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| UNITED STATES                                                                                                 |
| SECURITIES AND EXCHANGE COMMISSION                                                                            |
| Washington, DC 20549                                                                                          |
|                                                                                                          |
| **FORM 10-K**                                                                                                 |
|                                                                                                          |
| xANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES                    EXCHANGE ACT OF 1934      |
|                                                                                                          |
| For the fiscal year ended December 31, 2009                                                                   |
|                                                                                                          |
| oTRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES                     EXCHANGE ACT OF 1934 |
|                                                                                                          |
| For the transition period from ________ to ___________                                                        |
|                                                                                                          |
| Commission file number 001-33842                                                                              |
|                                                                                                          |
| **KEYON COMMUNICATIONS HOLDINGS, INC.**                                                                       |
| (Exact name of registrant as specified in its charter)                                                        |

|   |                           |                |   |
|--------|--------------------------------|---------------------|--------|
|   | Delaware                       | 74-3130469          |   |
|   | State or Other Jurisdiction of | (I.R.S. Employer    |   |
|   | Incorporation or Organization  | Identification No.) |   |

|                                     |                  |   |
|------------------------------------------|-----------------------|--------|
| 11742 Stonegate Circle                   |
|                                     | Omaha, Nebraska 68164 |   |
|                                     |                       |   |
| (Address of Principal Executive Offices) |

|                                                                      |           |   |
|---------------------------------------------------------------------------|----------------|--------|
|                                                                      | (402) 998-4000 |   |
|                                                                      |                |   |
| Telephone Number, Including Area Code)                                    |
|                                                                      |           |   |
| Securities Registered Pursuant to Section 12(b) of the Exchange Act: None |
|                                                                      |           |   |
| Securities registered under Section 12(g) of the Exchange Act: None       |

Indicate by check mark if the registrant is a well-known seasoned issued, as defined in Rule 405 of the Securities Act.        YES o     NO x

Indicate by check mark if the registrant is not required to file reports pursuant to Section 13 or 15(d) of the Exchange Act.         YES o     NO x

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Exchange Act during the past 12 months (or for such shorter period that the Registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. YES o     NO x

Indicate by check mark whether the registrant has submitted electronically and posted on its corporate Web site, if any, every Interactive Data File required to be submitted and posted pursuant to Rule 405 of Regulation S-T during the preceding 12 months (or for such shorter period that registrant was required to submit and post such files.) Yes o     No x

Indicate by check mark that disclosure of delinquent filers in response to Item 405 of Regulation S-K is not contained herein, and will not be contained, to the best of registrant’s knowledge, in definitive proxy or information statements incorporated by reference in Part III of this Form 10-K or any amendment to this Form 10-K. x

|                      |                        |
|---------------------------|-----------------------------|
| Large accelerated filer o | Accelerated filer o         |
| Non-accelerated filer o   | Smaller reporting company x |

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Act). YES o     NO x

As of April 12, the aggregate market value of the voting and non-voting common equity held by non-affiliates was $20,052,440 computed by reference to the closing price of the common stock on April 12, 2010.

1

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As of April 12, the Company has outstanding 21,332,383 shares of its $0,001 par value common stock.

**DOCUMENTS INCORPORATED BY REFERENCE**

None.

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**KEYON COMMUNICATIONS HOLDINGS, INC.**

**Table of Contents**

|                                                                                                                 |   |     |
|----------------------------------------------------------------------------------------------------------------------|--------|----------|
|                                                                                                                 |   | **Page** |
|                                                                                                                 |   |          |
| PART I                                                                                                               |   | 1        |
| Item 1. Description of Business                                                                                      |   | 1        |
| Item 1A. Risk Factors                                                                                                |   | 8        |
| Item 1B. Unresolved Staff Comments                                                                                   |   | 17       |
| Item 2. Properties                                                                                                   |   | 17       |
| Item 3. Legal Proceedings                                                                                            |   | 18       |
| Item 4. (Removed and Reserved)                                                                                       |   | 18       |
|                                                                                                                 |   |     |
| PART II                                                                                                              |   | 19       |
| Item 5. Market for Registrant's Common Equity, Related Stockholder Matters and Issuer Purchases of Equity Securities |   | 19       |
| Item 6. Selected Financial Data                                                                                      |   | 20       |
| Item 7. Management’s Discussion and Analysis of Financial Condition and Results of Operations                  |   | 21       |
| Item 7A. Quantitative and Qualitative Disclosures About Market Risk                                                  |   | 24       |
| Item 8. Financial Statements and Supplementary Data                                                                  |   | 24       |
| Item 9. Changes in and Disagreements with Accountants on Accounting and Financial Disclosure                         |   | 24       |
| Item 9A(T). Controls and Procedures                                                                                  |   | 24       |
| Item 9B. Other Information                                                                                           |   | 25       |
|                                                                                                                 |   |     |
| PART III                                                                                                             |   | 25       |
| Item 10. Directors, Executive Officers, and Corporate Governance                                                     |   | 25       |
| Item 11. Executive Compensation                                                                                      |   | 27       |
| Item 12. Security Ownership of Certain Beneficial Owners and Management and Related Stockholder Matters              |   | 28       |
| Item 13. Certain Relationships and Related Transactions, and Director Independence                                   |   | 29       |
| Item 14. Principal Accounting Fees and Services                                                                      |   | 30       |
|                                                                                                                 |   |     |
| PART IV                                                                                                              |   | 30       |
| Item 15. Exhibits, Financial Statements Schedules                                                                    |   | 30       |
| SIGNATURES                                                                                                           |   | 33       |

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**PART I**

**Explanatory Note**

*          This Annual Report on Form 10-K, including the “Management’s Discussion and Analysis of Financial Condition and Results of Operations,” contains “forward-looking statements” that represent our beliefs, projections and predictions about future events. These statements are necessarily subjective and involve known and unknown risks, uncertainties and other important factors        that could cause our actual results, performance or achievements, or industry results, to differ materially from any future results, performance or achievement described in or implied by such statements. Actual results may differ materially from the expected results described in our forward-looking statements, including with respect to the correct measurement and identification of factors affecting our business or the extent of their likely impact, the accuracy and completeness of        publicly available information relating to the factors upon which our business strategy is based, or the success of our business. You should review carefully the section entitled “Risk Factors” for a discussion of these and other risks that relate to our business.*

*          Except as otherwise noted, references to “we”, “us”, or “our” refer to KeyOn Communications Holdings, Inc. and its subsidiaries.*

**Item 1. Description of Business.**

**Overview**

          KeyOn Communications Holdings, Inc. (“KeyOn” or the “Company”) is one of the largest rural wireless broadband providers in the United States.1 As of December 31, 2009, the Company has approximately 15,000 subscribers and operates networks covering over 50,000 square miles in 11 states across the Midwest and Western United States. The Company has grown through        the consolidation of similar companies throughout its target markets as well as organic growth. KeyOn primarily focuses on providing fixed wireless broadband to rural and other areas of the country that it believes are currently underserved by traditional phone and cable companies. The Company’s current network footprint covers an addressable market of approximately 2.5 million people, as well as small to mid-sized businesses.

          Since launching its wireless broadband service in 2003, the Company has successfully increased its subscriber count and, based on both subscribers and revenue, KeyOn believes that it is the third largest wireless broadband company in the United States. To date, the Company has completed and successfully integrated seven acquisitions, including two in 2010 and is in active discussions with        other candidates located in adjacent markets to the Company’s existing network footprint. KeyOn’s acquisition strategy allows the Company to rapidly grow its subscriber base while expanding its earnings through operating expense reductions and other synergies achieved in integration.

          KeyOn offers residential and business subscribers a simple, reliable and affordable broadband service that compares favorably to traditional broadband technologies such as cable modem, Digital Subscriber Line (“DSL”) or satellite. The Company leverages wireless broadband technology which it believes allows its service to cover a geographic market for a fraction of the cost of other        competing broadband technologies. In addition to its broadband services, KeyOn also sells voice over Internet Protocol (“VoIP”) and video services through its national retailer agreement with DISH Network Corporation. 

          KeyOn is able to deliver broadband services at competitive prices to communities that it believes are ignored or underserved by traditional phone and cable companies. Generally, KeyOn’s markets are rural locations with populations of generally less than 50,000 that often lack the communications infrastructure to supply broadband access. In rural markets, broadband penetration is only 46%        compared to 67% of households in urban and suburban markets, respectively.3 KeyOn believes that the lower broadband penetration rate in rural areas compared to urban and suburban areas is driven primarily by the technical limitations and high cost of providing broadband over traditional terrestrial networks in less densely populated areas. As a result, the Company believes there is a significant addressable market which is not currently being targeted by competing providers        of broadband services.

