projected growth of Multi-Shot, LLC between June 30, 2007 and November 30, 2007; RBC concluded, therefore, based upon its expertise and experience, that the use of forecasted last twelve months ended November 30, 2007 Adjusted EBITDA of $29.5 million was appropriate in analyzing the merger. It should be noted that, in its review of the transactions, RBC utilized the precedent transaction analysis as one of several analytical methods in determining the fairness to JKA, from a financial point of view, as of the date of the opinion, of the consideration to be paid by JKA in connection with the merger. As stated above, RBC drew no specific conclusions from any individual analysis, but subjectively factored its observations from all of these analyses into its assessments.

 

No transaction utilized in the precedent transaction analysis is identical to the merger. In evaluating the transactions, RBC made judgments and assumptions with regard to industry performance, general business, economic, market and financial conditions and other matters, many of which are beyond the control of the parties to the merger agreement. Mathematical analysis of comparable transaction data (such as determining means and medians) in isolation from other analyses is not an effective method of evaluating transactions.

 

Comparable Public Company Analysis

 

RBC reviewed and compared publicly available selected financial data and reported stock trading prices for nine publicly traded companies chosen by RBC based on RBC’s energy industry knowledge and expertise. RBC believed these nine companies to be comparable to Multi-Shot, LLC,because they are oilfield service companies that provide similar services and product lines to those offered by Multi-Shot, LLC. While there are no perfectly comparable companies with identical products, services, or size range, in its selection process, RBC included companies that, based on RBC’s experience and expertise in analyzing energy industry companies, are comparable to Multi-Shot, LLC, RBC did not deliberately exclude any companies which may have been otherwise included. The comparable companies chosen by RBC included:

 

 

For each of the selected comparable companies, RBC calculated the applicable company’s total enterprise value as of August 22, 2007 (based on its publicly reported market capitalization as of August 22, 2007), as a multiple of that company’s publicly reported revenue and Adjusted EBITDA ⁽⁵⁾ for the last twelve months ended June 30, 2007. Comparable company last twelve months revenue and Adjusted EBITDA were calculated from

 

 

(5) Adjusted EBITDA as defined as EBITDA + Extraordinary Items + Non-Recurring Expenses + Non-Cash Expenses

information set forth in the applicable company’s SEC filings, press releases, IBES, FactSet, Wall Street research and company websites.

 

RBC calculated “Adjusted EBITDA” in its analysis for Multi-Shot, LLC and the selected comparable companies to arrive at a measurement that RBC believed, based upon its experience, was comparable. The calculation of Multi-Shot, LLC’s Adjusted EBITDA was identical to the calculation of Adjusted EBITDA described in RBC’s Precedent Transactions Analysis. Although any adjustments to EBITDA necessarily require some subjective determinations, the adjustments made in calculating Adjusted EBITDA above were those that, in RBC’s experience, were appropriate to remove the effects of one-time or non-recurring events or expenses. RBC excluded one-time management fees as well as commissions and bonuses that Multi-Shot, LLC management does not anticipate will recur following the proposed merger from Multi-Shot, LLC’s Adjusted EBITDA. These adjustments, if not included, would materially alter the valuation range; however, RBC believed, based on its experience and expertise, that the Adjusted EBITDA should be taken into account in this case in order to increase the comparability to the Adjusted EBITDA figures used in the comparable company analysis.

 

 

 

 

Based on its experience in analyzing energy industry companies and transactions and the comparable companies analysis, RBC selected a range of revenue and Adjusted EBITDA multiples of 1.7x to 2.3x and 5.2x to 7.2x, respectively, for Multi-Shot, LLC. In selecting these representative valuation multiple ranges, RBC took into consideration both the revenue and Adjusted EBITDA mean (1.9x and 6.2x, respectively) and median (1.7 and 6.0x, respectively) multiples provided by the comparable companies analysis.

 

Utilizing the above mentioned revenue and Adjusted EBITDA multiple ranges, RBC then estimated a range of transaction values for Multi-Shot, LLC by multiplying the endpoints of the revenue (1.7x and 2.3x) and Adjusted EBITDA (5.2x and 7.2x) multiple ranges by Multi-Shot, LLC’s revenue and Adjusted EBITDA of approximately $88.3 million and $26.3 million, respectively, for the last twelve months ended June 30, 2007.

 

RBC noted that assumed aggregate merger consideration for Multi-Shot, LLC of $197.5 million was within range of implied enterprise values (approximately $160 million to $213 million based on LTM revenues and $147 million to $199 million based on LTM Adjusted EBITDA) calculated by RBC based on comparable public company analyses.

 

No company utilized in the comparable public company analysis is identical to Multi-Shot, LLC. Each of the comparable companies analyzed are publicly traded, which generally have higher valuations than private companies like Multi-Shot, LLC due to their greater size and market penetration and the comparative liquidity of their securities, among other reasons. RBC made judgments and assumptions with regard to industry performance, general business, economic, market and financial conditions and other matters, many of which are beyond the control of the parties to the merger agreement. Mathematical analysis of comparable public companies (such as determining means and medians) in isolation from other analyses is not an effective method of evaluating transactions.

Discounted Cash Flow Analysis

 

RBC examined the value of Multi-Shot, LLC based on projected future free cash flow estimates provided by Multi-Shot, LLC’s management. The free cash flow estimates were generated utilizing financial projections for the years ending December 31, 2008 through December 31, 2012 that were prepared and furnished to RBC by Multi-Shot, LLC’s management. RBC did not perform any independent inquiry regarding the reasonableness of any assumptions underlying the financial projections provided by Multi-Shot, LLC’s management. The underlying projections were based on Multi-Shot, LLC management’s estimate of Multi-Shot, LLC’s annual revenue growth rate of approximately 17.5% in 2008 and approximately 10% per year thereafter through 2012. Multi-Shot, LLC management further assumed that forecasted margins would remain consistent with historical margins throughout the projection period. The projections provided by Multi-Shot, LLC management did not take into consideration any acquisitions, new financing transactions or any other material future events.

 

RBC discounted Multi-Shot LLC management’s free cash flow estimates using the half-year convention and with a discount rate calculated by using the weighted average cost of capital method, or “WACC”. WACC is calculated by multiplying the cost of each capital component by its proportional weight and then summing. RBC used the following formula for calculating the WACC:

 

WACC = E/V * Re + D/V * Rd * (1−Tc)

 

Re = cost of equity

 

Rd = cost of debt

 

E = market value of the firm’s equity

 

D = market value of the firm’s debt V = E + D

 

E/V = percentage of financing that is equity

 

D/V = percentage of financing that is debt

 

Tc = corporate tax rate

 

In calculating WACC, RBC utilized the following significant assumptions:

 

 

The foregoing calculation resulted in a WACC of 20.6%.

 

Next, RBC calculated terminal values using a range of exit EBITDA multiples (4.4x to 6.4x). which was estimated by RBC based on its review of the precedent transactions analysis. The exit multiple range was determined to be below the precedent transactions multiple range based on the fact that it is a forward looking multiple that requires a discount. The terminal value was calculated by multiplying the terminal year EBITDA by an EBITDA multiple using the following formula:

 

PV of Terminal Year = (Terminal Year EBITDA * EBITDA Multiple) / (1 + r) ^4.5

 

Enterprise values for Multi-Shot, LLC resulting from RBC’s discounted cash flow analysis ranged from approximately $159 million to approximately $203 million, as set forth in the chart below.

 

 

The following represents sensitivity of the discounted cash flow analysis to fluctuations in the WACC discount rate:

 

 

RBC noted that the assumed aggregate merger consideration for Multi-Shot, LLC of $197.5 was within the estimated range of implied enterprise values (approximately $159 million to $203 million) calculated by RBC based on the discounted cash flow analysis.

 

While discounted cash flow analysis is a widely accepted and practiced valuation methodology, it relies on a number of assumptions, including the above stated growth rates, terminal multiples and discount rates. The valuation derived from the discounted cash flow analysis is not necessarily indicative of Multi-Shot, LLC’s present or future value or results. Discounted cash flow analysis in isolation from other analyses is not an effective method of evaluating transactions.

 

Leveraged Buyout Analysis

 

Using Multi-Shot, LLC management’s financial projections for the years ending December 31, 2008 through December 31, 2012, RBC analyzed Multi-Shot, LLC from the perspective of a potential financial buyer effecting a leveraged buyout of Multi-Shot, LLC using leveraged capital structures typically employed by financial buyers. Principal among the assumptions RBC made regarding the leveraged capital structure was that a financial buyer could, in addition to its equity contribution, obtain debt financing in the amount of 3.0x Multi-Shot, LLC’s last twelve months Adjusted EBITDA to finance the transaction. RBC further assumed that the first 2.0x of the debt would bear a 9.25% annual interest rate and the remaining 1.0x of debt would bear a 14.0% annual interest rate. RBC made these debt and interest rate assumptions based on its experience as a financial advisor and its knowledge of capital markets.

