Kona Grill Reports Fourth Quarter and Full Year 2008 Results

Kona Grill, Inc. (Nasdaq: KONA), an American grill and sushi bar, today reported results for its fourth quarter and full year ended December 31, 2008.

Fourth Quarter 2008 Highlights Include:

• Opened restaurants in West Palm Beach, FL and Phoenix, AZ bringing total to 20

• Restaurant sales increased 6.4% to $18.6 million

• Same-store sales decreased 9.4%

• Restaurant operating profit margin of 16.3%

'Our fourth quarter performance reflects one of the most challenging periods the restaurant industry has ever faced. Despite this difficult economic environment, we continue to manage our business for the long-term, but with a near-term focus on driving sales, controlling costs and deploying available resources in the most prudent manner possible,' said Marcus E. Jundt, Chief Executive Officer of Kona Grill.

Fourth Quarter 2008 Financial Results

Restaurant sales increased 6.4% to $18.6 million from $17.5 million during the same quarter last year. The increase in restaurant sales during the fourth quarter reflects additional revenue from three stores opened during 2008, partially offset by an overall reduction in guest traffic. Restaurant sales reflect a 9.4% decrease in same-store sales compared to a 0.8% decrease in the fourth quarter a year ago.

Average weekly sales for the 14 restaurants in the comparable base were $76,700 during the fourth quarter of 2008, compared to $84,700 in the prior year period. Average weekly sales for restaurants not in the comparable base that were open for the entire fourth quarter of 2008 were $69,800 versus $78,300 last year.

Loss from continuing operations for the fourth quarter of 2008 was ($5.4) million, or ($0.82) per diluted share, including ($3.2) million, or ($0.49) per diluted share of non-cash asset impairment charges and ($0.5) million, or ($0.08) per diluted share for separation costs and other special charges. This compares to loss from continuing operations of ($0.7) million, or ($0.11) per diluted share, last year.

Net loss for the fourth quarter was ($5.4) million, or ($0.83) per diluted share, based upon 6.5 million diluted shares. This compares to net loss of ($0.9) million, or ($0.14) per diluted share, for the same period last year, based upon 6.3 million diluted shares.

Full Year 2008 Financial Results

Restaurant sales increased 9.1% to $75.8 million during 2008 from $69.5 million last year, primarily reflecting restaurant sales from five restaurants opened since the fourth quarter of 2007, offset by a 7.2% decrease in same-store sales.

Net loss for 2008 was ($10.5) million, or ($1.60) per diluted share, including ($3.5) million, or ($0.54) per diluted share, for discontinued operations associated with the closure of the Company's Naples, FL restaurant, and ($3.2) million, or ($0.49) per diluted share, for non-cash asset impairment charges. Net loss for 2007 was ($0.7) million, or ($0.11) per diluted share, including ($0.5) million, or ($0.09) per diluted share, for discontinued operations.

Financial Guidance

For the first quarter of 2009, the Company forecasts restaurant sales of $18.3 million to $19.3 million and a net loss of ($1.4) million to ($1.9) million, or ($0.22) to ($0.29) per diluted share. The Company anticipates opening four new restaurants in 2009, including Richmond, VA which opened on January 22, 2009, Woodbridge, NJ, Eden Prairie, MN, and Tampa, FL.

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