          KeyOn believes that it has a scalable operating platform used in the overall management and in all customer functions of the Company’s networks through its use of EngageIP, a sophisticated Operations Support Software (“OSS”) from Logisense Corporation. By centralizing operations in its Network Operations Center (“NOC”), including its OSS, and by decentralizing        management around market clusters, the Company believes it is able to achieve operating costs that are significantly lower than most of its competitors. Further, by expanding into adjacent and new markets or introducing new services, the Company is able to leverage its existing network investments to improve economic returns. KeyOn believes it can significantly improve its growth opportunities while achieving positive net earnings through:

|                                                                                                                                                    |   |
|---------------------------------------------------------------------------------------------------------------------------------------------------------|--------|
|                                                                                                                                                         |
| 1 Broadband Wireless Exchange Magazine Website (www.bbwexchange.com/wireless_isp/)                                                                      |
|                                                                                                                                                    |
| 2 United States Department of Agriculture, Economic Research Service and Wireless Communications Association International Conference, June 12-15, 2007 |

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|   |   |                                                                                                                                                                                                                                                                   |
|--------|--------|------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|
|   | • | strategic acquisitions of wireless broadband companies that complement its market footprint;                                                                                                                                                                           |
|   |   |                                                                                                                                                                                                                                                                   |
|   | • | “Greenfield” network builds in new, strategic markets through participation in the American Recovery and Reinvestment Act of 2009 (“ARRA”);                                                                                                    |
|   |   |                                                                                                                                                                                                                                                                   |
|   | • | contiguous market deployments combined with organic growth within KeyOn’s existing footprint;                                                                                                                                                                    |
|   |   |                                                                                                                                                                                                                                                                   |
|   | • | offering its subscribers bundled and additional services, such as satellite video and VoIP, to further increase average revenue per user; and                                                                                                                          |
|   |   |                                                                                                                                                                                                                                                                   |
|   | • | the strategic introduction of next generation networks, including fourth generation (4G) Worldwide Interoperability for Microwave Access (“WiMAX”), that also provide advanced services such as nomadic or mobile data and video (“4G WiMAX”). |

          In the face of a challenging capital market environment, we achieved numerous milestones during 2009.  However, two specific events position us to pursue our main growth initiatives.  The first occurred in February of 2010 when we raised $15 million through the issuance of a secured convertible promissory note.  This financing was the Company’s largest single financing in        its history, allowed for the repayment of a $4 million loan, and provides the Company with sufficient capital to pursue growth and other strategic initiatives in 2010, including strategic acquisitions, organic growth and the introduction of 4G WiMAX.  The second was the passage of the American Recovery and Reinvestment Act of 2009 (ARRA) and specifically, the Broadband Initiatives Program (BIP).  This federal program allocates $2.5 billion for broadband infrastructure in rural        markets and created a new opportunity for us to potentially access federal grants and loans for the build-out of 4G WiMAX networks in underserved and eligible markets.  On March 29, 2010, the Company submitted multiple applications under Round Two of the BIP.  Pursuant to its applications, KeyOn is seeking approximately $360 million of federal grants and loans to bring 4G WiMAX to as many as 22 states and provide wireless broadband access to as many as 8.2 million people in        some of the smallest communities in rural America.  Provided we are successful in its applications, we have secured commitments to contribute up to $163 million of outside capital to ensure the sustainability of our projects.

**Subscriber Growth Through Acquisitions**

          KeyOn believes it can take advantage of growing subscriber and operations scale by continuing to acquire wireless broadband subscriber bases together with their network assets, thus creating a highly profitable and valuable communications company. The wireless broadband industry is highly fragmented, comprised of thousands of potential acquisition targets in and around the Company’s        market areas. These targets represent an opportunity to grow revenues and expand the Company’s operating margins. 

          The Company has completed seven acquisitions over the past 4 years, including one that was completed in the fourth quarter of 2009 and two that were consummated in 2010. KeyOn believes it has access to proprietary deal flow and has developed an efficient process of negotiating and structuring purchases, managing due diligence and integrating the operations of acquired companies. Upon the        completion of acquisitions, the Company believes that it can derive higher margins than previous ownership through the elimination of duplicative overhead costs and infusing the necessary capital to grow the customer base. KeyOn is able to realize these synergies in the integration of acquisition targets through:

|   |   |                                                                                                                                                                                  |
|--------|--------|---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|
|   | • | Centralizing operations and customer support at KeyOn’s NOC which enables remote monitoring and diagnostics;                                                                    |
|   |   |                                                                                                                                                                                  |
|   | • | Generating scale economies in purchasing termination/access loops and capital equipment;                                                                                              |
|   |   |                                                                                                                                                                                  |
|   | • | Rationalizing expenses in areas of management, network and customer support and general and administrative; and                                                                       |
|   |   |                                                                                                                                                                                  |
|   | • | Leveraging KeyOn’s proven marketing initiatives, such as its network of resellers and targeted direct marketing, to quickly increase the rate of subscriber and revenue growth. |

**Broadband Stimulus Opportunities under the American Recovery and Reinvestment Act of 2009**

          The American Recovery and Reinvestment Act of 2009 (ARRA) has allocated $7.2 billion for the deployment of broadband infrastructure. Under ARRA, the National Telecommunications Information Administration (NTIA) is responsible for awarding $4.7 billion in grants to provide broadband access in rural and underserved areas through the Broadband Technologies Opportunity Program (BTOP). The Rural        Utilities Service (RUS) is charged with providing $2.5 billion in grants and loans through its Broadband Initiatives Program (BIP), so long as 75% of the area to be served is a rural area without sufficient access to broadband. The Company views the passage of ARRA and the broadband funding components as further evidence of the market opportunity that the Company seeks to address. 

          As a result of the Notice of Funds Available (NOFA) published on July 9, 2009, the Company participated in Round One of the BIP by submitting applications totaling approximately $150 million of federal grants and loans. Pursuant to its applications, KeyOn proposed to deliver fourth-generation data services using wireless WiMAX broadband technology, (“4G WiMAX”) to approximately 4        million people and approximately 1.4 million households using its nation-wide 3.65 GHz license. In connection with the BIP rules, KeyOn targeted unserved and underserved communities in rural areas across the Midwest. 

          The Company believes that its existing base of operations, business strategy and ability to deploy networks quickly made it an ideal candidate for participation in the funding. In addition, the Company had submitted comments to the relevant federal agencies on November 30, 2009 based upon a Request for Information published by the FCC, to help shape the rules for the second and final NOFA        (issued on January 15, 2010). As of December 31, 2009, KeyOn had not received any notification from the RUS regarding its applications. However, on January 4, 2010,

|                                                                         |
|------------------------------------------------------------------------------|
|                                                                         |
| 3Pew Internet & American Life Project, Home Broadband Adoption June 2009 |

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the Company received notification that all of the Company’s eleven applications moved to “phase two” due diligence, a thirty-day period in which the applicants were asked to provide detailed responses to a list of due diligence questions from the RUS. Despite producing this information in the requisite time period, together with third-party contingent commitments of approximately $90 million, on March 2, 2010, the Company was notified        that none of its applications advanced to an award. 

**          ** We believe that ARRA still represents a compelling growth opportunity for the Company to increase its network footprint and deliver 4G WiMAX to eligible communities. Based upon our analysis of the awards made by the RUS in Round One, a substantially majority of the communities we targeted remain unfunded by either federal program (BIP/BTOP). As a result, the Company has devoted        substantial resources in its efforts to obtain Round Two BIP grants and loans, including management time and effort and the engagement of consultants to assist in the process. Furthermore, the Company drew on its experience in preparing its Round One applications and advancing to the due diligence phase to apply under Round Two of the BIP program. On March 29, 2010, the Company submitted multiple applications under Round Two of the BIP. While there can be no assurances that we will be        awarded any awards, pursuant to its applications, KeyOn is seeking approximately $360 million of federal grants and loans to bring 4G WiMAX to as many as 22 states and provide wireless broadband access to as many as 8.2 million people in rural America. Provided it is successful in its applications, we have arranged financing to contribute up to $163 million of outside capital to some of the smallest communities in the United States to ensure the sustainability of its        projects.

**Current Markets Served and Organic Growth**

          KeyOn operates primarily in markets with populations of generally less than 50,000. The Company currently offers its broadband services to residential and business subscribers in a market footprint covering over 50,000 square miles in the following 11 Western and Midwestern states: Colorado, Idaho, Illinois, Indiana, Iowa, Kansas, Nebraska, Nevada, Ohio, South Dakota and Texas. The Company        estimates its existing footprint covers approximately 2.5 million people, as well as small to mid-sized businesses in these areas.

          KeyOn believes marketing efforts at the local level create a competitive advantage by creating awareness of its brand while strengthening the connection to its communities. The Company’s multi-pronged sales and marketing approach leverages its local presence and focuses on establishing strong distribution channels in each market. Direct marketing efforts include print and door hangers in        addition to working with businesses and community groups at the local level to promote brand and service awareness. Additionally, the Company works with distribution partners, such as satellite television providers, to offer bundled services within its markets. 

          Despite a decrease in subscribers in 2009 resulting from cost restructurings, since the beginning of 2006, the Company has experienced an average annualized subscriber growth rate of 34% with that growth coming from both organic marketing activities and acquisitions. Additionally, the Company has achieved a low average monthly churn of approximately 2% during the same period, which the Company        believes is a combined result of its subscribers’ satisfaction with its service combined with the lack of competitors in certain of the Company’s markets.

**Rural Market Opportunity**

          Within the United States, rural areas have an overall lower Internet penetration rate, and substantially less access to broadband, than the more densely populated urban and suburban areas. Although broadband adoption has experienced growth in the recent past, broadband penetration rates in rural markets still trail the rest of the country. While urban and suburban markets have reached broadband        penetration rates of 67%, rural market penetration totals only 46%. Importantly, rural market penetration grew at a compound annual growth rate of 20% while non-rural growth rates grew at only 12% since 2006.9 Consequently, we believe the growth of rural broadband penetration can be attributed to the growth in the number of small, wireless broadband companies who serve the needs of their communities.