 

RBC assumed that the buyer would value its investment in Multi-Shot, LLC as of December 31, 2012 using a range of exit EBITDA multiples (4.4x to 6.4x), which range was estimated by RBC based on its review of the precedent transactions analysis. The exit multiple range was determined to be below the precedent transactions multiple range based on the fact that it is a forward looking multiple that requires a discount. RBC then calculated Multi-Shot, LLC’s projected equity value as of December 31, 2012 by multiplying the 2012 projected EBITDA by the endpoints of the multiple range, adding its cash balance projected by Multi-Shot, LLC management as of December 31, 2012 and subtracting its debt outstanding projected by Multi-Shot, LLC management as of that same date. Based on these and certain other assumptions, RBC calculated a range of projected future equity values for Multi-Shot, LLC between $324.5 and $375.7 million as of December 31, 2012, and projected a range of enterprise values between $225.0 and $327.3 million as of December 31, 2012.

 

RBC calculated that the foregoing equity and enterprise values would result in a financial buyer realizing an internal rate of return range of 25.4% to 29.1% by December 31, 2012 if it purchased Multi-Shot, LLC for a purchase price equal to the assumed aggregate merger consideration of $197.5 million using the above described leveraged capital structure. Based on RBC’s experience with financial buyers, it believes that a financial buyer would typically expect returns in the range of 20% to 25% on its equity investment. Accordingly, a $197.5 million acquisition of Multi-Shot, LLC would generate internal rates of return of 25.4% to 29.1% by December 31, 2012, which are within or above the expected range.

As previously stated, RBC’s leveraged buyout analysis did not seek to estimate a range of present values for Multi-Shot, LLC, but instead provided a range of expected returns described above and compared this range to the expected returns based on past industry experience.

 

In conducting its leveraged buyout analysis, RBC made judgments and assumptions with regard to industry performance, general business, economic, market and financial conditions and other matters, many of which are beyond the control of the parties to the merger agreement. Mathematical analysis of leveraged buyout scenarios in isolation from other analyses is not an effective method of evaluating transactions.

 

 

Based on the foregoing analyses, RBC concluded that the value of Multi-Shot, LLC implied in the merger is greater than 80% of JKA’s net assets as of June 30, 2007.

 

Other Considerations

 

The summary set forth above describes the principal analyses performed by RBC in connection with its opinion delivered to the Board on August 24, 2007. The preparation of a fairness opinion is a complex process that involves the application of subjective business judgment in determining the most appropriate and relevant methods of financial analysis and the application of those methods to the particular circumstances and, therefore, is not necessarily susceptible to partial consideration of the analyses or summary description. RBC believes that its analyses must be considered as a whole and that selecting portions of the analyses and of the factors considered, without considering all of the factors and analyses, could create an incomplete or misleading view of the processes underlying its opinion.

 

In view of the wide variety of factors considered in connection with its evaluation of the fairness of the consideration to be paid by JKA in connection with the merger, from a financial point of view, RBC did not find it practicable to assign relative weights to the factors considered in reaching its opinion. No single company or transaction used in the above analyses as a comparison is identical to JKA or Multi-Shot, LLC or the proposed merger. The analyses were prepared solely for purposes of RBC providing an opinion as to the fairness, from a financial point of view, to JKA of the consideration proposed to be paid by JKA in the merger and do not purport to be appraisals or necessarily reflect the prices at which businesses or securities actually may be sold, which are inherently subject to uncertainty.

 

In connection with its analyses, RBC made, and was provided by JKA’s and Multi-Shot, LLC’s managements, numerous assumptions with respect to industry performance, general business and economic conditions and other matters, many of which are beyond JKA’s or Multi-Shot, LLC’s control. Analyses based upon forecasts of future results are not necessarily indicative of actual future results, which may be significantly more or less favorable than suggested by these analyses. None of JKA, Multi-Shot, LLC, RBC, or any other person assumes responsibility if future results or actual values are materially different from these forecasts or assumptions as these analyses are inherently subject to uncertainty, and are based upon numerous factors or events beyond the control of JKA, Multi-Shot, LLC, or their advisors.

 

Pursuant to the terms of an engagement letter dated August 17, 2007, JKA agreed to pay RBC fees for rendering its August 24, 2007 opinion to the Board that are customary in transactions similar to the merger. The terms of the fee arrangement with RBC were negotiated at arm’s-length between the Board and RBC. In accordance with the terms of the August 17, 2007 engagement letter, JKA paid RBC a fee of $175,000 for the delivery of RBC’s August 24, 2007 fairness opinion, which addresses the merger agreement. The fee was payable without regard to whether or not the opinion was accepted or the merger was consummated. JKA also agreed to reimburse RBC for its

reasonable out-of-pocket expenses under certain circumstances, and to indemnify RBC and related persons against liabilities in connection with its engagement.

 

RBC has not provided any services to Multi-Shot, LLC or any services to JKA other than in connection with the fairness opinion summarized above. JKA selected RBC to render its opinion based on RBC’s experience in mergers and acquisitions and in securities valuation generally. RBC is a nationally recognized investment banking firm and is regularly engaged in the valuation of businesses and securities in connection with mergers and acquisitions, corporate restructurings, underwritings, secondary distributions of listed and unlisted securities, private placements and valuations for corporate and other purposes. In the ordinary course of its business, RBC and its affiliates may act as a market maker and broker in the publicly traded securities of JKA and receive customary compensation, and may also actively trade securities (whether debt or equity) of JKA for its own account and the accounts of its customers, and accordingly, RBC and its affiliates, may hold a long or short position in such securities.

 

Fairness Opinion Comparison

 

The Board had previously received a fairness opinion from KeyBanc in conjunction with the Previous Merger Agreement. The KeyBanc opinion was dated April 30, 2007. The KeyBanc opinion resulted in a range of values for Multi-Shot of $108 million to $177 million. The Board determined that an updated fairness opinion would be requested in conjunction with the Merger Agreement. JKA requested that KeyBanc provide an updated fairness opinion based upon the terms of the Merger Agreement. KeyBanc was unable to commit to provide the updated fairness opinion sought by the Board within the time period requested by JKA. JKA then interviewed and engaged RBC, which had appropriate expertise and was able to complete the fairness opinion within the time period requested by JKA. All fees and expenses in connection with the KeyBanc opinion have been paid by JKA.

 

The following table summarizes what JKA believes to be certain key differences between the KeyBanc fairness opinion commissioned in conjunction with the Previous Merger Agreement and the RBC fairness opinion commissioned in conjunction with the merger agreement:

 

 

 

The information stated above regarding the RBC fairness opinion is merely a summary of the ranges resulting from certain of the analytical methodologies and inquiries conducted by RBC in rendering its opinion dated August 24, 2007. The summary table above should be read in conjunction with, and we urge you to refer to, RBC’s opinion as well as the section entitled “Opinion of RBC” for a more complete discussion of the analyses, material assumptions, qualifications and limitations underlying RBC’s opinion. As described above, RBC’s opinion speaks only as of the date of such opinion and is based on the conditions as they existed and information which RBC had been supplied as of the date of the opinion. RBC did not undertake to review or analyze, and has offered no analysis

or opinion regarding, the conclusions or analyses of KeyBanc contained in KeyBanc’s opinion, or regarding the assumptions, calculations, analyses, inquiries or methodologies underlying KeyBanc’s opinion.

 

BACKGROUND AND HISTORY OF NEGOTIATIONS

 

The terms of the merger agreement are the result of arm’s-length negotiations between representatives of JKA, Catalyst and Multi-Shot. The following is a brief discussion of the background of the formation of JKA, the negotiations between JKA and Multi-Shot, the merger and related transactions.

 

JKA was incorporated in Delaware on May 11, 2005, as a blank check company formed to serve as a vehicle for the acquisition, through a merger, capital stock exchange, asset acquisition or other similar business combination with a then currently unidentified operating business.

 

On April 10, 2006 JKA sold 333,334 units (“Private Placement Shares”) of common stock to two existing shareholders (James P. Wilson and Keith D. Spickelmier) for $2,000,004.

 

A registration statement for JKA’s initial public offering was declared effective on April 10, 2006. On April 11, 2006, JKA consummated its initial public offering of 11,500,000 units and on April 17, 2006, consummated the closing of an additional 1,725,000 units that were subject to the underwriters’ over-allotment option. Each unit consists of one share of common stock and two redeemable common stock purchase warrants. Each warrant expires on April 10, 2010, or earlier upon redemption, and entitles the holder to purchase one share of our common stock at an exercise price of $5.00 per share. The common stock and warrants started trading separately as of May 11, 2006.

 

The net proceeds from the sale of the JKA units and private placement shares were approximately $76,632,404. Of this amount, $76,532,404 was deposited in trust and, in accordance with JKA’s amended and restated certificate of incorporation, will be released either upon the consummation of a business combination or upon the liquidation of JKA. The remaining $100,000 was held outside of the trust for use to provide for business, legal and accounting due diligence on prospective acquisitions and continuing general and administrative expenses (“working capital”). Additionally, up to $900,000 of working capital may be funded from the interest earned from the trust account. As of December 31, 2006, approximately $77,627,249 was held in deposit in the trust account.

 

During the period from April 12, 2006 through September 2006, JKA evaluated approximately 20 prospective businesses regarding potential business combinations. Other than Multi-Shot, none of these evaluations led to an offer by JKA to pursue a business combination. JKA focused on companies that had experienced management, a track record of growth in revenues and cash flow that were involved in industries providing opportunity for additional acquisitions, regulatory or technical barriers to entry and growth prospects with a need for growth capital. These companies were sourced from contact with prospective target companies, private equity firms, investment firms, investment banks, banks, lawyers, accountants and other professionals. JKA chose to pursue Multi-Shot based on the terms it negotiated, its familiarity with the reputation of Messrs. Hermann and Nixon and because Multi-Shot met the investment parameters discussed above.

