Schedule 13D Amendment No. 5

-----BEGIN PRIVACY-ENHANCED MESSAGE----- Proc-Type: 2001,MIC-CLEAR Originator-Name: webmaster@www.sec.gov Originator-Key-Asymmetric: MFgwCgYEVQgBAQICAf8DSgAwRwJAW2sNKK9AVtBzYZmr6aGjlWyK3XmZv3dTINen TWSM7vrzLADbmYQaionwg5sDW3P6oaM5D3tdezXMm7z1T+B+twIDAQAB MIC-Info: RSA-MD5,RSA, HTYkX5kO6Q4v9iFozyNDra6RIw03bQhmhe2NHhjHpdWGvgSgb2qWC3LenC541Cnj BXS0lqdNdujW4ntUMkzW5g== 0001193125-09-051399.txt : 20090312 0001193125-09-051399.hdr.sgml : 20090312 20090312061253 ACCESSION NUMBER: 0001193125-09-051399 CONFORMED SUBMISSION TYPE: SC 13D/A PUBLIC DOCUMENT COUNT: 5 FILED AS OF DATE: 20090312 DATE AS OF CHANGE: 20090312 GROUP MEMBERS: CHARLES M. B. GOLDMAN GROUP MEMBERS: MILL ROAD CAPITAL GP LLC GROUP MEMBERS: SCOTT P. SCHARFMAN GROUP MEMBERS: THOMAS E. LYNCH SUBJECT COMPANY: COMPANY DATA: COMPANY CONFORMED NAME: KONA GRILL INC CENTRAL INDEX KEY: 0001265572 STANDARD INDUSTRIAL CLASSIFICATION: RETAIL-EATING PLACES [5812] IRS NUMBER: 200216690 STATE OF INCORPORATION: DE FISCAL YEAR END: 1231 FILING VALUES: FORM TYPE: SC 13D/A SEC ACT: 1934 Act SEC FILE NUMBER: 005-81402 FILM NUMBER: 09674065 BUSINESS ADDRESS: STREET 1: 7150 EAST CAMELBACK ROAD STREET 2: SUITE 220 CITY: SCOTTSDALE STATE: AZ ZIP: 85251 BUSINESS PHONE: 4809228100 MAIL ADDRESS: STREET 1: 7150 EAST CAMELBACK ROAD STREET 2: SUITE 220 CITY: SCOTTSDALE STATE: AZ ZIP: 85251 FILED BY: COMPANY DATA: COMPANY CONFORMED NAME: Mill Road Capital, L.P. CENTRAL INDEX KEY: 0001435260 IRS NUMBER: 205432103 STATE OF INCORPORATION: DE FISCAL YEAR END: 1231 FILING VALUES: FORM TYPE: SC 13D/A BUSINESS ADDRESS: STREET 1: TWO SOUND VIEW DRIVE STREET 2: SUITE 300 CITY: GREENWICH STATE: CT ZIP: 06830 BUSINESS PHONE: 203-987-3500 MAIL ADDRESS: STREET 1: TWO SOUND VIEW DRIVE STREET 2: SUITE 300 CITY: GREENWICH STATE: CT ZIP: 06830 SC 13D/A 1 dsc13da.htm SCHEDULE 13D AMENDMENT NO. 5 Schedule 13D Amendment No. 5


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UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

SCHEDULE 13D

Under the Securities Exchange Act of 1934

(Amendment No. 5)*

Kona Grill, Inc.

(Name of Issuer)

Common Stock, par value $0.01 per share

(Title of Class of Securities)

50047H201

(CUSIP Number)

Mill Road Capital, L.P.

Attn: Thomas E. Lynch

Two Sound View Drive

Suite 300

Greenwich, CT 06830

203-987-3501

With a copy to:

Peter M. Rosenblum, Esq.