          One of the primary reasons for the lagging penetration rate in rural areas is the lack of infrastructure or access to broadband, rather than lack of demand for a broadband connection.10 KeyOn believes that this substantially lower penetration rate of broadband in rural markets, or what has been termed the “Digital Divide”, demonstrates that many rural households with        Internet access still utilize analog dial-up connections for Internet access. As a result, the Company believes there is a significant market opportunity which is not currently being met by traditional phone and cable providers.

          The Company believes that the lower broadband penetration rate in rural versus urban and suburban areas is driven primarily by the technical limitations and high cost of providing broadband over terrestrial-based networks in less densely populated areas. DSL service suffers from distance limitations in less populated areas, and DSL equipment and cable plant upgrades both involve significant        upfront capital to deploy their service that is rarely justified in less densely populated rural markets. As a result, there may still be areas that will not be served by cable or DSL at any time in the near future.13 These limitations have generally discouraged broadband deployments and have caused incumbent phone and cable companies to maintain high prices for broadband in the small and rural markets where they offer these services. Where broadband has been deployed, rural        areas have experienced rapid growth in home broadband uptake, and in the past three years the gap between rural and non-rural in-home broadband adoption, though still substantial, has narrowed.

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9 Pew Internet & American Life Project, Home Broadband Adoption June 2009

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10 United States Government Accountability Office, Telecommunications, May 2006 and Pew Internet & American Life Project, Home Broadband Adoption 2006

11 Pew Internet & American Life Project, Home Broadband Adoption 2007

12 Pew Internet & American Life Project, Home Broadband Adoption 2007

13 Frost & Sullivan, Satellite and its Place Amongst Competing Broadband Technologies 2005

**Service Offerings**

*          Broadband*

          KeyOn provides broadband to homes and businesses for a flat monthly rate under service agreements for either annual or two-year contracts. These services are generally billed monthly, quarterly or annually in advance.

*          DISH Network*

          KeyOn began offering video services as a reseller of DISH Network Corporation in November 2007. By selling and installing DISH Network video packages directly (as opposed to through its indirect dealer network) to its subscribers, KeyOn receives marketing dollars, installation and activation fees and a nominal monthly recurring revenue fee, provided the end-user remains a DISH customer for over        one year. KeyOn does not collect any revenue directly from its end-users under the terms of this agreement.

*          WiMAX Deployments*

          KeyOn’s wireless broadband service today is provided to subscribers over primarily unlicensed spectrum in the 2.4 GHz band. The Company is in the process of introducing WiMAX networks. WiMAX is an international network technology standard that provides efficient use of spectrum, interoperability of manufacturers’ equipment, high-bandwidth throughput and self-installation by end        users. Global WiMAX subscribers are expected to grow from an estimated 3.8 million by the end of 2009 to 92.3 million in 2015, a compound annual growth rate of 69%.15

          In November of 2007, we were awarded a non-exclusive license to operate in the 3.65GHz spectrum band. The Company initially launched a WiMAX pilot in one of the Company’s markets in southern Nevada to confirm the viability of fixed and nomadic broadband wireless services using WiMAX technology in the 3.65 GHz band. Having successfully completed the pilot, the Company intends to        commercially market the services to its customers. KeyOn also successfully tested VoIP services on the 3.65 GHz WiMAX platform to provide an integrated voice and data solution to its customers.

          By using WiMAX-based equipment as an adjunct to its existing fixed-wireless networks, the Company expects to create a superior service offering, including nomadic or portable data services. The advantages of deploying WiMAX technology based on a global standard, include higher data speeds, greater spectral efficiency, advanced nomadic services with self-installation features, global        economies of scale and forward compatibility with the mobile WiMAX (802.16 (e) standard). In addition, with the certification of network standards and profiles to standards, network equipment costs should continue to decrease. The resulting interoperability of hardware will not only accelerate downward pricing, but will also afford service providers greater vendor selection and potential roaming revenues.

          Additional spectrum allocation for unlicensed applications has recently been made available. In 2007, the FCC released 50 MHz of spectrum in the 3.65 GHz band to facilitate “rapid expansion of broadband services in America’s rural heartland.” The FCC requires the approved licensees to register their base stations in a common database and to deploy FCC certified equipment that        incorporates specific protocols. There are several benefits of using 3.65 GHz spectrum:

|   |                                                                                                                                                                                                                                                                                                                                             |
|--------|--------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|
| • | The spectrum band is relatively unused;                                                                                                                                                                                                                                                                                                          |
|   |                                                                                                                                                                                                                                                                                                                                             |
| • | The obligation to register the base stations with the FCC creates an orderly process to manage interference, should multiple operators want to access the spectrum. Additionally, when utilizing the upper portion of the 3.65 GHz, spectrum, operators’ networks are required to talk with each other to eliminate any interference; and, |
|   |                                                                                                                                                                                                                                                                                                                                             |
| • | 3.5 GHz band is already being used in other countries and requires relatively little customization for deployment in the United States.                                                                                                                                                                                                          |

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15 The Yankee Group, The WiMAX Guide, November 2009 edition

16 Pew Internet & American Life Project, Home Broadband Adoption 2007

**Competition**

          In the United States, the broadband access market has evolved as a duoply between cable and telephone companies. KeyOn believes that rural markets have much less competition than urban markets, given the relatively high cost to deploy traditional networks in less densely populated areas. However, KeyOn is not the only provider of broadband services in its markets. KeyOn faces competition from        cable operators that offer broadband over cable networks, incumbent local exchange carriers, or ILECs, that offer DSL, satellite operators, wireless broadband service providers and mobile cellular operators. KeyOn competes with these companies on the basis of availability, price, speed and portability of the services. Specifically, the Company’s competitors include the following:

*Incumbent Local Exchange Carrier and Cable Companies*

          KeyOn faces competition from ILECs in the small markets in the Midwest and West. In particular, the Company generally faces competition from companies such as Qwest Communications International Inc., AT&T Inc. and smaller regional or local phone companies. If the market has a significant population density (35,000 - 50,000+), the larger ILECs have typically deployed DSL in the one central        office (CO) in the market. DSL deployments by smaller regional and local phone companies vary; however, the Company believes that all providers of DSL are restricted by DSL’s physical distance limitations.

          Cable operators typically deploy a hybrid fiber-COAX in order to offer broadband through a cable modem service. In markets with a population of 35,000-50,000 or more, cable modem service is often available to most households, with somewhat less availability to businesses. In these markets, KeyOn competes against large cable providers such as Cox Communications, Inc. and smaller, regional cable        providers, such as Cable One, Inc. and Bresnan Communications, LLC.

*Wireless Broadband Service Providers*

          KeyOn also faces competition from other wireless broadband providers that use unlicensed or licensed spectrum. For example, there may be a locally owned “mom and pop” wireless broadband operator present in the market offering local services. The Company believes that most of these operators lack the operating scale and thus are burdened with significant costs or inefficient        operations.

          Wireless broadband competition may also come from local governments, universities, and municipalities that provide “WiFi” networks over unlicensed spectrum. These services are occasionally characterized as public-private partnerships and may be partially subsidized. In some cases, they are offered to subscribers at no cost at all. Additionally, Cablevision and Time Warner Cable        began offering WiFi to their existing cable-modem broadband customers throughout parts of their cable network footprint.

          In addition, the Clearwire Corporation (“Clearwire”) also offers wireless high speed Internet access utilizing pre-WiMAX-based technology in 46 markets in the United States and WiMAX technology in up to 120 million people in major metropolitan markets including- Baltimore, MD Portland, OR, Atlanta, GA, Philadelphia, PA, Las Vegas, NV, and Houston, TX, among others by the end of        2010. In terms of both domestic deployments and subscribers, Clearwire is the largest company providing 4G WiMAX data services. Clearwire is focused primarily on larger population centers, underscoring the significant market opportunity available to the Company in serving underserved rural markets.

*Satellite*

          Satellite providers such as WildBlue Communications, Inc., (agreed to be purchased by ViaSat, Inc., in October 2009 for approximately $568 million) and Hughes Network Systems, LLC also offer broadband data services in rural and underserved markets. Although satellite has the capability to serve a large geographic area, the service levels can be impaired by the distance the signal travels to and        from the satellite. Communication delays, or latency, can significantly inhibit satellite providers’ ability to offer advanced services, such as voice over Internet Protocol (VoIP) and online gaming. According to research conducted by Pike & Fischer, satellite broadband is projected to serve only 1.3 million households by 2012, up from 600,000 subscribers currently being served by satellite broadband. Satellite remains a broadband access service of last resort, due to its        inherent latency and high price for equipment and service. KeyOn believes its services can be provided to its target customers more efficiently and at more competitive prices than satellite broadband services and as a result, it does not compete effectively with fixed wireless broadband.

*Cellular and PCS Services*

          Many of the major mobile wireless carriers offer higher data rate access plans, but these plans are either restricted to larger urban and suburban markets or the actual data transfer rate can be significantly less than KeyOn’s fixed broadband services. However, wireless carriers

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continue to expand their network coverage, allowing advanced data services to be offered to a broader subscriber base. Also, wireless carriers have continued to leverage data services by offering personal computer data card devices and providing customers with wireless access to the Internet. KeyOn believes that these nationwide players will continue to focus on larger metropolitan markets, and will continue to be limited in bandwidth relative to the        fixed wireless providers.