 

In May 2006, Multi-Shot began exploring potential strategic alternatives. On May 18, 2006, Multi-Shot’s Board of Managers engaged Parks Paton Hoepfl & Brown (“PPHB”), as its exclusive financial advisor to assist it with determining a range of market values and to make contact with certain agreed to prospective financing sources. PPHB and Multi-Shot’s Board of Managers, consisting of Messrs. Nixon, Neel and Robert P. Vilyus, evaluated various potential strategic alternatives, including an initial public offering of the Multi-Shot’s stock both in the U.S. and in the U.K. “AIM” markets, leveraged recapitalization transactions, acquisition and merger transactions and the continued execution of Multi-Shot’s strategic plan with its existing levels of capitalization. With respect to evaluating potential merger or sale alternatives, Multi-Shot requested that PPHB approach a targeted group of strategic and financial financing sources. Multi-Shot prepared a Confidential Information Memorandum to facilitate those discussions. During a period of approximately 60 days, PPHB approached a select group of potential strategic investors, which process was ongoing at the time when JKA approached Catalyst (which was then Multi-Shot’s controlling equity member, but JKA was unaware of this at such time).

 

On April 20, 2006 JKA sent a mass email to prospective target companies, investment banks, banks, lawyers, accountants and other professionals. The source of the email marketing campaign was JKA’s internal data base. Ron Nixon and Rick Herrman of Catalyst were included in the JKA internal data base and received the email from JKA.

 

Mr. Wilson has known Mr. Nixon and Mr. Herrman professionally since approximately 1992. Mr. Wilson’s firm, RSTW Partners, provided a subordinated debt investment to Messrs. Nixon and Herrman’s firm, the Catalyst Group, in 1994. The Catalyst Group’s principals have been in Mr. Wilson’s contact data base since they met in 1992. Prior to April 20, 2006 the most recent contact the principals of JKA had with a person associated with the Catalyst Group was in early 2004 when Mr. Spickelmier called upon Mr. Herrman to discuss a potential investment opportunity that was unrelated to JKA. No investment was completed as a result of this contact. After the JKA email of April 20, 2006, Mr. Spickelmier contacted Mr. Herrman at Catalyst in early May 2006 to inquire as to whether the Catalyst investment vehicles might have any assets that met the JKA investment parameters. At that time, JKA had no knowledge of the existence of Multi-Shot. Mr. Herrman indicated to Mr. Spickelmier that Catalyst may have assets in the form of security holdings in certain private companies that could fit the JKA investment parameters.

 

At the request of Catalyst, on May 12, 2006, Messrs. Wilson and Spickelmier met with Messrs. Brown, Hoepfl, Parks and Paton of PPHB to describe JKA and its investment parameters, processes and procedures. At this meeting PPHB informed Messrs. Wilson and Spickelmier that a Catalyst portfolio company, Multi-Shot may be a candidate for a transaction with JKA. PPHB indicated they would discuss this opportunity with representatives of Catalyst.

 

During the week of May 15, 2006, Mr. Brown contacted Mr. Spickelmier and described Multi-Shot in summary fashion. Mr. Brown requested that JKA review and sign a confidentiality agreement to review certain information related to Multi-Shot. After review of the confidentiality agreement, a meeting was scheduled for May 25, 2006 between JKA and Multi-Shot.

 

On May 25, 2006, Messrs. Wilson and Spickelmier met, at the offices of PPHB in Houston, Texas, with Messrs. Brown and Nixon and Mr. Allen Neel, President of Multi-Shot. This meeting was the first in-person meeting between JKA, Catalyst and management of Multi-Shot. At the outset of the meeting a confidentiality agreement was executed between JKA and Multi-Shot. Messrs. Wilson and Spickelmier provided a detailed explanation of the JKA entity and described the process to complete a merger/acquisition transaction. Messrs. Wilson and Spickelmier then received a memorandum entitled “Multi-Shot Executive Summary Discussion Materials”. Mr. Neel discussed the document and provided answers to the initial questions posed by Messrs. Wilson and Spickelmier.

 

On June 7, 2006 Mr. Wilson met with Mr. Brown to review additional due diligence materials prepared by Multi-Shot and PPHB.

 

On June 8, 2006 Mr. Wilson contacted Jon McCarty of Ernst & Young, LLP (“Ernst & Young”) to schedule an appointment to discuss the use of Ernst & Young’s Oil & Gas Transactional Services Group to provide due diligence assistance to JKA with respect to the Multi-Shot transaction.

 

On June 9, 2006 Mr. Wilson visited Multi-Shot’s headquarters and manufacturing facility in Conroe, Texas to meet with Mr. Neel. Mr. Wilson toured the facilities and held discussions with other members of the Multi-Shot management team.

 

On June 12, 2006, Mr. Wilson met with Mr. McCarty to describe a potential transaction with Multi-Shot and to describe the due diligence procedures that JKA would require Ernst & Young to perform.

 

On June 13, 2006, Messrs. Wilson, Herrman and Nixon met in Catalyst’s offices. Mr. Spickelmier attended by telephone. A series of due diligence questions raised by JKA were discussed. Additionally, general parameters of a merger agreement and terms of a transaction were discussed.

 

The officers and directors of JKA analyzed several potential investments before agreeing to the Multi-Shot merger, including companies in various manufacturing and service sectors. Management reviewed five energy production service companies, including Multi-Shot. In reviewing the energy production service industry, management began to focus on the natural gas drilling operations that management believed was one of the significant causes of increased U.S. onshore drilling activity. In its analysis, JKA management used information available regarding publicly traded energy production service companies. Based on this analysis, management believed that a drilling company focused on directional drilling activities could be an attractive public company due to the increasing need to drill unconventional natural gas wells. Management’s analysis indicated the number of directional drilling rigs was increasing at a higher rate, approximately 485%, than the rate of increase of conventional drilling rigs, approximately 122%, over the period from March 2002 to July 2006. Additionally,

natural gas exploration and production companies in the U.S. are experiencing a significant first year production decline rate with respect to their producing wells. Industry reports indicate that decline rates have risen from approximately 21% in 1997 to approximately 32% in 2006. The increase in the production decline rates requires a higher number of wells to be drilled to produce a similar amount of natural gas. Drilling and other well service providers such as Multi-Shot have benefited from the increase in drilling activity. In addition, drilling companies with significant directional drilling capability have benefited from the increased use of unconventional drilling techniques to recover less accessible natural gas fields. The initial assessment of Multi-Shot’s management team by JKA was favorable and met JKA’s requirement of an experienced management team to operate the business after the merger. As a result of its analysis of the business and management of Multi-Shot, JKA began exclusively focusing on a business combination with Multi-Shot.

 

On June 14, 2006, Mr. Wilson and Mr. Herrman met in Catalyst’s offices to begin drafting an outline of a proposed transaction. On the same day Mr. Wilson executed, on behalf of JKA, an engagement letter with Ernst & Young to perform certain agreed upon due diligence procedures related to the proposed Multi-Shot merger transactions.

 

On June 16, 2006, Mr. Wilson visited Multi-Shot’s headquarters to continue due diligence and meet with Mr. Neel, Mr. Paul Culbreth, Vice President of Operations and David Cudd, Vice President of Sales.

 

On June 20, 2006 Mr. Wilson and Mr. Spickelmier held an informal conference call with Messrs. Michael McConnell and Herb Williamson, both Board members of JKA to discuss a proposed merger transaction with Multi-Shot along with other potential opportunities that JKA was evaluating at that time. Mr. Wilson indicated to the Board that after additional due diligence a Board meeting would likely be called to discuss formal action. The same day, after the conference call with the Board, Messrs. Wilson and Spickelmier met with Messrs. Herrman, Nixon and Neel in the offices of JKA to further discuss and negotiate terms of a proposed transaction.

 

During the week of June 26, 2006 several conference calls were held between JKA, Catalyst and Multi-Shot to continue due diligence and to further develop the outline of a proposed merger transaction. Also during this week, Multi-Shot delivered its comprehensive overview of key accounting policies and procedures and controls to assist in JKA’s due diligence.

 

On July 5, 2006, Mr. Wilson visited Multi-Shot’s headquarters to meet with Mr. Neel and to introduce the Ernst & Young due diligence team, who began their due diligence procedures per the terms of the engagement letter with JKA.

 

On July 11, 2006 Messrs. Wilson and Spickelmier met with Messrs. Herrman, Nixon and Neel to further negotiate the outline of terms of the proposed merger transaction. The same afternoon, Messrs. Wilson, Nixon and Neel met with representative of Hein & Associates, LLP (“Hein”) to discuss retaining Hein to perform certain audit procedures necessary for the requirements of this proxy statement. Subsequently, on July 13, 2006, Hein was engaged by JKA to perform certain audit procedures related to Multi-Shot.