Foley Hoag LLP

155 Seaport Blvd.

Boston, MA 02210

617-832-1151

(Name, Address and Telephone Number of Person Authorized to Receive Notices and Communications)

March 11, 2009

(Date of Event which Requires Filing of this Statement)

If the filing person has previously filed a statement on Schedule 13G to report the acquisition that is the subject of this Schedule 13D, and is filing this schedule because of §§240.13d-1(e), 240.13d-1(f) or 240.13d-1(g), check the following box. ¨

Note: Schedules filed in paper format shall include a signed original and five copies of the schedule, including all exhibits. See §240.13d-7 for other parties to whom copies are sent.

*	The remainder of this cover page shall be filled out for a reporting person’s initial filing on this form with respect to the subject class of securities, and for any subsequent amendment containing information which would alter disclosures provided in a prior cover page.

The information required on the remainder of this cover page shall not be deemed to be “filed” for the purpose of Section 18 of the Securities Exchange Act of 1934 (“Act”) or otherwise subject to the liabilities of that section of the Act but shall be subject to all other provisions of the Act (however, see the Notes).


CUSIP No. 50047H201		13D		Page 2 of 10 Pages


1.	Names of Reporting Persons. Thomas E. Lynch
2.	Check the Appropriate Box if a Member of a Group (See Instructions) (a) ¨ (b) ¨
3.	SEC Use Only
4.	Source of Funds (See Instructions) OO
5.	Check if Disclosure of Legal Proceedings Is Required Pursuant to Items 2(d) or 2(e)	¨
6.	Citizenship or Place of Organization USA


Number of Shares Beneficially Owned by Each Reporting Person With		7. Sole Voting Power
		8. Shared Voting Power 648,171
		9. Sole Dispositive Power
		10. Shared Dispositive Power 648,171


11.	Aggregate Amount Beneficially Owned by Each Reporting Person 648,171
12.	Check if the Aggregate Amount in Row (11) Excludes Certain Shares (See Instructions)	¨
13.	Percent of Class Represented by Amount in Row (11) 10.0%
14.	Type of Reporting Person (See Instructions) IN; HC


CUSIP No. 50047H201		13D		Page 3 of 10 Pages


1.	Names of Reporting Persons. Charles M. B. Goldman
2.	Check the Appropriate Box if a Member of a Group (See Instructions) (a) ¨ (b) ¨
3.	SEC Use Only
4.	Source of Funds (See Instructions) OO
5.	Check if Disclosure of Legal Proceedings Is Required Pursuant to Items 2(d) or 2(e)	¨
6.	Citizenship or Place of Organization USA


Number of Shares Beneficially Owned by Each Reporting Person With		7. Sole Voting Power
		8. Shared Voting Power 648,171
		9. Sole Dispositive Power
		10. Shared Dispositive Power 648,171


11.	Aggregate Amount Beneficially Owned by Each Reporting Person 648,171
12.	Check if the Aggregate Amount in Row (11) Excludes Certain Shares (See Instructions)	¨
13.	Percent of Class Represented by Amount in Row (11) 10.0%
14.	Type of Reporting Person (See Instructions) IN; HC


CUSIP No. 50047H201		13D		Page 4 of 10 Pages


1.	Names of Reporting Persons. Scott P. Scharfman
2.	Check the Appropriate Box if a Member of a Group (See Instructions) (a) ¨ (b) ¨
3.	SEC Use Only
4.	Source of Funds (See Instructions) OO
5.	Check if Disclosure of Legal Proceedings Is Required Pursuant to Items 2(d) or 2(e)	¨
6.	Citizenship or Place of Organization USA


Number of Shares Beneficially Owned by Each Reporting Person With		7. Sole Voting Power
		8. Shared Voting Power 648,171
		9. Sole Dispositive Power
		10. Shared Dispositive Power 648,171


11.	Aggregate Amount Beneficially Owned by Each Reporting Person 648,171
12.	Check if the Aggregate Amount in Row (11) Excludes Certain Shares (See Instructions)	¨
13.	Percent of Class Represented by Amount in Row (11) 10.0%
14.	Type of Reporting Person (See Instructions) IN; HC