*Other*

          Other emerging technologies, such as long-term evolution (LTE), may also play a role in the evolving broadband services market. The LTE standard is the preferred choice for most existing cellular operators and should serve as the technology platform for mobile broadband services. Deployments using LTE to date have consisted largely of trials. It appears commercial deployments will focus on        markets with significant populations and subscriber densities while the LTE “ecosystem” emerges from its formative stages. The mobile broadband opportunity has resulted in new entrants from the cable industry. Cox Communications has begun building Greenfield networks and companies such as Comcast, Time Warner and Brighthouse are re-selling wireless broadband services utilizing Clearwire’s network. Finally, power and distribution companies have attempted to provide        broadband services over their existing power lines, though without much commercial success. It is possible that over time with the further development of technology, broadband over power lines may prove to be a means of providing competitive broadband services.

**Corporate History**

          The Company was organized in the State of Delaware on September 9, 2004 under the name Grant Enterprises, Inc., and became a public shell company, as defined by the Securities and Exchange Commission. On August 9, 2007, a wholly-owned subsidiary of the Company merged with and into a private company, KeyOn Communications Inc., with KeyOn Communications Inc. being the surviving company. Upon        closing of the merger, the Company discontinued its former business and succeeded to the business of KeyOn Communications Inc. as its sole line of business. At the same time, the Company also changed its name from Grant Enterprises, Inc. to KeyOn Communications Holdings, Inc.

**Regulatory Matters**

          Wireless broadband services are subject to regulation by the Federal Communications Commission (FCC). At the federal level, the FCC has jurisdiction over wireless transmissions over the electromagnetic spectrum, all interstate and foreign telecommunications services, and many aspects of intrastate telecommunications. State regulatory commissions have jurisdiction over many aspects of intrastate        telecommunications. Municipalities may regulate limited aspects of KeyOn’s business by, for example, imposing zoning requirements and requiring installation permits.

*Telecommunications Regulation*

          KeyOn’s wireless broadband systems can be used to provide Internet access service, interconnected VoIP service and virtual private networks, or VPNs. 

          The FCC has classified Internet access service as an interstate information service that is subject to regulation under Title I of the Communications Act of 1934, as amended, or the Communications Act. Accordingly, most regulations that apply to telephone companies and other common carriers under Title II of the Communications Act do not apply to KeyOn’s wireless broadband Internet access        service. For example, KeyOn is not required to file tariffs with the FCC, setting forth the rates, terms, and conditions of its Internet access service.

          The FCC is conducting a comprehensive proceeding to address all types of Internet protocol-enabled services, including Internet access service and interconnected VoIP service, and to consider what regulations, if any, should be applied to such services, as use of broadband services becomes more widespread. A number of obligations have been imposed on both broadband Internet access and        interconnected VoIP service providers. Some of the more significant of these are discussed below.

          In June 2005, the FCC adopted the first set of regulations in this comprehensive Internet protocol-enabled proceeding, imposing enhanced 911-related requirements on interconnected VoIP service providers as a condition of offering such service to consumers. The FCC defined “interconnected VoIP service” as voice service that:

|   |   |                                                                                                               |
|--------|--------|--------------------------------------------------------------------------------------------------------------------|
|   | • | enables real-time, two-way voice communications;                                                                   |
|   |   |                                                                                                               |
|   | • | requires a broadband connection from the user’s location;                                                    |
|   |   |                                                                                                               |
|   | • | requires Internet protocol-compatible customer premises equipment; and                                             |
|   |   |                                                                                                               |
|   | • | permits users generally to receive calls that originate on and terminate to the public switched telephone network. |

          Effective November 28, 2005, all interconnected VoIP providers are required to transmit, through the wireline network, all 911 calls, as well as a call-back number and the caller’s registered location for each call, to the appropriate public safety answering point that is capable of receiving and processing that information. In addition, all interconnected VoIP providers must have a        process to obtain a subscriber’s registered

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location prior to activating service, and must allow their subscribers to update their registered location immediately if the subscriber moves the service to a different location. Interconnected VoIP providers are also required to prominently and in plain English advise subscribers of the manner in which dialing 911 using VoIP service is different from dialing 911 service using traditional telephone service, and to provide warning labels with VoIP        equipment. A rulemaking proceeding is pending before the FCC considering whether to impose additional 911-related obligations on interconnected VoIP providers. (Interconnected VoIP providers are also required to transmit 711 calls to appropriate telecommunications relay service providers for the deaf.)

          On August 5, 2005, the FCC adopted an Order finding that both facilities-based broadband Internet access providers and interconnected VoIP providers are subject to the Communications Assistance for Law Enforcement Act (CALEA), which requires service providers covered by that statute to build certain law enforcement surveillance assistance capabilities into their communications networks. The FCC        required facilities-based broadband Internet access providers and interconnected VoIP providers to comply with CALEA requirements by May 14, 2007. On May 3, 2006, the FCC adopted an additional Order addressing CALEA compliance obligations of these providers, which Order concluded, among other things, that interconnected VoIP providers may use certain third parties to satisfy CALEA obligations and adopted interim progress report filing obligations.

          On June 27, 2006, the FCC released an Order addressing USF fee obligations of interconnected VoIP service providers. The FCC amended the USF rules to require providers of interconnected VoIP service to contribute to the USF under the existing contribution methodology. Interconnected VoIP providers must report and contribute to the USF on all their interstate and international end-user        telecommunications revenues. The proposed USF fee rate for the first and second quarters of 2010 is 14.1% and 15.3%, respectively, of gross revenues derived from the provision of interstate telecommunications or interconnected VoIP to end users. Beginning in late 2007, similar fees used to support interstate telecommunications relay service providers and the administration of numbering resources, number portability, and the costs of FCC regulation also apply to interconnected VoIP        providers as well.

          All interconnected VoIP providers must file a FCC Form 499-A with the FCC for registration purposes even if they qualify for the de minimis exemption for contribution purposes. Interconnected VoIP service also may be subject to state and local taxation. Providers of Internet access are not currently required to contribute to universal service. However, as directed by Congress as part of the        American Recovery and Reinvestment Act of 2009, the FCC delivered to Congress on March 16, 2010, a National Broadband Plan to ensure that every American has “access to broadband capability” (National Broadband Plan). The National Broadband Plan recommends that the FCC review its rules regarding universal service contributions given the rising importance of Internet access.

          In a decision released April 2, 2007, the FCC determined that interconnected VoIP providers should be subject to its rules implementing Section 222(c) of the Communications Act, which governs telecommunications carriers’ use of customer proprietary network information, or CPNI. CPNI is customer-specific information derived from the provision of telecommunications service, including call        detail and caller location information. FCC rules permit carriers and interconnected VoIP providers to use CPNI to market the services they already provide to customers, and for limited service-related and fraud prevention purposes, without prior customer approval. All other uses or third party disclosure of CPNI generally require prior customer approval, as follows: service providers, either themselves or through agents, may use CPNI to market other communications-related services        through “opt-out” consent such that the service provider may use CPNI unless the customer affirmatively instructs the service provider otherwise; all other use or third party disclosure of CPNI, including any use of location information, requires “opt-in” approval whereby a service provider may not use or disclose CPNI without the customer’s express affirmative permission. The FCC rules also require that carriers and interconnected VoIP providers implement        personnel, network and related safeguards to protect CPNI from unauthorized third party disclosure, and certify their compliance to the FCC annually. Providers of Internet access are not currently subject to CPNI rules, but the FCC is considering whether to impose such requirements in a pending rulemaking proceeding.

          On October 22, 2009, the FCC initiated a rulemaking and proposed to adopt so-called “net neutrality” or “open Internet” rules that would prevent Internet service providers (“ISPs”) from interfering with consumers’: (a) ability to send or receive lawful content over the Internet; (b) ability to run the services and applications of their choice; (c)        ability to connect their choice of lawful devices that do not harm the ISP’s network; and (d) entitlement to competition among network providers, application providers, service providers and content providers. The rulemaking also proposes to require ISPs to adhere to new nondiscrimination and transparency principles, but would allow ISPs to employ reasonable network management to address, among other things, network congestion and unlawful transfers of content. The FCC’s        proposals also could limit the ability of ISPs to enter into agreements with website owners for “premium” or “fast-lane” delivery of content and quality-of-service guarantees on the open Internet (as distinct from “specialized” or “managed” services). In the proceeding, the FCC also is exploring whether different rules should apply to wireless Internet access providers given the spectrum constraints that they face in delivering their        services. The FCC is expected to finalize its rules in 2010. The FCC’s statutory authority to adopt net neutrality rules has been challenged in a case pending before the U.S. Court of Appeals for the District of Columbia Circuit. In the event the court determines the FCC lacks authority in this area, it is possible that Congress will intervene to establish FCC jurisdiction or adopt net neutrality legislation. We cannot predict whether Congress or the FCC will adopt rules regarding        net neutrality that may limit ISPs’ flexibility to provide services. 

          Internet access providers are currently subject to generally applicable state consumer protection laws enforced by state Attorneys General and generally applicable Federal Trade Commission consumer protection rules.