 

On July 13, 2006 a meeting of the Board was held in the offices of JKA. Messrs. Wilson, Spickelmier and McConnell attended in person and Mr. Williamson participated by telephone. Mr. Wilson described the potential transaction with Multi-Shot. Mr. Wilson gave a brief history of Multi-Shot and its primary owner, Catalyst. Mr. Wilson notified the Board that Ernst & Young had been retained to perform due diligence and to prepare a report for the Board and that Hein had been retained to perform the audits of Multi-Shot necessary to meet the proxy requirements. Mr. Wilson also noted that an investor relations firm would be retained to assist JKA in preparing an investor presentation and to prepare for investor meetings. Mr. Wilson also noted that a compensation expert would be retained to evaluate the terms of employment agreements and to offer guidance on director compensation. During the meeting, the Board also discussed the option of obtaining a fairness opinion for the proposed merger. It was determined by the Board that a nationally recognized firm would be retained after the signing of the merger agreement to conduct a fairness opinion on behalf of the shareholders of JKA, and that the merger agreement would contain a provision whereby, prior to the closing of the merger, a fairness opinion would be issued by a nationally recognized firm stating that (i) the merger is fair, from a financial point of view, to JKA and (ii) the fair market value of Multi-Shot is equal to at least 80% of JKA’s net assets. Mr. Wilson reviewed with the Board an executive summary that described the business of Multi-Shot. Mr. Wilson also discussed the internal growth prospects of Multi-Shot, including the possibilities for add-on acquisitions. Mr. Wilson also discussed the management team of

Multi-Shot and the structure of the proposed merger transaction. Mr. Wilson did not ask for formal Board action on the transaction at this meeting.

 

On July 14, 2006, Messrs. Wilson and Spickelmier met with representatives of Ernst & Young to review and discuss the draft financial due diligence report.

 

From July 17, 2006 through August 2, 2006, JKA, Multi-Shot and Catalyst and their respective counsel had a series of conference calls, meetings and drafting sessions to negotiate and document the terms of the merger agreement and related documents.

 

On August 3, 2006, the Board met again to review the merger with Multi-Shot and discussed in detail the draft merger agreement. After a full discussion and review of the draft merger agreement, the Board resolved for JKA to enter into the merger transaction with Multi-Shot, as detailed in the draft merger agreement, and the Board gave its officers the authority to sign any documents necessary to carry out the resolution. While no one factor determined the final agreed upon consideration in the merger, the Board again reviewed various industry and financial data, including certain valuation analysis and metrics compiled by JKA and its consultants, in order to determine that the consideration to be paid to the members of Multi-Shot was fair to and in the best interest of JKA’s shareholders.

 

From August 3, 2006 through September 6, 2006, JKA, Multi-Shot and Catalyst and the respective counsels for JKA and Multi-Shot had a series of conference calls, meetings and drafting sessions to further negotiate and document the terms of the merger agreement and related documents. During this time, a presentation regarding Multi-Shot and the proposed merger transaction was drafted and filed with the SEC for use in discussions with current and prospective investors after the signing of the merger agreement.

 

On September 6, 2006, JKA, Multi-Shot and various other parties entered into the Agreement and Plan of Merger (“Original Merger Agreement”) and related agreements. The Original Merger Agreement had a transaction value of $107,500,000 based upon an estimated EBITDA of approximately $17.6 million for the year ended December 31, 2006.

 

On September 7, 2006 JKA and Multi-Shot publicly announced the Original Merger Agreement through a joint press release.

 

On September 10, 2006, JKA engaged KeyBanc to issue and deliver a fairness opinion, and on October 23, 2006, KeyBanc delivered a fairness opinion to the Board. This fairness opinion addressed the Original Merger Agreement.

 

On November 22, 2006, JKA filed a preliminary proxy on Schedule 14A with the Securities and Exchange Commission.

 

In January 2007, JKA and Multi-Shot began discussions to extend the Original Merger Agreement past the January 31, 2007 deadline stipulated in the Original Merger Agreement. Through a series of conversations and negotiations between JKA, Multi-Shot and Catalyst, the Previous Merger Agreement was signed on February 14, 2007 as described in the JKA Form 8-K filing on February 15, 2007.

 

On April 3, 2007, JKA filed a Form 8-K announcing the closing of the private recapitalization between Multi-Shot and SG-Directional, LLC, a new entity managed by The Stephens Group, LLC. PPHB did not contact The Stephens Group regarding the private recapitalization and did not provide any services in connection with the private recapitalization.

 

On May 8, 2007, JKA filed Amendment No. 1 to its preliminary proxy statement on Schedule 14A with the SEC.

 

On July 9, 2007, Multi-Shot verbally notified JKA that if JKA was unable to obtain stockholder approval of the transactions contemplated by the amended and restated merger agreement prior to July 31, 2007, then Multi-Shot intended to exercise its termination rights on July 31, 2007 or soon thereafter pursuant to Section 9.01(a) of the Previous Merger Agreement. Based on the then current status of JKA’s proxy materials on Schedule 14A related to the Previous Merger Agreement, as well as certain terms and provisions in the Previous Merger Agreement and JKA’s bylaws, as amended, JKA did not believe that it would obtain the necessary stockholder approval of the transactions contemplated by Previous Merger Agreement prior to July 31, 2007. It was JKA’s position that any

inability to obtain the necessary stockholder approval prior to July 31, 2007 was the result of wrongful acts and omissions by Multi-Shot. Multi-Shot disagreed with this assessment.

 

On July 16, 2007, JKA filed suit in the state district court of Harris County, Texas against Multi-Shot and twelve other named defendants. JKA sought injunctive relief and other damages related to various claims of breach of contract in connection with the Previous Merger Agreement. On July 17, 2007 a temporary restraining order was issued by the court that prohibited Multi-Shot and twelve other named defendants from selling, transferring, encumbering, diluting, or otherwise disposing of any asset of or interest in Multi-Shot other than in the usual course of business.

 

On August 15, 2007, JKA and Multi-Shot began discussions to extend the Previous Merger Agreement past the July 31, 2007 deadline stipulated in the Previous Merger Agreement. Multi-Shot and JKA discussed a settlement proposal whereby Multi-Shot would agree to an extension of the merger agreement based upon a variety of factors, including a transaction price increase, a cancellation of certain JKA officers and directors shares, an agreement by JKA officers to fund up to an additional $500,000 in expenses related to completion of the merger transaction, restructuring of the post-merger board of directors and mutual releases related to the litigation. After extensive negotiations, JKA reached a tentative agreement with Multi-Shot on the terms of the merger.

 

On August 26, 2007, the Board held a board meeting to discuss the terms of the settlement proposal. The Board considered a variety of factors in connection with its evaluation of the merger and the settlement agreement. In light of the complexity of those factors, the Board did not consider it practical to, nor did it attempt to, quantify or otherwise assign relative weights to the specific factors it considered in reaching its decision. In addition, individual members of the Board may have given different weight to different factors.

 

The Board reviewed and discussed the economic terms of the settlement proposal, including the proposed consideration paid to the members of Multi-Shot pursuant to the Merger Agreement. The Board reviewed the financial performance of Multi-Shot since February 2007 and discussed its evaluation of the future performance prospects of Multi-Shot. The Board also reviewed and evaluated the fairness opinion supplied by RBC. The Board concurs with RBC’s analysis that the valuation is fair to JKA shareholders. Further, the Board believes that Multi-Shot continues to exhibit the growth prospects that originally attracted JKA to propose the merger. Additionally, the Board believes the long-term prospects of the directional drilling industry remain attractive. The Board determined that Multi-Shot’s 2007 financial performance through June 30 was better than the performance levels contemplated in the Previous Merger Agreement. The Board believes the increased performance level justifies the increase in consideration paid to the members of Multi-Shot pursuant to the Merger Agreement.

 

In addition to analyzing and discussing the economic terms of the transaction, the Board discussed with Gibbs & Bruns, JKA’s special litigation counsel, the option of continuing the litigation process. The Board was advised that the litigation process is complex and lengthy. Furthermore, the litigation process is inherently subject to uncertainties regardless of the merits of the underlying claims. In addition to monetary damages, JKA was seeking a ruling by the court that would bar Multi-Shot from terminating the merger agreement. The Board was informed by counsel that such rulings are more difficult to obtain than monetary damages. The Board believed that it would be very difficult to raise the additional capital that JKA would require to complete a lengthy litigation process. While the Board believed in the merits of JKA’s claims, it determined that there was no certainty that JKA would ultimately be successful in the litigation. Based on its determination that the terms of the transaction reflected in the merger agreement were fair to JKA’s shareholders and the uncertainties of continuing the litigation process, the Board did not believe that the litigation process would result in a better result for JKA’s shareholders than the settlement proposal.

 

The Board also considered the prospects of finding another potential acquisition candidate before October 11, 2007. Pursuant to JKA’s certificate of incorporation, if JKA had not entered into a letter of intent with respect to an acquisition transaction on or before October 11, 2007, the trust fund would be liquidated. The Board believed there was a significant risk that JKA would not have the ability to find a suitable acquisition candidate, perform appropriate due diligence and enter into a letter of intent on or before October 11, 2007. In addition, the Board was not confident that any new acquisition candidate would represent a more attractive transaction for JKA’s shareholders. The Board also reviewed the financial ability of JKA to complete a transaction with a new acquisition candidate given JKA’s current financial situation and the projected future expenses of JKA.

Based on the factors it considered, the Board concluded that it was in the best interests of JKA and its shareholders to settle the litigation under the terms of the settlement proposal and complete the merger with Multi-Shot pursuant to the Merger Agreement.