CUSIP No. 50047H201		13D		Page 5 of 10 Pages


1.	Names of Reporting Persons Mill Road Capital GP LLC
2.	Check the Appropriate Box if a Member of a Group (See Instructions) (a) ¨ (b) ¨
3.	SEC Use Only
4.	Source of Funds (See Instructions) OO
5.	Check if Disclosure of Legal Proceedings Is Required Pursuant to Items 2(d) or 2(e)	¨
6.	Citizenship or Place of Organization Delaware


Number of Shares Beneficially Owned by Each Reporting Person With		7. Sole Voting Power 648,171
		8. Shared Voting Power
		9. Sole Dispositive Power 648,171
		10. Shared Dispositive Power


11.	Aggregate Amount Beneficially Owned by Each Reporting Person 648,171
12.	Check if the Aggregate Amount in Row (11) Excludes Certain Shares (See Instructions)	¨
13.	Percent of Class Represented by Amount in Row (11) 10.0%
14.	Type of Reporting Person (See Instructions) OO; HC


CUSIP No. 50047H201		13D		Page 6 of 10 Pages


1.	Names of Reporting Persons. Mill Road Capital, L.P.
2.	Check the Appropriate Box if a Member of a Group (See Instructions) (a) ¨ (b) ¨
3.	SEC Use Only
4.	Source of Funds (See Instructions) WC
5.	Check if Disclosure of Legal Proceedings Is Required Pursuant to Items 2(d) or 2(e)	¨
6.	Citizenship or Place of Organization Delaware


Number of Shares Beneficially Owned by Each Reporting Person With		7. Sole Voting Power 648,171
		8. Shared Voting Power
		9. Sole Dispositive Power 648,171
		10. Shared Dispositive Power


11.	Aggregate Amount Beneficially Owned by Each Reporting Person 648,171
12.	Check if the Aggregate Amount in Row (11) Excludes Certain Shares (See Instructions)	¨
13.	Percent of Class Represented by Amount in Row (11) 10.0%
14.	Type of Reporting Person (See Instructions) PN


CUSIP No. 50047H201				Page 7 of 10 Pages

This Amendment No. 5 (this “Amendment”) to the joint statement on Schedule 13D with respect to the common stock, par value $0.01 per share, of Kona Grill, Inc., a Delaware corporation, filed by the undersigned on June 26, 2008 (the “Initial Filing”), as amended by Amendment No. 1 on Schedule 13D filed by the undersigned on November 14, 2008 with respect to the Initial Filing, as amended by Amendment No. 2 on Schedule 13D filed by the undersigned on December 30, 2008 with respect to the Initial Filing, as amended by Amendment No. 3 on Schedule 13D filed by the undersigned on January 2, 2009 with respect to the Initial Filing, and as amended by Amendment No. 4 on Schedule 13D filed by the undersigned on January 30, 2009 with respect to the Initial Filing (the “Schedule 13D”), amends the Schedule 13D as follows:

1. Item 4 of the Schedule 13D shall hereby be amended by inserting the following paragraph between the second and third paragraphs:

“On February 20, 2009 and March 6, 2009, the Fund transmitted two letters concerning the Issuer’s financing process to one of the Issuer’s directors, Mark Zesbaugh; these letters are attached hereto as Exhibits 10 and 11. On March 11, 2009, the Fund issued a press release, attached hereto as Exhibit 12, regarding a letter that the Fund transmitted to Mr. Zesbaugh on that date concerning the Issuer’s financing process; this letter is attached hereto as Exhibit 13.”

