The ONE Group Hospitality, Inc. (NasdaqCM:STKS) entered into a definitive agreement to acquire substantially all of the assets of Kona Grill, Inc. (OTCPK:KONA.Q), Kona Texas Restaurant, Inc., Kona Sushi, Inc., Kona Restaurant Holdings, Inc., Kona Macadamia, Inc., Kona Grill International Holdings, Inc., Kona Baltimore, Inc., Kona Grill Puerto Rico, Inc. and Kona Grill International, Inc. for $35.8 million on August 30, 2019. Under the terms of the agreement, ONE Group has agreed to purchase the remaining 24 of Kona's domestic restaurants and assume certain contracts, including two international franchise licenses, for approximately $25 million in cash plus the assumption of working capital liabilities of approximately $10.8 million. The Kona assets include the worldwide rights to the name “Kona Grill” and other intellectual property, including trademarks, domain names, menu recipes, and customer databases. The final purchase price will be determined at the closing of the transaction based on the completion of due diligence, subject to certain agreed upon adjustments.

ONE Group expects to finance the acquisition with a new financing facility and cash on hand. ONE Group deposited $0.25 million into an escrow account, which amount will be credited to the purchase price at the closing and all or a portion of which amount will be forfeited to Kona as liquidated damages if ONE Group fails to complete the acquisition in specified circumstances. ONE Group may terminate the agreement without penalty on or before September 16, 2019 if it is dissatisfied with its due diligence investigation of Kona's business and operations or if it notifies Kona that it has not obtained financing to complete the transaction.

The acquisition is subject to Key Bank, N.A. shall have irrevocably consented to Kona Grill and affiliated entities' execution of this agreement and the contemplated transaction by executing the consent, ONE Group shall have notified sellers in writing either that it has completed its business and legal due diligence with respect to each Seller and the results thereof are acceptable to it or it has waived such requirement, ONE Group shall have notified sellers in writing either that it has received the financing on the terms provided for in the Term Sheet signed on August 7, 2019 or it has waived such requirement, the approval of the United States Bankruptcy Court for the District of Delaware, and other customary closing conditions. The sale hearing is scheduled for September 24, 2019. As of September 24, 2019, the United States Bankruptcy Court has authorized the sale of substantially all assets of Kona Grill.

The transaction is expected to close on October 11, 2019. Once fully integrated, the acquisition is expected to add approximately $100 million in annualized revenue and to be accretive to earnings per diluted share and Adjusted EBITDA. Piper Jaffray acted as financial advisor and Jeremy V. Richards, James E. O'Neill and John W. Lucas of Pachulski Stang Ziehl & Jones LLP acted as legal advisor to Kona Grill. Alison Bauer of Foley Hoag LLP acted as legal advisor to ONE Group.