 

As a result, a Settlement Agreement was executed simultaneously with the merger agreement on August 27, 2007. Pursuant to the settlement agreement, JKA, Multi-Shot and other parties have agreed to waive any prior claims any of the parties have, or may have had against any and all parties to the Settlement Agreement in exchange for, among other consideration, JKA and Multi-Shot entering into the Merger Agreement.

 

On August 17, 2007, JKA engaged RBC Capital Markets Corporation to issue and deliver a fairness opinion, and on August 24, 2007, RBC Capital Markets Corporation delivered a fairness opinion to the Board in connection with the merger agreement.

 

INTEREST OF JKA DIRECTORS AND OFFICERS IN THE MERGER

 

In considering the recommendation of the Board of JKA to vote for the proposals to adopt the merger, you should be aware that certain members of the Board have agreements or arrangements that provide them with interests in the merger that differ from, or are in addition to, those of JKA stockholders generally. In particular, if the merger is not approved and JKA fails to consummate an alternative business combination within the time allotted pursuant to its amended and restated certificate of incorporation and JKA is therefore required to liquidate, the shares of common stock and warrants held by JKA’s executives and directors will be worthless because JKA’s executives and directors are not entitled to receive any of the net proceeds of JKA’s initial public offering held in trust that will be distributed upon liquidation of JKA.

 

At the close of business on the record date, James P. Wilson, Keith D. Spickelmier, Herbert C. Williamson and Michael H. McConnell, who together comprise all of JKA’s current directors and officers, beneficially owned 3,291,667 shares of JKA common stock, or 19.9% of the outstanding shares of JKA common stock. 2,958,333 of these shares were purchased prior to JKA’s initial public offering for an aggregate purchase price of $31,250 (approximately $0.01 per share). In addition, Mr. Wilson purchased 183,334 units and Mr. Spickelmier purchased 150,000 units in a private placement immediately prior to the initial public offering for an aggregate purchase price of $2,000,004 ($6.00 per unit). Each unit consisted of one common share and two warrants. Collectively, the 3,625,001 shares of JKA common stock held by the officers and directors have a market value of approximately $21,460,000 based on JKA’s common stock price of $5.92 per share as of September 28, 2007 (without taking into account any discount that may be associated with the restrictions on transfer of these shares).

 

The 666,668 warrants included in the units purchased by Mr. Wilson and Mr. Spickelmier have a value of approximately $247,000 based upon the warrant price of $0.37 per warrant as of September 28, 2007 (without taking into account any discount that may be associated with the restrictions on transfer of these warrants).

 

Under the terms of the Merger Agreement, Messrs. Wilson, Spickelmier, Williamson and McConnell have agreed to the cancellation of 2,458,334 shares of JKA common stock they currently own. Our officers and directors will receive no compensation for the cancellation of the 2,458,334 shares.

 

Our officers and directors will also transfer 92,522 of their remaining shares to Gibbs & Bruns upon the consummation of the merger with Multi-Shot pursuant to the terms of the Settlement Agreement. Gibbs & Bruns is the law firm that represented JKA in connection with the litigation against Multi-Shot. The transfer of 92,522 shares from our directors and officers to Gibbs & Bruns represents a portion of the compensation payable to Gibbs & Bruns for services rendered. The shares transferred to Gibbs & Bruns remain subject to the escrow provisions and transfer restrictions imposed on our officers and directors.

 

As a result of the cancellation of shares and transfer to Gibbs & Bruns, Messrs. Wilson, Spickelmier, Williamson and McConnell will own a total of 740,741 shares of JKA common stock (including the 333,334 shares included in the units separately acquired by Mr. Wilson and Mr. Spickelmier immediately prior to JKA’s initial public offering) upon the consummation of the merger. These 740,741 shares had a market value of approximately $4,385,000 based on JKA’s common stock price of $5.92 per share as of September 28, 2007 (without taking into account any discount that may be associated with certain restrictions on transfer these shares). Additionally, the 666,668 warrants included in the units purchased separately by Mr. Wilson and Mr. Spickelmier have a value of

approximately $247,000 based upon the warrant price of $0.37 per warrant as of September 28, 2007 (without taking into account any discount that may be associated with certain restrictions on transfer these warrants).

 

Mr. Wilson and Mr. Spickelmier have agreed to indemnify JKA with respect to the due diligence, accounting, legal and other expenses of JKA in connection with the merger in the event the merger or another business combination is not consummated before April 10, 2008. If the merger is completed before April 10, 2008, this indemnity will terminate. As of September 30, 2007 we estimate JKA had unpaid accounts payable or accrued liabilities of $584,090 that we believe could be covered by Mr. Wilson’s and Mr. Spickelmier’s indemnity agreement. As of September 30, 2007, JKA had approximately $90,492 in cash. Mr. Wilson and Mr. Spickelmier have advanced JKA a total of $500,000 to provide working capital (as described in JKA’s Current Reports on Form 8-K filed May 24, 2007, June 15, 2007, August 8, 2007 and September 6, 2007). None of the $500,000 advances are included in the $584,090 of accounts payable and accrued liabilities as of September 30, 2007. These advances will be repaid upon the closing of the merger. If the merger or another business combination is not consummated by April 10, 2008, these advances will not be repaid. As a result of the advances and the indemnification obligations, we estimate that Mr. Wilson and Mr. Spickelmier will be out of pocket approximately $1.1 million if the merger or another business combination is not consummated by April 10, 2008.

 

The management fee payable by JKA to 4350 Management LLC (wholly owned by Mr. Wilson) totaling $7,500 per month will cease at the closing date of the proposed merger.

 

REQUIRED VOTE AND EFFECT OF DISAPPROVAL

 

Approval of the merger proposal will require the affirmative vote of a majority of the shares of JKA’s common stock issued in JKA’s initial public offering as voted at the Special Meeting. In addition, each JKA stockholder that holds shares of common stock issued in JKA’s initial public offering or purchased following such offering in the open market has the right to vote against the merger proposal and, at the same time, demand that JKA convert such stockholder’s shares into cash equal to a pro rata portion of the trust account into which a substantial portion of the net proceeds of JKA’s initial public offering were and remain deposited. These shares will be converted into cash only if the merger is completed and the stockholder requesting conversion holds such shares until the date the merger is consummated. However, if the holders of 20% or more of the aggregate shares of common stock issued in JKA’s initial public offering and the private placement immediately prior to the initial public offering vote against the merger and demand conversion of their shares into a pro rata portion of the trust account, then JKA will not be able to consummate the merger. Abstentions (not broker non-votes and failures to vote) will have the same effect as a vote against the proposal. Broker non-votes and abstentions are counted for purposes of determining a quorum. Broker non-votes, abstentions and failures to vote will not constitute an election to convert a shareholder’s shares into cash.

 

RECOMMENDATION

 

After careful consideration, the Board has determined unanimously that the merger proposal is fair to, and in the best interests of, JKA and its stockholders. The Board has approved and declared the merger proposal advisable and unanimously recommends that you vote or give instructions to vote “FOR” the proposal to approve the merger.

 

The foregoing discussion of the information and factors considered by the Board is not meant to be exhaustive, but includes the material information and factors considered by the Board.

 

THE BOARD OF DIRECTORS UNANIMOUSLY RECOMMENDS THAT THE STOCKHOLDERS VOTE “FOR” THE MERGER PROPOSAL TO MERGE WITH MULTI SHOT, LLC. VIA THE ACQUISITION OF ALL OF THE OUTSTANDING SECURITIES OF MULTI-SHOT.

 

RISK FACTORS

 

You should carefully consider the following risk factors, together with all of the other information included in this proxy statement, before you decide whether to vote or instruct your vote to be cast to adopt the merger proposal. As JKA’s operations will be those of Multi-Shot, LLC (“Multi-Shot”) upon completion of the merger, a number of the following risk factors relate to the business and operations of Multi-Shot and JKA, as the successor to Multi-Shot’s business.

 

Risks Associated with Multi-Shot’s Business and Industry

 

Multi-Shot’s business depends on the oil and gas industry, and particularly on the level of activity for domestic gas exploration and drilling. Multi-Shot’s markets may be adversely affected by industry conditions that are beyond our control. The domestic energy industry, has historically been highly cyclical.

 

Multi-Shot’s revenues and profitability, as well as its growth prospects depend primarily on the overall level of drilling and exploration activity by its customers. This activity depends on the willingness of our customers (and their customers) to make operating and capital expenditures to explore for, develop and produce oil and gas in the U.S. Historically, oil and gas prices have been volatile and are subject to fluctuation in response to changes in supply and demand, market uncertainty, and a variety of other factors, each beyond the control of Multi-Shot. The variety of other factors include, but are not limited to:

 

 

Expected trends in oil and gas production activities may not continue and demand for its services may not reflect the level of industry activity. A material decline in oil and gas prices or domestic drilling activity levels could have a material adverse effect on Multi-Shot’s business, financial condition and results of operations and cash flows. Additionally, while it operates in numerous geographic regions, and it believes, most of the more active regions, a decrease in activity in such regions of service may adversely impact us, irrespective of the price for oil and gas production.

 

Our operating results may fluctuate, due to the cyclical nature of the oil and gas industry.