2. Item 5(a) of the Schedule 13D shall hereby be amended and restated in full as follows:

“(a) In the aggregate, the Reporting Persons beneficially own, as of March 11, 2009, 648,171 shares of the Common Stock, representing approximately 10.0% of such class of securities. The Fund, the GP, as the sole general partner of the Fund, and each Manager, as a management committee director of the GP, each beneficially owns, as of March 11, 648,171 shares of the Common Stock, representing approximately 10.0% of such class of securities. These percentages of beneficial ownership are based on a total of 6,511,991 shares of the Common Stock outstanding as of March 3, 2009, as reported in preliminary proxy statement on Schedule 14A filed by the Issuer on March 3, 2009.”

3. The first clause of Item 5(c) of the Schedule 13D shall hereby be amended and restated in full as follows:

“No Reporting Person, other than the Fund as set forth in the table below, effected any transaction in shares of the Common Stock from April 17, 2008 (the date 60 days prior to the event which required the initial filing of this statement) to March 11, 2009:”

4. Item 7 of the Schedule 13D shall hereby be amended by adding Exhibits 10, 11, 12 and 13 as follows:

“Exhibit 10 Letter from Mill Road Capital, L.P. to Mark Zesbaugh dated February 20, 2009.”

“Exhibit 11 Letter from Mill Road Capital, L.P. to Mark Zesbaugh dated March 6, 2009.”


CUSIP No. 50047H201				Page 8 of 10 Pages

“Exhibit 12 Press release entitled “10% Shareholder Deems Kona Sweetheart Deal to Chairman’s Father Unfair” issued by Mill Road Capital, L.P. on March 11, 2009.”

“Exhibit 13 Letter from Mill Road Capital, L.P. to Mark Zesbaugh dated March 11, 2009.”

5. Except as expressly modified hereby, all provisions of the Schedule 13D shall continue in full force and effect.

[signature page follows]


CUSIP No. 50047H201				Page 9 of 10 Pages

Signature

After reasonable inquiry and to the best of my knowledge and belief, I certify that the information set forth in this statement is true, complete and correct.


DATE:		March 11, 2009



MILL ROAD CAPITAL, L.P.

By:		Mill Road Capital GP LLC,
		its General Partner

By:		/s/ Charles M. B. Goldman
		Charles M. B. Goldman
		Management Committee Director

MILL ROAD CAPITAL GP LLC

By:		/s/ Charles M. B. Goldman
		Charles M. B. Goldman
		Management Committee Director


CUSIP No. 50047H201				Page 10 of 10 Pages



THOMAS E. LYNCH

By:		/s/ Charles M. B. Goldman
		Charles M. B. Goldman, attorney-in-fact

CHARLES M. B. GOLDMAN

/s/ Charles M. B. Goldman
Charles M. B. Goldman

SCOTT P. SCHARFMAN

By:		/s/ Charles M. B. Goldman
		Charles M. B. Goldman, attorney-in-fact

EX-10 2 dex10.htm LETTER FROM MILL ROAD CAPITAL, L.P. - FEBRUARY 20, 2009 Letter from Mill Road Capital, L.P. - February 20, 2009

Exhibit 10


		MILL ROAD CAPITAL

February 20, 2009

Mark Zesbaugh

Kona Grill, Inc.

7150 East Camelback Road

Suite 220

Scottsdale, AZ 85251

Dear Mark:

As Kona’s second largest shareholder, I find it wholly unacceptable that the Company’s Chairman and CEO, Marcus Jundt, has made numerous proposals, and has run a fund raising process, that are inconsistent with his fiduciary duties. The Independent Members of the Board have failed to fully and fairly investigate these issues, the Company refuses to hire independent advisors in its fundraising process, and finally and most recently, the Company is selectively offering Mill Road less favorable terms than other investors.