          Broadband Internet-related and Internet protocol-services regulatory policies are continuing to develop, and it is possible that KeyOn’s broadband Internet access and VoIP services could be subject to additional regulations in the future. The extent of the regulations that will ultimately be applicable to these services and the impact of such regulations on the ability of providers to        compete are currently unknown.

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*Spectrum Regulation*

          The FCC routinely reviews its spectrum policies and may change its position on spectrum allocations from time to time. On June 7, 2007, the FCC issued a Memorandum Opinion and Order regarding rules for the 3650-3700 MHz spectrum band. Currently, this band is allocated for use to an unlimited number of operators pursuant to a link registration process. Similarly, the FCC has modified regulation        in the 2.5 GHz BRS/EBS spectrum band and, from time to time, can modify or change spectrum allocations pursuant to rulemaking proceedings. KeyOn believes that the FCC is committed to allocating spectrum to support wireless broadband deployment throughout the United States and will continue to modify its regulations to foster such deployment, which will help the Company implement its existing and future business plans.

          The National Broadband Plan includes recommendations designed to make more spectrum available for broadband, 500 MHz within 10 years from federal and non-federal sources, including 300 MHz by 2015. The availability of new spectrum could increase competition. We cannot predict whether Congress or the FCC will adopt or implement any of the Plan’s recommendations or how any such actions        might affect our business.

*Internet Taxation*

          The Internet Tax Freedom Act of 1998 imposed a temporary moratorium on taxes on Internet access and multiple, discriminatory taxes on electronic commerce. Congress has twice extended the Internet Tax Freedom Act moratorium, which now is effective until November 1, 2014 unless further extended. States that taxed Internet access prior to October 1998 may continue to do so. Certain states have        enacted various taxes on Internet access or electronic commerce, and selected states’ taxes are being contested on a variety of bases. However, state tax laws may not be successfully contested and future state and federal laws imposing taxes or other regulations on Internet access and electronic commerce may arise, any of which could increase the cost of providing Internet services, which could, in turn, materially adversely affect KeyOn’s business.

**Employees**

          As of April 13, 2010, the Company had 54 full-time employees. Of these employees, approximately, 14 serve in customer service and support positions, 23 serve as network engineers and field technicians, 10 serve in accounting and administrative positions and 4 serve in sales and marketing positions. None of KeyOn’s employees is subject to a collective bargaining agreement. The Company        considers its relationship with its employees to be good. 

**Item 1A. Risk Factors**

**Certain Risks and Uncertainties**

          Certain statements in this Annual Report on Form 10-K, including certain statements contained in “Description of Business” and “Management’s Discussion and Analysis,” constitute “forward-looking statements” within the meaning of Section 27A of the Securities Act of 1933, as amended, and Section 21E of the Securities Exchange Act of 1934, as amended. The        words or phrases “can be,” “may,” “could,” “would,” “expects,” “believes,” “seeks,” “estimates,” “projects” and similar words and phrases are intended to identify such forward-looking statements. Such forward-looking statements are subject to various known and unknown risks and uncertainties, including those described on the following pages, and the Company cautions you that any        forward-looking information provided by or on behalf of the Company is not a guarantee of future performance. The Company’s actual results could differ materially from those anticipated by such forward-looking statements due to a number of factors, some of which are beyond the Company’s control. All such forward-looking statements are current only as of the date on which such statements were made. The Company does not undertake any obligation to publicly update any        forward-looking statement to reflect events or circumstances after the date on which any such statement is made or to reflect the occurrence of unanticipated events.

**Risks Relating to the Company**

***          The Company may be unable to successfully execute on either its acquisition strategy or organic growth strategy, both of which it depends upon to drive the growth of its subscriber base.***

          In order to successfully execute on both its acquisition strategy and organic growth strategy, KeyOn will need to continue to build its infrastructure and operational capabilities. The Company’s ability to do any of these successfully could be affected by any one or more of the following factors:

|   |                                                                                                                                                                                                                                      |
|--------|-------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|
| • | the Company’s ability to successfully negotiate with potential acquisition targets, including the targets’ willingness to accept consideration such as cash, debt, the Company’s common stock or a combination thereof; |
|   |                                                                                                                                                                                                                                      |
| • | the Company’s ability to acquire companies or their assets at purchase prices that are consistent with KeyOn’s targeted returns;                                                                                              |
|   |                                                                                                                                                                                                                                      |
| • | the Company’s ability to successfully integrate companies it acquires, which could result in increased costs, additional churn or damage to an                                                                                      |

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|   |                                                                                                                                                                    |
|--------|-------------------------------------------------------------------------------------------------------------------------------------------------------------------------|
|   | existing or acquired brand;                                                                                                                                             |
|   |                                                                                                                                                                    |
| • | the ability of the Company’s equipment, equipment suppliers or third-party service providers to perform as it expects;                                            |
|   |                                                                                                                                                                    |
| • | the Company’s ability to further penetrate its existing markets and contribute to the organic growth of its subscriber base;                                      |
|   |                                                                                                                                                                    |
| • | the Company’s ability to differentiate its services from those offered by its competitors in the markets it serves;                                               |
|   |                                                                                                                                                                    |
| • | the Company’s ability to obtain both network and customer premise equipment, which it currently receives from third parties;                                      |
|   |                                                                                                                                                                    |
| • | the Company’s ability to attract and retain qualified personnel;                                                                                                  |
|   |                                                                                                                                                                    |
| • | equipment failure or interruption of service, which could adversely affect the Company’s reputation and its relations with customers;                             |
|   |                                                                                                                                                                    |
| • | the Company’s ability to accurately predict and respond to the rapid technological changes in its industry and the evolving demands of the markets it serves; and |

          The Company’s failure to adequately address any one or more of the above factors could have a significant adverse impact on the Company’s ability to implement its business plan with respect to its acquisition strategy and organic growth plans, as well as its ability to pursue other opportunities that arise.

***          Any acquisitions the Company makes could result in integration difficulties that could lead to substantial costs, delays or other operational or financial difficulties.***

          KeyOn seeks to expand by acquiring businesses, including those in its current or new geographic markets. The Company cannot accurately predict the timing, size and success of its acquisition efforts and the associated capital commitments that might be required. The Company expects to face competition for acquisitions, which may limit the number of acquisition opportunities available and may        lead to higher acquisition prices. KeyOn may not be able to identify, acquire or profitably manage additional businesses or successfully integrate acquired businesses, if any, without substantial costs, delays or other operational or financial difficulties. In addition, such acquisitions involve a number of other risks, including:

|   |                                                                                      |
|--------|-------------------------------------------------------------------------------------------|
| • | failure of the acquired businesses to achieve expected results;                           |
|   |                                                                                      |
| • | diversion of management’s attention and resources to acquisitions;                  |
|   |                                                                                      |
| • | inability to timely and cost-effectively integrate acquired operations;                   |
|   |                                                                                      |
| • | failure to retain key customers or personnel of the acquired businesses;                  |
|   |                                                                                      |
| • | disappointing quality or functionality of acquired equipment, networks and personnel; and |
|   |                                                                                      |
| • | risks associated with unanticipated events, liabilities or contingencies.                 |

          Subscriber dissatisfaction with, or performance problems of, a single acquired business could negatively affect KeyOn’s reputation. The inability to acquire businesses on reasonable terms or successfully integrate and manage acquired companies, or the occurrence of performance problems at acquired companies, could result in dilution, unfavorable accounting treatment or one-time charges        and difficulties in successfully managing the business.

***          The Company has a history of operating losses and expects to continue suffering losses for the foreseeable future.***

          The Company has incurred losses since it was launched in 2002. Moreover, in each of 2009 and 2008, KeyOn recorded net losses of $6,595,702 and $8,050,358, respectively. The Company cannot anticipate when, if ever, its operations will become net cash-flow positive. The Company may incur net losses as it integrates acquisitions, introduces new network equipment, increases its marketing for        organic subscriber growth and pursues other aspects of its business strategy.

***          The opportunity to receive federal grants and loans under the American Recovery and Reinvestment Act of 2009 is a highly competitive process, and there are no assurances that the Company will have any measure of success with its applications.***

          While the Company believes it has submitted what it believes to be compelling applications under the BIP, there is no guarantee that the Company will be successfully awarded any of the funds that it is seeking. This is a highly competitive process in which only 68 awards were made by the RUS out of a total of over 1,200 BIP eligible applications. As a contrast to Round One, Round Two        applications do not have an

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official due diligence phase, which places even greater importance on the initial application submissions. As a result, there can be no assurances that the Company will be successful in Round Two or that it will receive any grants and loans under BIP. If the Company is not successful in Round Two of the BIP, the Company will pursue growth through acquisitions and organic growth and may face        additional competition from service providers who do receive BIP funding.

***          The Company may experience difficulties in maintaining its existing network, as well as in constructing, upgrading and introducing new technologies, such as WiMAX, into networks, which could adversely affect customer satisfaction, increase subscriber churn and reduce the Company’s revenues.***

          KeyOn’s success depends on providing affordable and reliable broadband access, as well as related services. If the number of subscribers using its network and the complexity of its services increase, the Company will require more infrastructure, network and customer service resources to maintain the quality of its services. Consequently, the Company may be required to make substantial        investments to construct and improve its facilities and equipment and to upgrade its technology and network infrastructure. This is particularly true in connection with the WiMAX networks the Company intends to pursue. If KeyOn does not implement these developments and network upgrades successfully, or if it experiences inefficiencies, operational failures, or unforeseen costs during implementation, the quality of the Company’s services could decline.