 

Oil and gas prices are volatile. During the period of Multi-Shot’s existence (since August, 2004), prices in general have risen and somewhat dramatically, prompting oil and gas companies to increase their levels of expenditures which has benefited us. Over the time frame that includes the predecessors to Multi-Shot (i.e., companies assembled and owned by the prior owner of Multi-Shot) significant changes in the prices for oil and gas

reserves have influenced the results and business of the predecessors to Multi-Shot. Similar fluctuations prospectively could be expected to have similar results on Multi-Shot.

 

Substantially all service and equipment revenues Multi-Shot earns are based on charges for relatively short periods of time (i.e., days, weeks, and occasionally several weeks on a single job order), that correlates to the period of time the service and equipment is provided to the customer. Short term services tend to expose Multi-Shot to the risks of rapid declines in market prices for oil and gas and hence, the activity levels of our customers, while in the alternative, allowing Multi-Shot the ability to participate in service price escalation should market conditions accommodate price increases for its services.

 

Multi-Shot’s success depends substantially upon the continued retention of certain key personnel.

 

Multi-Shot believes that its success has depended on and continues to depend to a significant extent on the efforts and abilities of its senior management team, which is a group including the four officers, but also includes a second level of very key members who number between 10-15 persons, at present, and is expected to grow in correlation to Multi-Shot’s ability to grow. The top three members of Multi-Shot’s management team, as well as six persons in its second level of key managers currently are employed pursuant to employment agreements. In connection with the merger, Allen Neel, President and Chief Executive Officer of JKA and Multi-Shot, Inc., David Cudd and Paul Culbreth, each as Vice-Presidents of Multi-Shot, Inc., will enter into employment agreements with JKA and/or Multi-Shot, Inc. (as their respective agreements call for) that are effective upon consummation of the merger. As well, the existing contracts covering the six second level Multi-Shot key managers, will be “assumed” by Multi-Shot, Inc. Multi-Shot’s failure to retain any of these individuals, and to recruit and retain other similarly skilled individuals to the extent growth so requires, could adversely affect our ability to sustain or expand the size, scope, and results of Multi-Shot’s historical business. Regarding potential new hires, Multi-Shot typically reviews the candidates, including in some instances, performing background checks and reference checks. There is no assurance that the review and assessment of these individuals will prove to be accurate, complete or correct. These individuals may be unfamiliar with the requirements of operating a public company as well as United States securities laws, which could cause the combined company to have to expend time and resources in assisting them become familiar with such laws.

 

Multi-Shot may not be able to source equipment on a timely basis, or at all, to replace physically obsolete equipment, or equipment necessary to support expanded activity.

 

A key component of Multi-Shot’s services is specialized equipment used in directional drilling and directional surveying. While the equipment is provided by third party manufacturers, who Multi-Shot believes are reputable and financially viable, the level of market demand, and its potential effect on equipment pricing and the lead times for order deliveries, fluctuates meaningfully. Multi-Shot attempts to forecast its equipment needs to minimize negative scenarios relating to its requirements for equipment and its available inventory of equipment. When equipment is required that Multi-Shot does not have available, it can, subject to the then existing availability of such third party equipment, rent the equipment from third parties. However, third party rentals do have the effect of reducing the level of profitability of the service revenues earned while utilizing such rented equipment. Additionally, no guarantees exist that third party rental equipment acceptable or appropriate for Multi-Shot’s requirements will be available, should the need arise. Consequently, Multi-Shot may not be able to capitalize on future opportunities it may have and risks losing those opportunities to their competitors.

 

Multi-Shot’s operating history may not be sufficient for investors to evaluate its business and prospects.

 

Multi-Shot, LLC was formed via an asset acquisition by management and a private equity firm in August 2004. The assets comprised a former division of a larger, public company, causing Multi-Shot to develop and implement various elements of its business to succeed as a stand alone entity. There are no outstanding payment obligations from such transaction. While the results would indicate the transition to a stand alone entity has succeeded, the time frame for this evaluation is relatively limited. The fiscal year ended December 31, 2005 was the first year that Multi-Shot did not operate at a loss. Multi-Shot’s future results depend on its ability to continue to efficiently manage its personnel and equipment in delivering services to its markets and customers, while focusing on the design and

implementation of additional, and in some cases, new systems, procedures, policies, and controls to continue to accommodate growth and to succeed as a public entity.

 

Multi-Shot may not be able to raise additional capital on acceptable terms.

 

While expanding its revenue base, Multi-Shot invested approximately $12.0 million in capital expenditures for equipment in 2006 versus approximately $3.8 million in 2005. Multi-Shot expects capital expenditures to be in the range of $11.0 million to $13.0 million in 2007 for new survey, MWD, steering and directional drilling equipment. To meet its capital needs, Multi-Shot expects to rely on its cash flow from operations, the proceeds from JKA’s trust account, the possibility of the exercise of the existing JKA public warrants, the potential ability for MS Energy Services, Inc. to effect future public offerings of securities, and potentially, third-party debt financing. Additional public capital, and/or third-party debt financing may not, however, be available on favorable terms, or at all. The ability to obtain additional funding will be subject to various factors, including public market conditions in general and specifically as it relates to energy service companies, Multi-Shot’s operating performance, lender sentiment and its ability to incur additional debt in compliance with other contractual restrictions, such as financial covenants under our credit facility. These factors may make the timing, amount, terms and conditions of additional financings unattractive or unavailable. Our inability to raise capital could impede its growth, or under extreme conditions, result in more negative outcomes for the financial condition and solvency of Multi-Shot.

 

Failure of Multi-Shot’s internal control over financial reporting and its operations could harm its business and financial results. The combined company will need to improve and/or expand its operations and financial systems and staff to fully comply with the standards established for public companies and if it cannot successfully achieve these improvements, the company’s operations and financial results may be negatively impacted.

 

The management of Multi-Shot is responsible for establishing and maintaining adequate internal control over financial reporting. Internal control over financial reporting is a process to provide reasonable assurance regarding the reliability of financial reporting for external purposes in accordance with accounting principles generally accepted in the United States. Internal control over financial reporting includes: maintaining records that in reasonable detail accurately and fairly reflect Multi-Shot’s transactions; providing reasonable assurance that transactions are recorded as necessary for preparation of the financial statements; providing reasonable assurance that receipts and expenditures of Multi-Shot’s assets and the incurrence of liabilities are made in accordance with appropriate management authorization; and providing reasonable assurance that unauthorized acquisition, use or disposition of Multi-Shot’s assets or the incurrence of liabilities that could have a material effect on the financial statements would be prevented or detected on a timely basis. Because of its inherent limitations, internal control over financial reporting is not intended to provide absolute assurance that a misstatement of Multi-Shot’s financial statements would be prevented or detected. Any failure to maintain an effective system of internal control over financial reporting could limit Multi-Shot’s ability to report its financial results accurately and/or timely or to detect and prevent fraud. To date, the management at Multi-Shot has worked with its auditors to assess its internal controls over financial reporting and have not found any material weaknesses and have found the controls to be adequate for a private company. Multi-Shot, has not yet evaluated its adherence to Section 404 of the Sarbanes-Oxley Act but it intends to hire experienced third party consultants to help it assess its compliance with such Section and other public company standards that may be applicable. Multi-Shot is aware that making these disclosures does not release management of its obligation with respect to internal controls. In addition, Multi-Shot’s initial operating and financial systems may not be adequate as it implements its plans to expand and its attempts to improve these systems may be ineffective. Multi-Shot must be able to operate its financial and operations systems effectively, and to recruit suitable employees as it expands its operations, or it may be unable to effectively control and manage a larger operation. Although it is impossible to predict the nature of the errors that might occur as the result of inadequate controls, Multi-Shot believes it is more difficult to oversee a sizable operation than a smaller one and accordingly, more likely that errors will occur as operations grow. As a result, additional management infrastructure and systems will be required to attempt to avoid such errors.

 

Multi-Shot, Inc. will incur increased costs as a result of being a wholly-owned subsidiary of a public company.

 

As a wholly-owned subsidiary of a public company, Multi-Shot will incur significant legal, accounting and other expenses that it did not incur as a private company, which may range from $500,000 to $1,000,000 on an annual basis. The U.S. Sarbanes-Oxley Act of 2002 and related rules of the U.S. Securities and Exchange Commission, or SEC, and the AMEX regulate corporate governance practices of public companies. Multi-Shot expects that compliance with these public company requirements will increase our costs and make some activities more time-consuming. For example, new Board committees and adopt new internal controls and disclosure controls and procedures will be created. In addition, additional expenses associated with our SEC reporting requirements will be incurred. A number of those requirements necessitate Multi-Shot to carry out activities it has not previously carried out. For example, under Section 404 of the Sarbanes-Oxley Act, for the annual report on Form 10-K for 2007, depending upon certain facts existing upon closing of the merger, document and test our internal control procedures may need to be tested. As a result, Multi-Shot’s management will need to assess and report on its internal control over financial reporting and its independent accountants will need to issue an opinion on that assessment and the effectiveness of those controls. Furthermore, if it identifies any issues in complying with those requirements (for example, if it or its accountants identify a material weakness or significant deficiency in our internal control over financial reporting), Multi-Shot could incur additional costs rectifying those issues, and the existence of those issues could adversely affect Multi-Shot’s reputation or investor perceptions of Multi-Shot.