In our last conversation in mid-January, I outlined a set of concerns relating to the Company’s CEO, Marcus Jundt, and actions that he took on behalf of himself and the Company. I noted to you:

•

His stated objective of finding a non-competitive process in which he and related parties could inject cheap and highly dilutive capital in the Company;

•

His improper request to Mill Road for a $6 million personal loan so that he and Board Member Hauser could buy cheap and highly dilutive equity in the Company;

•

His unconscionable offer to reward us with $3 million in underpriced shares in Kona and a Board seat as compensation for that loan;

•

His fundraising plan in which he stated he was only considering one other financing offer and that was from a quasi-related party (likely his father);

•

His failure to follow through on his pledge to allow us to compete for any legitimate fundraising done by the Company;

•

His failure to follow through on a pledge that the Company would not raise any financing between December 17 and the end of the year;

•

His attempted sale of Company shares to Mr. James Jundt (his father) in a non-competitive process, at a near record low price that was announced in the downtime between Christmas and New Year; and

•

His subsequent offer to buy all of Mill Road’s shares at a price of $5 per share if we “would go away”.

In our call, I filed a formal ethics complaint with you against Marcus Jundt and told you I would fully elaborate the complaint and provide supporting documentation if and when I was contacted by an independent investigator. I further urged you to hire an independent investment bank and independent legal counsel to ensure that any future fundraising was done in an fair way consistent with the Company’s fiduciary duty to all shareholders.

Two Sound View Drive, Suite 300 — Greenwich, CT 06830 — (203) 987-3500

The follow through on these requests has been both disappointing and unacceptable. With respect to my ethics complaint, you recently reported to me that the ethics charges against Mr. Jundt were reviewed, investigated and dismissed. In the course of the “appropriate” investigation, no one from the Company attempted to contact me, or anyone else at Mill Road, for a full elaboration of the complaint, no one at Mill Road was asked to corroborate the complaint and no documentary evidence was requested.

With respect to the fundraising, we have learned that the Company has not hired an independent investment bank to guide the process, nor has it hired independent counsel to document and regulate the process. Given this lack of independent control, I communicated to you as recently as yesterday that I was very concerned:

“that the Company is not running a full and fair process, that the special committee is not duly constituted according to Delaware law, and that the Company is continuing to put itself and its directors at great financial risk.”

Yesterday afternoon, we received a term sheet from the Company’s CFO, Mark Robinow, and were told that we had 24 hours to respond. Today, I learned that the process has been neither fair nor equitable. In conversations with other potential investors, I learned that the term sheet that Mr. Robinow provided to Mill Road was different and less favorable than the term sheet that other investors were working with.

As such, we are formally withdrawing from this fundraising process. If any fundraising is closed as a result of this skewed fundraising process, we reserve the right to pursue any and all remedies against the Company and personally against its management and directors.

We further note that we are very concerned that related party insiders may be receiving the more favorable term sheet and that they may be allocated a disproportionate share of the offering.

In the very strongest terms, I urge you not to finalize this financing.

Yours,

/s/ Thomas E. Lynch

Thomas Lynch

Senior Managing Director

Mill Road Capital L.P.

Page 2 of 2

EX-11 3 dex11.htm LETTER FROM MILL ROAD CAPITAL, L.P. - MARCH 6, 2009 Letter from Mill Road Capital, L.P. - March 6, 2009

Exhibit 11


		MILL ROAD CAPITAL

March 6, 2009

Board of Directors

Attn: Mark Zesbaugh

Kona Grill, Inc.

7150 East Camelback Road

Suite 220

Scottsdale, AZ 85251

Dear Mark:

As a very large public shareholder in Kona Grill, I firmly believe that if insiders want to disregard the interests of outside public shareholders and operate the Company as if it were private, they should make an offer to all shareholders and take the Company private. If they choose not to do so, it is up to the Board to protect the collective interests of all outside shareholders against insider dominated, related party transactions.

Mill Road believes that the Board failed in its fiduciary obligations in December when it offered to sell shares to the Chairman’s father at concessionary prices in a non-competitive process. We believe this failure continues today as the Board finalizes another unfair and skewed process that will result in the Chairman’s father once again financing the Company in a manner that will grant him a considerable number of shares at a similarly discounted price.