          The Company may experience quality deficiencies, cost overruns and delays in implementing its network improvements and expansion, in maintenance and upgrade projects, including slower than anticipated technology migrations. In addition, KeyOn typically is required to obtain rights from land, building or tower owners to install its antennae and other equipment to provide service to its        subscribers. The Company may not be able to obtain, on terms acceptable to itself, or at all, the rights necessary to construct its network and expand its services.

          KeyOn also faces challenges in managing and operating its networks. These challenges include operating, maintaining and upgrading network and customer premises equipment to accommodate increased traffic or technological advances, and managing the sales, advertising, customer support, billing and collection functions of its business, while providing reliable network service at expected speeds        and quality. The Company’s failure in any of these areas could adversely affect customer satisfaction, increase subscriber churn, increase its costs and decrease its revenues.

***          The Company utilizes primarily unlicensed spectrum, which is subject to intense competition, low barriers of entry and potential interference from multiple competing users.***

          The Company presently utilizes primarily unlicensed spectrum in connection with its broadband service offerings. While unlicensed spectrum is regulated by the Federal Communications Commission, it is available to multiple simultaneous users and may be subject to interference, which may reduce the quality of the service provided to subscribers. The availability of unlicensed spectrum is limited        and others do not need to obtain permits or licenses to utilize the same unlicensed spectrum used by KeyOn currently or may in the future utilize, threatening its ability to reliably deliver services. The Company also holds a nationwide license in the “lightly-licensed” 3.65GHz band. This band affords greater protection than some of the unlicensed bands which the Company utilizes, but is still available to multiple simultaneous users.

***          Unlicensed spectrum becomes impractical to use in certain markets and the Company is required to obtain and maintain rights to use licensed spectrum in those markets which could negatively impact its ability to execute its business strategy. To the extent KeyOn secures licensed spectrum, it faces increased operational costs and greater regulatory scrutiny.***

          In certain markets, the Company intends to provide mobile or nomadic service by using technologies such as WiMAX and licensed spectrum. If unlicensed spectrum bands, are insufficient to use for the deployment of such services, the Company may need to secure and maintain sufficient rights to use licensed spectrum by obtaining licenses or long-term leases in those markets. Obtaining licensed        spectrum can be a long and difficult process that can be costly and require a disproportionate amount of management resources, and may require the Company to incur significant indebtedness or secure additional capital. KeyOn may not be successful in its efforts to secure spectrum acquisition financing or be able to acquire, lease or maintain, either from third parties or through a licensed spectrum auction, the spectrum necessary to execute its strategy.

          Licensed spectrum, whether owned or leased, poses additional risks, including:

|   |                                                                                                                                                                                       |
|--------|--------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|
| • | adverse changes to regulations governing spectrum rights;                                                                                                                                  |
|   |                                                                                                                                                                                       |
| • | the risk that spectrum acquired or leased will not be commercially usable or free of damaging interference from licensed or unlicensed operators in the Company’s or adjacent bands; |
|   |                                                                                                                                                                                       |
| • | failure of the Federal Communications Commission or other regulators to renew spectrum licenses as they expire;                                                                            |
|   |                                                                                                                                                                                       |
| • | inability to satisfy build-out or service deployment requirements upon which spectrum licenses or leases are, or may be, conditioned;                                                      |
|   |                                                                                                                                                                                       |
| • | increases in spectrum acquisition costs;                                                                                                                                                   |
|   |                                                                                                                                                                                       |
| • | uncertainty in obtaining the equipment required to use the licensed spectrum;                                                                                                              |
|   |                                                                                                                                                                                       |
| • | increases in capital expenses associated with new equipment required to utilize the licensed spectrum;                                                                                     |

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|   |                                                                                                                                                                          |
|--------|-------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|
| • | contractual disputes with, or the bankruptcy or other reorganization of the license holders, which could adversely affect control over the spectrum subject to such licenses. |

***          Depending upon the geographic market, some of the Company’s competitors are better established and have engineering, sales and marketing resources that are significantly greater than the Company has, which may make it difficult to attract and retain subscribers.***

          As a general matter, the market for broadband and related services is highly competitive, and KeyOn may compete with other companies in its markets. Some of these competitors are well established with larger and better-developed networks and support systems, longer-standing relationships with customers, greater name recognition and greater financial, technical and marketing resources than the        Company has. As a result, KeyOn’s competitors may reduce the prices of their services significantly or may offer broadband connectivity packaged with other services. The Company may not be able to reduce its prices or otherwise combine its services with other services, which may make it more difficult to attract and retain subscribers.

          The Company’s competitors include:

|   |                                                                                                                                                                                                                                                                                                                         |
|--------|------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|
| • | cable operators offering broadband Internet connectivity services and voice communications;                                                                                                                                                                                                                                  |
|   |                                                                                                                                                                                                                                                                                                                         |
| • | incumbent and competitive local exchange carriers providing DSL services;                                                                                                                                                                                                                                                    |
|   |                                                                                                                                                                                                                                                                                                                         |
| • | wireless Internet service providers using licensed or unlicensed spectrum;                                                                                                                                                                                                                                                   |
|   |                                                                                                                                                                                                                                                                                                                         |
| • | fourth generation, or 4G, cellular, personal communications service, or PCS, and other wireless providers offering wireless broadband services and capabilities, including developments in existing cellular and PCS technology that may increase network speeds or have other advantages over the Company’s services; |
|   |                                                                                                                                                                                                                                                                                                                         |
| • | Internet service providers offering dial-up Internet connectivity;                                                                                                                                                                                                                                                           |
|   |                                                                                                                                                                                                                                                                                                                         |
| • | providers of VoIP telephone services;                                                                                                                                                                                                                                                                                        |
|   |                                                                                                                                                                                                                                                                                                                         |
| • | satellite providers offering or developing broadband connectivity; and                                                                                                                                                                                                                                                       |
|   |                                                                                                                                                                                                                                                                                                                         |
| • | electric utilities and other providers offering or planning to offer broadband Internet connectivity over power lines.                                                                                                                                                                                                       |

Additionally, as a result of the broadband funding initiatives of the American Recovery and Reinvestment Act of 2009, existing and prospective competitors who receive an award could have greater financial wherewithal and adopt technologies or business plans similar to KeyOn’s, or seek other means to develop services competitive with the Company, particularly if the Company’s services prove to be attractive in its target markets. This        competition may make it difficult for the Company to attract and retain subscribers.

***          The Company relies on third party sales representatives to assist in selling its services, and the failure of these representatives to perform as expected could reduce the Company’s future sales.***

          KeyOn sells its services to some of its customers through third party sales representatives. However, the Company’s relationships with some of these third party sales representatives are relatively new and it is unable to predict the extent to which its third party sales representatives will be successful in marketing and selling the Company’s services. Moreover, many of        KeyOn’s third party sales representatives also market and sell competing products. The Company’s third party sales representatives may terminate their relationships with the Company at any time, or with short notice and may give greater attention to the products sold by KeyOn’s competitors. KeyOn’s future performance will also depend, in part, on its ability to attract additional third party sales representatives that will be able to market the Company’s        services effectively, especially in markets in which KeyOn has not previously distributed services. If the Company cannot retain its current third party sales representatives and recruit additional or replacement third party sales representatives, its revenues and operating results could be harmed.

***          The Company relies on a limited number of third party suppliers that produce its network and customer premise equipment, and occasionally install or service its network sites. The Company is also currently using one or more third-party providers to supply the Company with certain aspects of its video and VoIP services. If these companies fail to perform or experience delays, shortages or        increased demand for their services, KeyOn may face a shortage of components, increased costs, and may be required to suspend its network deployment and its product and service introduction.***

          In addition to the personnel the Company has on staff, KeyOn also depends on a limited number of third party suppliers to produce and deliver services required for its networks. The Company does not maintain any long-term supply contracts with its equipment manufacturers and distributors. In addition, KeyOn relies on providers of Internet bandwidth in order to transport data traffic on its        networks onto the public Internet. If a manufacturer or other provider does not satisfy KeyOn’s requirements, or if KeyOn loses a manufacturer or any other significant provider, it may have insufficient network equipment for delivery to subscribers and for installation or maintenance of its infrastructure, and the Company may be forced to suspend the deployment of its network and growth of new subscribers, thus impairing future growth. KeyOn also currently contracts with        third-party providers for certain video and VoIP services and relies on those services to be compliant with all relevant regulatory

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requirements. To the extent these third-party providers are unable to meet either KeyOn’s or the regulatory requirements, KeyOn may be forced to suspend the deployment of these services, thus impairing future revenue growth.

***          The Company’s inability to use shares of its common stock to finance future acquisitions could impair the growth and expansion of its business.***

          The extent to which KeyOn will be able or willing to use shares of its common stock to consummate acquisitions will depend on:

|   |                                                                                                                                     |
|--------|------------------------------------------------------------------------------------------------------------------------------------------|
| • | the market value of the Company’s securities, which will vary;                                                                     |
|   |                                                                                                                                     |
| • | the willingness of potential sellers to accept shares of the Company’s common stock as full or partial payment for their business. |

          Using shares of KeyOn’s common stock for this purpose may also result in significant dilution to the Company’s then existing stockholders. To the extent that the Company is unable to use its common stock to make future acquisitions, KeyOn’s ability to grow through acquisitions may be limited to the extent that the Company will have to utilize existing capital.