 

It is expected that, based on current insurance coverage and investigation in regards to expanded coverage, especially in light of being publicly traded, it will be difficult and expensive to obtain expanded and appropriate director and officer liability insurance. It may be necessary to accept reduced policy limits and coverage or incur substantially higher costs to obtain the same or similar coverage. As a result, it may be more difficult to attract and retain qualified persons to serve on the Board or as executive officers. Advocacy efforts by shareholders and third parties may also prompt even more changes in governance and reporting requirements. The amount of additional costs that may be incurred or the timing of such costs cannot be predicted or estimated.

 

Multi-Shot’s operations are subject to hazards inherent in the oil and gas industry.

 

Risks inherent in its industry, such as equipment defects, human error or accident, vehicle accidents, explosions and fires, and uncontrolled flows of oil and gas well fluids, can cause personal injury, loss of life, suspension of operations, claims for damage to well formations or facilities, business interruption, and damage to or destruction of property, equipment and the environment. These risks can expose Multi-Shot to substantial liability for related losses and damages. The frequency, or severity of these types of events is, to some extent, beyond Multi-Shot’s control, and the effect could exceed the liability for loss or damages to the extent customers elect to no longer do business with Multi-Shot due to a perception of unacceptable safety programs, insurance, and controls.

 

The industry and business are dangerous. Safety procedures and training may not always prevent accidents and do not eliminate the dangers. Adequate insurance for such risks may not be attainable at rates considered reasonable, or the terms (rates, coverage limits, deductible limits, etc.) for such coverage may not be as favorable as current coverage. The incurrence of an uninsured claim (a claim in excess of our coverage limits) could have a material adverse effect on our operations and financial condition. Although safety and training are a meaningful focus and emphasis of management, these efforts may fail to successfully mitigate the risks of the business to Multi-Shot.

 

A terrorist attack or armed conflict could harm our business.

 

Terrorist activities, anti-terrorist efforts and other armed conflicts involving the U.S. or other countries may adversely affect the U.S. and global economies and could negatively affect the business. Any of these events could reduce overall demand for oil and gas, causing reduced demand for Multi-Shot’s services and therefore, lower revenues and potentially, lower profitability. Attacks on the U.S., and/or on the U.S. energy industry infrastructure, may raise the cost of insurance and make some types of insurance unavailable.

 

Conservation measures and technological advances could reduce demand for oil and gas.

 

Fuel and energy conservation measures, alternative fuel and energy developments, technological advances in either conservation and/or alternative sources of fuel and energy could all reduce demand for oil and gas production. Major changes could negatively impact the U.S. and worldwide energy industry, which would likely negatively impact the company’s business and prospects.

 

If third parties bring claims against Multi-Shot or if Multi-Shot has breached any of its representations, warranties or covenants set forth in the merger agreement, JKA may not be adequately indemnified for any resulting losses related thereto.

 

Although the merger agreement provides that the members of Multi-Shot will jointly and severally indemnify JKA for losses arising from a breach of the representations, warranties and covenants by Multi-Shot, LLC and the members set forth in the merger agreement, such indemnification is limited to an aggregate amount of $10,000,000 (with an aggregate deductible of $500,000), which corresponds to the merger consideration held in escrow. In addition, the survival period for any claims under the merger agreement relating to all but three representations is limited to eighteen months after the closing of the merger, whereupon the escrowed consideration relating to the maximum liability of the Members is also reduced to $3,000,000. All amounts, subject to outstanding claims at such time, will be released and the escrow terminated sixty months after the closing of the merger. Accordingly, JKA will be prevented from seeking indemnification for any claims that aggregate less than the deductible, and for claims in excess of the then applicable aggregate threshold, and as it relates to all but three claims, from seeking indemnification arising after the eighteen month survival period.

 

Risks Relating to the JKA Business

 

If 20% or more of the holders of JKA’s common stock issued in its public offering and the private placement immediately prior to the initial public offering vote against the merger and demand conversion of their shares of JKA common stock, JKA may be forced to liquidate, whereupon stockholders may receive less than $6.00 per share and the warrants will expire worthless.

 

Under the terms of JKA’s corporate charter, if 20% or more of shares issued in JKA’s initial public offering and the private placement immediately prior to the initial public offering vote against the merger and demand conversion of their shares to cash held in trust, JKA may ultimately be forced to liquidate. While JKA will continue to search to acquire an operating company, if (i) it does not consummate a business combination by October 10, 2007, or, (ii) if a letter of intent, agreement in principle or definitive agreement is executed, but not consummated, by October 10, 2007, then by April 10, 2008, it will be forced to liquidate. In any liquidation, the net proceeds of JKA’s initial public offering held in the trust account, plus any interest earned thereon (other than amounts distributed to JKA for working capital not exceeding $0.9 million) will be distributed on a pro rata basis to the holders of JKA’s common stock issued in its public offering. If JKA is forced to liquidate its assets, the per-share liquidation will be the $76,532,404 deposited in the trust account at the time of the initial public offering, plus interest accrued thereon until the date of any liquidation (other than amounts distributed to JKA for working capital not exceeding $0.9 million). As of September 30, 2007, there was approximately $79,721,079, or $6.03 per share, held in trust. Furthermore, there will be no distribution with respect to JKA’s outstanding warrants and, accordingly, the warrants will expire worthless.

 

Stock ownership of JKA after the merger will be concentrated and, as a result, the principal stockholder will influence JKA’s affairs significantly.

 

SG Directional, LLC will, immediately after the merger, own approximately 37.3% of JKA’s outstanding common stock (assuming that no JKA stockholders exercise their conversion rights and that no warrants are exercised). SG-Directional is managed by The Stephens Group, LLC. As a result,SG Directional, LLC will have the voting power to significantly influence JKA’s policies, business and affairs, and the outcome of any corporate transaction or other matter, including mergers, consolidations and the sale of all, or substantially all, of its assets. This concentration in control may have the effect of preventing a change in control that otherwise could result in a premium in the price of JKA’s common stock.

If the merger’s benefits do not meet the expectations of financial or industry analysts, the market price of JKA’s common stock may decline.

 

The market price of JKA’s common stock may decline as a result of the merger if:

 

 

Accordingly, investors may experience a loss as a result of a decreasing stock price and JKA may not be able to raise future capital, if necessary, in the equity markets.

 

Failure to complete the merger could negatively impact the market price of JKA’s common stock and may make it more difficult for JKA to attract another acquisition candidate, resulting, ultimately, in the disbursement of the trust proceeds, causing investors to experience a loss on their investment. If the merger is not completed for any reason, JKA may be subject to a number of material risks, including:

 

 

Such decreased market price and added costs and charges of the failed merger, together with the history of failure in consummating a merger, may make it more difficult for JKA to attract another acquisition candidate, resulting, ultimately, in the disbursement of the trust proceeds, causing investors to experience a loss on their investment.

 

If Parent Warrants or Redemption Warrants are exercised, additional shares of JKA common stock will be issued causing dilution to current JKA stockholders.

 

In connection with the merger the members of Multi-Shot will receive Parent Warrants. In addition, the members of Multi-Shot may receive Redemption Warrants if the amount paid by JKA to its stockholders from the trust fund in connection with exercises of the conversion rights of JKA stockholders exceeds $3,000,000. Parent Warrants and Redemption Warrants may only be exercised if it is determined that a Contingent Award is due to the holder. Contingent Awards are determined to be due to the extent that currently outstanding warrants to purchase JKA common stock other than Parent Warrants or Redemption Warrants, including the warrants issued in connection with JKA’s initial public offering are exercised. If such currently outstanding warrants are exercised during a Determination Period, the Parent Warrants and Redemption Warrants may be exercised for either (i) shares of JKA common stock on a cashless exercise basis or (ii) replacement warrants to purchase JKA common stock for a cash exercise price between $5.00 and $6.25 per share. The issuance of shares of JKA common stock as a result of such cashless exercise of Parent Warrants or Redemption Warrants would be dilutive to current JKA stockholders. In addition, the exercise of cash exercise warrants issued in replacement of Parent Warrants or Redemption Warrants may be dilutive to current JKA stockholders if the market value of the JKA common stock exceeds the cash exercise price of such replacement warrants.

 

For a more complete discussion of Parent Warrants, Redemption Warrants and Contingent Awards, see “Warrants and Contingent Awards” on page 14.

 

Under Delaware law, JKA’s dissolution requires the approval of the holders of a majority of its outstanding stock, without which JKA will not be able to dissolve and liquidate and distribute its assets to JKA’s public stockholders.

 

JKA has agreed with the trustee to promptly adopt a plan of dissolution and liquidation and initiate procedures for our dissolution and liquidation if JKA does not effect a business combination within 18 months after

consummation of our initial public offering (or within 24 months after the consummation of our initial public offering if a letter of intent, agreement in principle or definitive agreement has been executed within 18 months after consummation of our initial public offering and the business combination related thereto has not yet been consummated within such 18-month period). However, pursuant to Delaware law, our dissolution requires the affirmative vote of stockholders owning a majority of our then outstanding common stock. Soliciting the vote of JKA’s stockholders will require the preparation of preliminary and definitive proxy statements, which will need to be filed with the Securities and Exchange Commission and could be subject to their review. This process could take a substantial amount of time.