In my letter addressed to you on February 20, 2009 and our subsequent meeting on February 26, 2009, I cited a continuing pattern of misrepresentations, irregularities and fiduciary breaches in the Company’s fundraising process. In both that letter and the follow-up meeting, I explicitly noted that the Company’s Chairman and CEO, Marcus Jundt, had told me on December 17, 2008 that his goal in this fundraising was to manage a “non-competitive process in which he and related parties could inject cheap and highly dilutive capital in the Company.” I further communicated a grave concern that the fundraising process was being structured to achieve these stated objectives.

Since our meeting, I have uncovered further irregularities in the fundraising process and I have also noted that the Company has steadfastly refused to take any action to address the fiduciary breaches that I communicated to you. The list of fiduciary breaches is both long and unconscionable. In my February 20th letter, I outlined eight material breaches associated with the Company’s December fundraising process. Since then, I note that our investigations have indicated that the Company has:

•

Allowed Marcus Jundt to play a continuing role in the fundraising process and permitted him to speak to potential investors and outline the terms and timing of the fundraising, despite his vested interest in ensuring that related parties (his father, James Jundt and his friend and business partner, Richard Hauser) will lead the financing;

Two Sound View Drive, Suite 300 — Greenwich, CT 06830 — (203) 987-3500

•

Failed to hire independent counsel to advise the Special Committee and refused to allow an independent investment bank to guide the process;

•

Neglected to follow-up with investors who previously solicited an interest in financing the Company;

•

Selectively offered different terms and sent different term sheets to different investors;

•

Failed to solicit at least one sizeable shareholder who was a known adversary of the Jundt family;

•

And finally, as the share price declined and the financing became more dilutive, the Company withdrew all reasonable protections from potential note-holders, thus ensuring that only friends and related party insiders could comfortably participate in the financing.

Given this pattern of irregularities and fiduciary breaches, we have no confidence in the fairness of the fundraising process and believe that the Company is continuing to show little or no fiduciary regard for the best interests of non-related party shareholders. As such, we continue to have no interest in participating in this skewed fundraising process.

We note with no surprise that the Company’s supposed “fair process” has yielded a result consistent with Marcus Jundt’s stated intention: insiders (James Jundt and Richard Hauser) are providing over 90 percent of the financing with James Jundt “coincidentally” providing the exact same sum that he intended to provide in the earlier non-competitive process.

Mill Road, as a stockholder of Kona Grill, formally demands that the Board of Directors cease pursuing the unfair and skewed financing process currently underway and implement a new, fair process run by independent advisors designed to produce the best financial terms for the Company.

I reiterate once more that if any fundraising is closed as a result of this obviously skewed process, Mill Road reserves the right to pursue any and all remedies against the Company and personally against its management and Board of Directors.

Once again, and in the very strongest terms, I urge you not to put the Company at further risk by finalizing this ill-conceived, shareholder unfriendly, insider dominated financing.

Sincerely,

/s/ Thomas E. Lynch

Thomas Lynch

Senior Managing Director

Mill Road Capital L.P.

Page 2 of 2

EX-12 4 dex12.htm PRESS RELEASE Press Release

Exhibit 12

10% Shareholder Deems Kona Sweetheart Deal to Chairman’s Father Unfair

GREENWICH, Conn., March 11 /PRNewswire— In a letter sent today to director Mark Zesbaugh of Kona Grill, Inc. (NasdaqGM: KONA), Mill Road Capital, L.P. strongly objected to the insider dominated financing that Kona Grill announced on March 6th. Mill Road noted:

•

The Company’s press release failed to identify James Jundt, the father of CEO and Chairman Marcus Jundt, as the primary investor.

•

The Company offered and granted materially better financing terms to insiders than were made available to Mill Road and other outside shareholders.

•

This financing could enable James Jundt and director Richard Hauser’s wife to buy nearly 10% of the Company at below market prices through oversubscription rights.