***          The Company depends on the continued availability of leases for the deployment of its communications equipment.***

          KeyOn has either constructed or acquired networks in each of the markets it serves. Networks are typically built by installing antennae on rooftops, cellular towers and other elevated structures pursuant to lease agreements that allow the Company to collocate its equipment. In the markets where the Company builds networks itself, it typically seeks five-year initial terms for its leases with        multiple three to five year renewal options. Such renewal options are generally exercisable at KeyOn’s discretion before the expiration of each term. If the leases the Company enters into or assume by way of acquisition are terminated or if the owners of these structures are unwilling to continue to enter into leases with KeyOn in the future, KeyOn would be forced to seek alternative arrangements with other providers. If KeyOn is unable to continue to obtain or renew such leases        on satisfactory terms, its business would be harmed.

***          The Company’s business depends on its service brands, and if it does not maintain and enhance its brands, the Company’s ability to attract and retain subscribers may be impaired and its business and operating results may be harmed.***

          KeyOn believes that its brands are a critical part of its business. Maintaining and enhancing the Company’s brands may require substantial investments with no assurance that these investments will be successful. The Company currently markets under the “KeyOn,” “SpeedNet” and “SIRIS” brands, and if it incurs significant expenses in promoting and        maintaining these brands, KeyOn’s business, prospects, operating results and financial condition may be harmed. KeyOn anticipates that maintaining and enhancing its brands may become increasingly competitive, difficult and expensive.

          ***KeyOn might not have sufficient capital or generate enough cash flow to service interest obligations or repay its indebtedness.***

          On February 1, 2010, the Company, and an institutional investor (the “Buyer”) entered into a Note Purchase Agreement (the “Note Purchase Agreement”). On February 5, 2010, pursuant to the Note Purchase Agreement, the Company issued the Buyer a secured convertible promissory note for the principal sum of $15,000,000 (the “Note”), which Note is convertible        into shares preferred stock of the Company. A portion on the proceeds was used to repay the Loan with Sun West Bank in full. The Note has a principal amount of $15,000,000, bears interest at a rate of 8% per annum and matures on February 5, 2015. The Company’s obligations under the second promissory note are secured by a perfected security interest in all of the assets and property of the Company, including the stock of its subsidiaries. 

          If KeyOn is unable to secure additional financing at acceptable terms or generate sufficient cash flow from operations, the Company might not have adequate capital for interest payments or for principal repayment. In addition, while it is outstanding, the promissory note contains prohibitions on the Company’s ability to secure additional debt or grant future security interests with        respect to the Company’s assets. These limitations may limit KeyOn’s ability to obtain additional financing, withstand downturns in its business and take advantage of business and strategic opportunities.

          ***Our indebtedness, restrictive debt covenants and recent agreement to issue shares of preferred stock could limit our financing options and liquidity position, which would limit our ability to grow our business. Further, failure to comply with the debt covenants could have a material adverse effect on our business.***

          In February 2010 we issued a secured convertible promissory note due February 5, 2015 in an aggregate principal amount of $15,000,000, which Note is convertible into shares of Series Cal Cap Preferred Stock (the “Series Cal Cap Preferred Stock”). The terms of this Note could have negative consequences to the holders of our common stock, such as: 

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|   |                                                                                                                                                                                                                                                                                                                                                   |
|--------|--------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|
| • | repayment of the Notes in cash and the payment of cash dividends to the holders of the Series Cal Cap Preferred Stock could reduce the funds available to us for our operations, acquisitions, product development or other corporate initiatives and limit our flexibility in planning for, or reacting to, changes in our business and the industry; |
|   |                                                                                                                                                                                                                                                                                                                                                   |
| • | our debt service obligations could place us at a competitive disadvantage to our competitors who have less leverage relative to their overall capital structures;                                                                                                                                                                                      |
|   |                                                                                                                                                                                                                                                                                                                                                   |
| • | in the event that we are unable to repay the outstanding borrowings under the Note when due or otherwise default on the terms of the Note, the holders of the Note have the right to proceed against the collateral granted to them, including all of our personal property, equipment and deposit accounts; and                                       |
|   |                                                                                                                                                                                                                                                                                                                                                   |
| • | our vulnerability to general economic downturns and adverse industry conditions is increased.                                                                                                                                                                                                                                                          |

          Further, covenants in the Note impose operating and financial restrictions on us. Compliance with these covenants may prevent us from engaging in transactions that might otherwise be considered beneficial. The covenants prohibit or limit our ability, and the ability of our subsidiaries, to, among other things: 

|   |                                                                                                                                                                                                                                      |
|--------|-------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|
| • | permit liens on or conduct sales of assets;                                                                                                                                                                                               |
|   |                                                                                                                                                                                                                                      |
| • | incur additional indebtedness, which may be necessary to pursue further development and/or acquisition opportunities, the timing, size and success as well as associated potential capital commitments of which are unknown at this time; |
|   |                                                                                                                                                                                                                                      |
| • | sell interests in any of our subsidiaries;                                                                                                                                                                                                |
|   |                                                                                                                                                                                                                                      |
| • | pay dividends to holders of our common stock;                                                                                                                                                                                             |
|   |                                                                                                                                                                                                                                      |
| • | issue shares of preferred stock other than the issuance of any shares of Series Cal Cap Preferred Stock in connection with the conversion of the Note;                                                                                    |
|   |                                                                                                                                                                                                                                      |
| • | engage in transactions with affiliates; and                                                                                                                                                                                               |
|   |                                                                                                                                                                                                                                      |
| • | enter into or change any business other than that carried on or contemplated on the date of the issuance of the Note.                                                                                                                     |

          Because of the significance of our outstanding indebtedness, debt covenant compliance is important to our operations. The Note is a primary source of committed funding from which we finance our planned capital expenditures, strategic initiatives and working capital needs. Failure to comply with the covenants listed above could result in an event of default which, if not cured or waived, could        have a material adverse effect on our business. 

***          Excessive customer churn may adversely affect the Company’s financial performance by slowing customer growth, increasing costs and reducing revenue.***

          The successful implementation of KeyOn’s business plan depends upon controlling customer churn. Customer churn is a measure of customers who stop using KeyOn’s services. Customer churn could increase as a result of:

|   |                                                                                                                                                                                                                                                                                        |
|--------|---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|
| • | personal economic conditions;                                                                                                                                                                                                                                                               |
|   |                                                                                                                                                                                                                                                                                        |
| • | customers moving out of the Company’s geographic coverage area;                                                                                                                                                                                                                       |
|   |                                                                                                                                                                                                                                                                                        |
| • | interruptions to the delivery of services to customers over the Company’s network;                                                                                                                                                                                                    |
|   |                                                                                                                                                                                                                                                                                        |
| • | billing errors and/or general reduction in the quality of the Company’s customer service;                                                                                                                                                                                             |
|   |                                                                                                                                                                                                                                                                                        |
| • | competitors offering additional, desired service offerings that the Company does not offer; and                                                                                                                                                                                             |
|   |                                                                                                                                                                                                                                                                                        |
| • | the availability of competing technology, such as cable modems, DSL, fourth-generation cellular, satellite, wireless Internet service and other emerging technologies, some of which may, from time to time, be less expensive or technologically superior to those offered by the Company. |

          An increase in customer churn can lead to slower customer growth, increased costs and a reduction in revenue.

***          Interruption or failure of the Company’s networks, which in certain rural markets are often subject to severe weather such as storms or tornados, could impair the Company’s ability to provide its services, which could damage the Company’s reputation and harm operating results.***

          KeyOn’s services depend on the continuing operation of its networks. The Company has experienced service interruptions in the past and may experience service interruptions or system failures in the future. Any unscheduled service interruption, as a result of severe weather or otherwise, adversely affects the Company’s ability to operate its business and could result in an immediate        loss of revenues. If KeyOn experiences frequent or persistent system or network failures, regardless of the reason, KeyOn’s reputation could be permanently harmed. The Company may need to make significant capital expenditures to increase the reliability of its systems, but these capital expenditures may not achieve the results the Company expects.

- 13 -

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***          The success of the Company’s business depends on the continuing contributions of its key personnel and the Company’s ability to attract, train and retain highly qualified personnel.***

          KeyOn is highly dependent on the continued services of its chief executive officer and president, Jonathan Snyder and its chief operating officer, A. Robert Handell. Loss of the services of any of these individuals could adversely impact KeyOn’s operations. While KeyOn maintains a “key man” insurance policy for Jonathan Snyder, neither Jonathan Snyder nor A. Robert Handell is        currently bound by employment agreements. As a result, the Company cannot guarantee that either of these persons will stay with the Company for any definite period.

          In addition, to successfully introduce its services in new markets and grow its business in existing markets, KeyOn must be able to attract, train, motivate and retain highly skilled and experienced employees. In particular, qualified technical employees periodically are in great demand and may be unavailable in the time frame required to satisfy customer requirements. The Company may not be        able to attract and retain sufficient numbers of highly skilled technical employees in the future. The loss of skilled personnel or the KeyOn’s inability to hire or retain sufficient skilled personnel at competitive rates of compensation could impair KeyOn’s ability to successfully grow its business and retain its existing customer base.