 

As a result, the distribution of our assets to the public stockholders could be subject to a considerable delay. Furthermore, JKA may need to postpone the stockholders meeting, and solicit our stockholders again or amend our plan of dissolution and liquidation to obtain the required stockholder approval, all of which would further delay the distribution of our assets and result in increased costs. If we are not able to obtain approval from a majority of our stockholders, JKA will not be able to dissolve and liquidate and JKA will not be able to distribute funds from our trust account to holders of our common stock sold in our initial public offering and these funds will not be available for any other corporate purpose. In the event JKA seeks stockholder approval for a plan of dissolution and liquidation and do not obtain such approval, JKA will nonetheless continue to pursue stockholder approval for our dissolution. However, JKA cannot predict whether our stockholders will approve its dissolution in a timely manner or will ever approve its dissolution. As a result, we cannot provide our initial stockholders with assurances of a specific timeframe for the dissolution and distribution. If our stockholders do not approve a plan of dissolution and liquidation and the funds remain in the trust account for an indeterminate amount of time, JKA may be considered to be an investment company under the Investment Company Act of 1940 (the “Investment Company Act”).

 

If JKA is deemed to be an investment company, JKA may be required to institute burdensome compliance requirements and its activities may be restricted, which may make it difficult for it to complete a business combination.

 

In order not to be regulated as an investment company under the Investment Company Act, unless JKA can qualify for an exclusion, JKA must ensure that it is engaged primarily in a business other than investing, reinvesting or trading of securities and that its activities do not include investing, reinvesting, owning, holding or trading “investment securities.” JKA’s business is to identify and consummate a business combination and thereafter to operate the acquired business or businesses. JKA invests the funds in the trust account only in treasury bills issued by the United States having a maturity of 180 days or less or money market funds meeting the criteria under Rule 2a-7 under the Investment Company Act until it uses them to complete a business combination. By limiting the investment of the funds to these instruments, JKA believes that it will not be considered an investment company under the Investment Company Act. The trust account and the purchase of government securities for the trust account is intended as a holding place for funds pending the earlier to occur of either: (i) the consummation of our primary business objective, which is a business combination, or (ii) absent a business combination, our dissolution, liquidation and distribution of our assets, including the proceeds held in the trust account, as part of our plan of dissolution and liquidation. If we fail to invest the proceeds as described above or if we cease to be primarily engaged in our business as set forth above (for instance, if our stockholders do not approve a plan of dissolution and liquidation and the funds remain in the trust account for an indeterminable amount of time), we may be considered to be an investment company and thus be required to comply with the Investment Company Act.

 

If JKA is deemed to be an investment company under the Investment Company Act, its activities may be restricted, including:

 

 

each of which may make it difficult for it to consummate a business combination. JKA would also become subject to burdensome regulatory requirements, including reporting, record keeping, voting, proxy and disclosure requirements and the costs of meeting these requirements would reduce the funds it has available outside the trust account to consummate a business combination.

 

If third parties bring claims against us, the proceeds held in the trust account could be reduced and the per share liquidation price received by stockholders will be less than $6.03 per share.

 

Our placing of funds in the trust account may not protect those funds from third party claims against us. Pursuant to Delaware General Corporation Law Sections 280 and 281, upon our dissolution we will be required to pay or make reasonable provision to pay all claims and obligations of the corporation, including all contingent, conditional or claims not yet matured or due and owing. While we intend to pay those amounts from our funds not held in trust, we cannot assure you those funds will be sufficient to cover such claims and obligations.

 

In addition, although James P. Wilson and Keith D. Spickelmier have agreed to indemnify us for claims by any vendor that is owed money by us for services rendered or products sold to us, to the extent that such claims reduce the amounts in the trust fund to be distributed to the public stockholders upon our dissolution and liquidation, this indemnification is limited to claims by vendors that do not execute a valid and enforceable waiver of all rights, title, interest, and claim of any kind in or to the monies held in the trust account. The indemnification provided by our directors and officers would not cover claims by target businesses or other entities and vendors that execute such waivers. Based on representations made to us by our initial directors and officers, we currently believe that they are of substantial means and capable of funding a shortfall in our trust account to satisfy their foreseeable indemnification obligations, however, the indemnification may be limited as we have not asked them to reserve for or escrow any amounts with respect to such an eventuality. The indemnification obligations may be substantially higher than our directors and officers currently foresee or expect and/or their financial resources may deteriorate in the future which could also act as a limitation to this indemnification. Hence, we cannot assure you that our initial directors and officers will be able to satisfy those obligations or that the proceeds in the trust account will not be reduced by such claims. Furthermore, creditors may seek to interfere with the distribution of the trust account pursuant to federal or state creditor and bankruptcy laws, which could delay the actual distribution of such funds or reduce the amount ultimately available for distribution to our public stockholders. If we are forced to file a bankruptcy case or an involuntary bankruptcy case is filed against us and it is not dismissed, the funds held in our trust account will be subject to applicable bankruptcy law and may be included in our bankruptcy estate and subject to claims of third parties with priority over the claims of our public stockholders. To the extent bankruptcy claims deplete the trust account, we cannot assure you we will be able to return to our public stockholders the liquidation amounts due to them. Accordingly, the actual per share amount distributed from the trust account to our public stockholders could be significantly less than approximately $6.03 per share, without taking into account interest earned on the trust account, due to claims of creditors. Any claims by creditors could cause additional delays in the distribution of trust funds to the public stockholders beyond the time periods required to comply with Delaware General Corporation Law procedures and federal securities laws and regulations.

 

As of September 30, 2007, we estimate that JKA had $584,090, in outstanding accounts payable or accrued liabilities. Of these liabilities, $584,090 represent amounts payable or accrued liabilities to entities which have not waived claims against the trust account. As of September 30, 2007, JKA’s cash balance was $90,491. To the extent there is a shortfall, Messrs. Wilson and Spickelmier have agreed to indemnify the trust for claims by any vendor for service rendered or products provided, to the extent those claims reduce the trust and that vendor has not executed a waiver as against the trust. JKA believes Messrs. Wilson and Spickelmier are capable of funding any foreseeable indemnity obligations, if any.

 

FORWARD-LOOKING STATEMENTS

 

JKA believes that some of the information in this proxy statement constitutes forward-looking statements. You can identify these statements by forward-looking words such as “may,” “expect,” “anticipate,” “contemplate,” “believe,”’ “estimate,” “intends,” and “continue” or similar words. You should read statements that contain these words carefully because they:

 

 

JKA believes it is important to communicate its expectations to its stockholders. However, there may be events in the future that JKA is not able to accurately predict or over which JKA has no control. The risk factors and cautionary language discussed in this proxy statement provide examples of risks, uncertainties and events that may cause actual results to differ materially from the expectations described by JKA in its forward-looking statements, including among other things:

 

 

You are cautioned not to place undue reliance on these forward-looking statements, which speak only as of the date of this proxy statement.

 

All forward-looking statements including those herein attributable to JKA, Multi-Shot or any person acting on either party’s behalf are expressly qualified in their entirety by the cautionary statements contained or referred to in this section. Except to the extent required by applicable laws and regulations, JKA undertakes no obligation to update these forward-looking statements to reflect events or circumstances after the date of this proxy statement or to reflect the occurrence of unanticipated events.

 

Before you grant your proxy or instruct how your vote should be cast or vote on the approval of the merger and the other proposals, you should be aware that the occurrence of the events described in the “Risk Factors” section and elsewhere in this proxy statement could have a material adverse effect on JKA upon completion of the merger.

 

SELECTED HISTORICAL FINANCIAL INFORMATION — MULTI-SHOT, LLC

 

JKA is providing the following financial information to assist you in the analysis of the financial aspects of the merger. We derived Multi-Shot, LLC’s historical information from the audited financial statements of Multi-Shot, LLC as of and for each of the years ended December 31, 2003, 2004, 2005 and 2006, and from unaudited financial statements as of and for (i) the year ended December 31, 2002 and (ii) the nine month periods ended September 30, 2006 and 2007. The information is only a summary and should be read in conjunction with the historical financial statements and related notes contained elsewhere herein. The historical results included below and elsewhere in this document are not indicative of the future performance of Multi-Shot, LLC or JKA following the merger.

 

 

 

 

 

SELECTED HISTORICAL FINANCIAL INFORMATION — JKA

 

JKA is providing the following selected financial information to assist you in your analysis of the financial aspects of the merger. The following selected financial and other operating data should be read in conjunction with “JKA’s Management’s Discussion and Analysis of Financial Condition and Results of Operations” and its financial statements and the related notes to those statements included elsewhere in this proxy statement. The statement of operations data for the period from May 11, 2005 (inception) through December 31, 2005 and the balance sheet data as of December 31, 2005 have been derived from JKA’s audited financial statements included elsewhere in this proxy statement. The statement of operations data for the year ended December 31, 2006 and the balance sheet data as of December 31, 2006 have been derived from JKA’s audited financial statements included elsewhere in this proxy statement. The statements of operations data for the period from May 11, 2005 (inception) through December 31, 2006 has been derived from JKA’s audited financial statements included elsewhere in this proxy statement. The statement of operations data for the nine months ended September 30, 2007 and 2006 and for the period from inception to September 30, 2007 and the balance sheet data as of September 30, 2007 has been derived from JKA’s unaudited financial statements included elsewhere in this proxy statement.

 

 

 

 

 

 

SUMMARY UNAUDITED PRO FORMA CONDENSED