•

The Company’s fundraising process was skewed by a consistent pattern of misrepresentations and fiduciary breaches.

Mill Road noted that it strenuously objects to continued fiduciary breaches and the Company’s heavy-handed attempt to sell discounted Company stock to the Chairman’s father and his business associates at the expense of all outside shareholders.

March 11, 2009

Mark Zesbaugh

Kona Grill, Inc.

7150 East Camelback Road

Suite 220

Scottsdale, AZ 85251

Dear Mark:

Mill Road Capital objects in the very strongest terms to the insider-dominated financing that the Company announced on Friday, March 6th.

We have previously noted to you with grave concern that the Company’s CEO and Chairman Marcus Jundt explicitly stated to us that his objective in the current fundraising process was to secure low price stock for himself and related parties. In my letters to you on February 20, 2009 and March 6, 2009 (both to be filed in our amended 13D), we outlined 14 specific misrepresentations, irregularities and material breaches in the fundraising process. Most significantly, we noted to you Marcus Jundt’s continued involvement in this process despite his vested interest in ensuring that a related party (his father, James Jundt) would lead the financing.

We explicitly warned you several times that we believed that the process was structured to favor Marcus Jundt’s relatives and business associates. As far as we can tell, none of our complaints were investigated or taken seriously.

Instead, the Special Committee voted twice – first in December and again in March – to allow James Jundt to invest $1 million in the Company and be given access to discounted shares.

In December, the Special Committee voted to sell to Marcus Jundt’s father $1 million of Company stock at the deeply discounted price of $1.19 per share. He was offered this stock in an entirely non-competitive process. When shareholder opposition prevented you from closing that transaction, you initiated another skewed fundraising process that rendered a nearly identical result.

This time, you voted to allow James Jundt to invest $1 million in the Company. For making this investment, he will be granted preferential oversubscription rights in the Company’s expected right’s offering. Assuming a rights offering of $3 million with 30% of rights unsubscribed, these preferential rights would allow James Jundt to buy approximately $1 million in shares at a discounted price, likely in the $1.19 price range. This result is so appalling that only a fool would count it as a coincidence.

We were further stunned to note that the terms in the definitive documentation as disclosed in the Company’s March 9th 8K were fundamentally different and significantly more investor friendly than the terms offered to Mill Road and other outside shareholders.

As a fiduciary, you have now twice failed to run a fair process and twice failed to reach a fair outcome. On behalf of all outside shareholders, we demand that you terminate this unfair insider-dominated deal and develop a financing plan that serves the best interests of all shareholders.

Sincerely,

Thomas Lynch

Senior Managing Director

Mill Road Capital L.P.

CONTACT: Scott Scharfman of Mill Road Capital, +1-203-987-3504

EX-13 5 dex13.htm LETTER FROM MILL ROAD CAPITAL, L.P. - MARCH 11, 2009 Letter from Mill Road Capital, L.P. - March 11, 2009

Exhibit 13


		MILL ROAD CAPITAL

March 11, 2009

Mark Zesbaugh

Kona Grill, Inc.

7150 East Camelback Road

Suite 220

Scottsdale, AZ 85251

Dear Mark:

Mill Road Capital objects in the very strongest terms to the insider-dominated financing that the Company announced on Friday, March 6^th.

Instead, the Special Committee voted twice – first in December and again in March – to allow James Jundt to invest $1 million in the Company and be given access to discounted shares.

Two Sound View Drive, Suite 300 — Greenwich, CT 06830 — (203) 987-3500

We were further stunned to note that the terms in the definitive documentation as disclosed in the Company’s March 9^th 8K were fundamentally different and significantly more investor friendly than the terms offered to Mill Road and other outside shareholders.

Sincerely,

/s/ Thomas E. Lynch

Thomas Lynch

Senior Managing Director

Mill Road Capital L.P.

Page 2 of 2

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