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Kona Grill warns of declining revenue, growing loss

Brand notifies SEC of late filing of 2018 financial reports

After telling federal regulators of a management and board shakeup last Friday, Kona Grill Inc. on Tuesday warned that its financial performance had deteriorated in the fourth quarter in a “Notice of Late Filing” with the Securities and Exchange Commission.

The Scottsdale, Ariz.-based casual-dining brand has not yet filed its required SEC annual 10-K earnings reports for fiscal 2018, though the company said it intended to file the required documents within the mandated 15 calendar days.

In its Tuesday SEC notice, Kona Grill warned that “revenue has decreased 12.4% and the net loss increased to approximately $32 million, primarily because of a decline in same-store sales of 12.3% since the comparable period for 2017 and $18.3 million of non-cash asset impairment charges for certain underperforming restaurants.”

The company has closed high-profile locations in Las Vegas and Miami, and executives in January said the company was evaluating every location. Kona in late February shuttered its restaurant in Fort Worth, Texas.

The company cited the resignation of CEO Marcus Jundt, effective March 31, as a reason for its delay in filing its 2018 financial report.

Jundt’s resignation came amid board changes at the company and the hiring of an adviser to oversee strategic alternatives, including a possible sale.

Jundt took over as sole CEO in January with the resignation of Steve Schussler. Jundt and Schussler had served as co-CEOs since early November, succeeding Jim Kuhn, who had been in the role for just more than three months.

The company also underwent a board shakeup last week. Kona on Friday said Shawn Hassel, co-founder and managing partner of the investment firm Bestige Holdings LLC, had been appointed to the board and would chair the company’s strategic alternatives committee.

The company on March 4 retained Piper Jaffray as its financial adviser to assist in evaluating strategic options “such as a sale of the company, merger, financing transactions or other potential alternatives.”

Among other board changes, the company said Berke Bakay, who preceded Kuhn as CEO and remained on the board, had resigned March 27 as the company’s executive chairman and from the board, and Alex Nanyan Zheng had also stepped down as a director.

In its most recent financial report for the third quarter ended Sept. 30, Kona Grill’s loss widened to $5.1 million, or 39 cents a share, from $3.3 million, or 33 cents a share, in the same period a year ago. Revenues fell 15.7% to $37.4 million, from $44.4 million in the prior-year quarter.

Same-store sales fell 14.1% in the third quarter. For the first nine month of 2018, Kona’s same-store sales were down 11.6% after a full-year decline of 5.9% in 2017.

Comparable average unit volumes had been slipping as well, falling from $4.5 million per unit in 2016 to $4.1 million in 2017.

Kona Grill ranked No. 195 in U.S. systemwide sales among the chains in Nation’s Restaurant News’ most recent Top 200, booking $176.3 million for the fiscal year ended in December 2017.

Kona’s stock was trading at 82 cents a share Wednesday morning, up two cents from Tuesday’s close of 80 cents. The company’s shares have traded between 75 cents and $3 a share over the past 52 weeks.

Kona Grill, founded in 1998, has about 40 locations in 22 states and Puerto Rico, and it has one franchised location each in Dubai, United Arab Emirates, and Vaughan, Canada.

Contact Ron Ruggless at [email protected] 

Follow him on Twitter: @RonRuggless

TAGS: Finance
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