Kona Grill said in an April 22 filing that it was recently notified by Nasdaq that it could face delisting on the stock market if it fails to pay “certain fees,” by April 25. If Kona Grill elects not to appeal, trading of its common stock will be suspended at the opening of business that day, the notice said, and the company’s securities will be removed from listing and registration.
The brand, which last week hinted at a possible bankruptcy filing in the future, faced this possibility not too long ago. It received a deficiency notice from Nasdaq toward the end of 2018 that said Kona Grill fell below Nasdaq’s listing standard of $15 million minimum market value within the previous 30 consecutive business days. The warning gave Kona Grill until June 26 to lift the value of its shares to $15 million or more for at least 10 straight days, or $1.89 per share.
It’s been a downward spiral in recent weeks. Kona Grill’s shares were trading for just 26 cents, down 4.59 percent, by midday Tuesday. They were $2.10 on November 7 but have failed to break the $2 mark since. Shares closed at $1 on March 27 and have steadily fallen since.
In Kona Grill’s annual report, filed April 16, the company said it was continuing to explore potential strategy alternatives, including the possible sale of the company. However, even if a deal was reached, Kona Grill could be forced to file for bankruptcy protection.
The company also announced the appointment of Jonathan Tibus, managing director with turnaround firm Alvarez & Marsal, as chief executive officer. Fellow Alvarez & Marsal director Christopher Wells was named chief restructuring officer. Tibus previously served as CEO of Real Mex Restaurants (Chevy’s, El Torito, Sinigual, and Las Brisas), and led the since dissipated Ignite Restaurant Group (Joe’s Crab Shack and Brickhouse Tavern) and Last Call Operating Co. (Fox & Hound, Champps). All of those companies filed for bankruptcy protection. Real Mex Restaurants did so this past summer. Tibus also served as chief restructuring officer at Quiznos, a quick-service brand that emerged from bankruptcy in 2014, and chief operating officer of Max & Erma’s, which filed for chapter 11 protection in 2009 and nearly shuttered all of its restaurants.
Kona Grill reported $33.2 million in secured debt and said it missed its quarterly principal payment due March 31.
“In the event that we cannot refinance the company or otherwise obtain new capital, or in the event that no third party acquires our secured debt and renegotiates its terms, the company may be required to file for chapter 11 protection of the U.S. Bankruptcy Code,” Kona Grill said in the filing.
Kona Grill’s same-store sales dropped 12.3 percent in 2018 after declining 5.9 percent in 2017. This after six consecutive years of comparable restaurant sale increases.
Revenue fell 12.4 percent in the fiscal year that ended December 31, year-over-year.
The chain’s footprint is shrinking, too. Kona Grill doubled the size of its company from 23 restaurants in 2012 to 46 by 2017. Since January 1, it closed 12 restaurants and terminated two leases for units not yet opened. There are now 34 locations in 20 states throughout the U.S. and Puerto Rico.