Hedge fund Mill Road Capital recently sent Kona a $3.5 million financing proposal which could replace the company's currently planned rights offering. Mill Road said the proposal is intended as a "replacement" for the currently planned rights offering, and would provide the same proceeds to the company with no dilution to any shareholders. It said it could provide $3.5 million in unsecured subordinated notes to the company, with an interest rate of 12%. In mid-May, Mill Road made a "nonbinding" offer to acquire all of Kona's capital stock for $27.9 million in cash, or $4.60 a share. Mill Road previously said the offer wasn't conditioned on the receipt of any outside financing. Mill Road holds 640,062 shares (9.8%).

Hedge fund Mill Road Capital said it had sent a non-binding offer to Kona Grill, which operates "upscale casual" restaurants, to acquire all of the company's capital stock for $27.9 million, or $4.60 a share. Mill Road said the offer isn't conditioned on the receipt of any outside financing. The hedge fund added that if Kona decides to proceed with its rights offering, and if the deal is fully subscribed, it will increase the consideration that it pays to shareholders by $3.5 million, or the amount raised in the rights offering. In addition, Mill Road said that, given the large increase in shares outstanding, the price paid per share probably will fall. Mill Road, which is Kona's second-largest shareholder, said it is prepared to commence negotiations "immediately," and believes it could reach a definitive acquisition agreement in less than 30 days. Mill Road holds 640,062 shares (9.8%).

Mill Road Capital said that Kona Grill had rejected its non-binding $10.75-a-share purchase offer. To fend off a potential hostile takeover, Kona Grill on May 28 adopted a poison-pill plan, under which it will declare a dividend distribution of preferred-share purchase rights to stockholders if any person or group acquires 20% or more of its common stock. Mill Road raised its stake to 544,227 shares (8.2%) by buying 219,167 from June 11 to 25 at $6.21 to $7.44 a share.

potential room for growth

growth

Upgraded by Sanders Morris Harris from Hold to Buy

Seemed to have good growth potentail

Downgraded by Wedbush Morgan from Buy to Hold

like restaurant concept, small cap, good growth prospects, only seven current locations

Thought it had a chence to grow share value.