***          The Company may not be able to effectively control and manage its growth, which would negatively impact its operations.***

          The Company may face challenges in managing expanding service offerings and in integrating acquired businesses. Such eventualities will increase demands on KeyOn’s existing management, workforce and facilities. Failure to satisfy increased demands could interrupt or adversely affect the Company’s operations and cause administrative inefficiencies.

***          If unauthorized persons gain access to the Company’s network, subscribers may perceive its network and services as not secure, which may adversely affect the Company’s ability to attract and retain subscribers and expose the Company to liability.***

          Although KeyOn takes certain measures to guard against unauthorized access to its network, it may be unable to anticipate or implement adequate preventive measures against unauthorized access. Unauthorized parties may overcome the Company’s encryption and security systems and obtain access to data on its network, including on a device connected to its network. In addition, because KeyOn        operates and controls its network and its subscribers’ Internet connectivity, unauthorized access of KeyOn’s network could result in damage to its network and to the computers or other devices used by KeyOn’s subscribers. An actual or perceived breach of network security, regardless of whether the breach is the Company’s fault, could harm public perception of the effectiveness of its security measures, adversely affect the ability to attract and retain        subscribers, expose the Company to significant liability and adversely affect the Company’s business prospects.

**Risks Relating to the Company’s Industry**

***          The licensing of additional spectrum in the companies’ markets by the FCC could introduce additional competition.***

          The FCC regulates the spectrum bands in which the companies and their competitors operate. The FCC can make additional spectrum available for use or change the way existing spectrum is regulated, which may hamper the ability of the companies to offer their services or result in additional competitors entering the companies’ markets and providing services that may directly compete with the        companies’ offerings. There are several spectrum bands that the FCC has recently licensed under rules that may make them suitable for offering data, voice and video services, but which largely have yet to be deployed in the companies’ markets. In addition, the FCC is presently considering the licensing of additional spectrum that may be suitable for offering services that will compete with the companies’. Section 6001(k) of the American Recovery and Reinvestment Act of        2009 required the creation of the National Broadband Plan by the FCC, which was announced on March 17, 2010. One of the many specific goals of the plan was to make approximately 500 MHz of wireless spectrum available over the next ten years, 300MHz of which is intended to be made available by 2015 through additional auctions or other means. There are no assurances that Company will be successful in acquiring any additional spectrum or that we will be adequately capitalized to do so. The        future availability of this and other spectrum may result in additional competition into our markets.

          Additionally, KeyOn has received the FCC’s approval to operate in the 3.65 GHz band on a nationwide, non-exclusive basis. This band, which recently became available for commercial use, may bring additional competition to the companies’ markets as more companies are awarded approval to operate on a non-exclusive basis.

***          The industry in which the Company operates is continually evolving. The Company’s services may become obsolete, and it may not be able to develop competitive services on a timely basis or at all.***

          The broadband and wireless services industries are characterized by rapid technological change, competitive pricing, frequent new service introductions, evolving industry standards and regulatory requirements. The Company believes that its success depends on its ability to anticipate and adapt to these challenges and to offer competitive services on a timely basis. The Company faces a number of        difficulties and uncertainties associated with its reliance on technological development, such as:

|   |   |                                                                                                                                                                        |
|--------|--------|-----------------------------------------------------------------------------------------------------------------------------------------------------------------------------|
|   | • | competition from service providers using more traditional and commercially proven means to deliver similar or alternative services to the Company’s targeted markets; |

- 14 -

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|   |   |                                                                                                                                                                                               |
|--------|--------|----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|
|   | • | competition from better capitalized service providers using more efficient, less expensive technologies, including services not yet invented or developed to the Company’s targeted markets; |
|   |   |                                                                                                                                                                                               |
|   | • | the Company’s inability to develop a spectrum portfolio and offer advanced data services in a timely and cost efficient manner;                                                              |
|   |   |                                                                                                                                                                                               |
|   | • | responding successfully to advances in competing technologies in a timely and cost-effective manner; and                                                                                           |
|   |   |                                                                                                                                                                                               |
|   | • | uncertainty of timing with respect to a migration toward standards-based technology, requiring substantial capital expenditures.                                                                   |

          As the services offered by the Company and its competitors develop, residential and business customers may not accept the Company’s services as a commercially viable alternative to other means of delivering broadband or wireless broadband services. As a result, the Company’s services may become obsolete, and the Company may be unable to develop competitive services on a timely        basis, or at all.

***          The Company is subject to extensive regulation that could limit or restrict its activities. If the Company fails to comply with these regulations, it may be subject to penalties, including fines and suspensions, and past due fees and interest, which may adversely affect the Company’s financial condition and results of operations.***

          The Company’s business, including the acquisition, lease, maintenance, and use of spectrum licenses, is extensively regulated by federal, state and local governmental authorities. A number of federal, state and local privacy, security and consumer laws also apply to the Company’s business. These regulations and their application are subject to continual change as new legislation,        regulations or amendments to existing regulations are adopted from time to time by governmental or regulatory authorities, including as a result of judicial interpretations of such laws and regulations. Current regulations directly affect the breadth of services the Company is able to offer and may impact the rates, terms and conditions of the Company’s services. Regulation of companies that offer competing services, such as cable and DSL providers and telecommunications carriers,        also affects the Company’s business.

          The Company believes that it is not required to register with the Universal Service Administrative Company, or the USAC, as a seller of telecommunications, nor is it required to collect universal service fund, or USF, fees from its customers or to pay USF fees directly. It is possible, however, that the Federal Communications Commission may assert that the Company is a seller of        telecommunications and that it is required to register and pay USF fees on some or all of the Company’s gross revenues. Although the Company would contest any such assertion, the Company could become obligated to pay USF fees, interest and penalties to USAC with respect to its gross revenues, past and/or future, from providing telecommunications and the Company may be unable to retroactively bill its customers for past USF fees.

          In addition, the Federal Communications Commission or other regulatory authorities may in the future restrict the Company’s ability to manage subscribers’ use of its network, thereby limiting the Company’s ability to prevent or address subscribers’ excessive bandwidth demands. To maintain the quality of its network and user experience, the Company may manage the        bandwidth used by its subscribers’ applications, in part by restricting the types of applications that may be used over the Company’s network. If the Federal Communications Commission or other regulatory authorities were to adopt regulations that constrain the Company’s ability to employ bandwidth management practices, excessive use of bandwidth-intensive applications would likely reduce the quality of its services for all subscribers. Such decline in the quality of        the Company’s services could harm its business.

          The breach of a license or applicable law, even if inadvertent, can result in the revocation, suspension, cancellation or reduction in the term of a license or the imposition of fines. In addition, regulatory authorities may grant new licenses to third parties, resulting in greater competition in territories where the Company already has rights to licensed spectrum. In order to promote        competition, licenses may also require that third parties be granted access to the Company’s bandwidth, frequency capacity, facilities or services. The Company may not be able to obtain or retain any required license, and it may not be able to renew a license on favorable terms, or at all.

          Wireless broadband services may become subject to greater state or federal regulation in the future. The scope of the regulations that may apply to similar companies and the impact of such regulations on the Company’s competitive position are presently unknown and could be detrimental to its business and prospects.

***          In providing the Company’s services, the Company could infringe on the intellectual property rights of others, which may cause the Company to engage in costly litigation and, if the Company does not prevail, could also cause the Company to pay substantial damages and prohibit the Company from selling its services.***

          Third parties may assert infringement or other intellectual property claims against KeyOn. The Company may have to pay substantial damages, including damages for past infringement if it is ultimately determined that the Company’s services infringe a third party’s proprietary rights. Further, KeyOn may be prohibited from selling or providing some of its services before it obtains        additional licenses, which, if available at all, may require KeyOn to pay substantial royalties or licensing fees and divert much needed financial resources. Even if claims are without merit, defending a lawsuit takes significant time, may be expensive and may divert management’s attention from other business concerns. Any public announcements related to litigation or interference proceedings initiated or threatened against KeyOn could cause the Company’s business to be        harmed and the Company’s stock price to decline.

- 15 -

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**Risks Relating to the Company’s Common Stock**

          ***The conversion of the Note and our Series Cal Cap Preferred Stock could have a dilutive impact on our stockholders and a significant negative impact on the market price of our common stock.***

          The holders of the Note may elect to convert all or a portion of our indebtedness then outstanding under the Note into that number of shares of Series Cal Cap Preferred Stock which is equal to the quotient obtained by dividing (a) the sum of (i) the then outstanding principal amount of the Note and (ii) any accrued but unpaid interest thereon elected by the Note holders to be so converted by        (b) the lesser of (i) $0.75 and (ii) the average volume weighted average price of our common stock for the 40 trading days following March 3, 2010 (such lesser price, the “Note Conversion Price”). Further, in the event that any indebtedness under the Note remains outstanding on its maturity date, the Note holders may elect to convert the principal amount then outstanding and any accrued but unpaid interest thereon into that number of shares of Series Cal Cap Preferred Stock        that is equal to the quotient obtained by dividing (a) the sum of (i) the then outstanding principal amount of the Note and (ii) any accrued but unpaid interest thereon elected by the Note holders to be so converted by (b) the Note Conversion Price. If after September 30, 2010, the volume weighted average for each of any 10 consecutive trading days exceeds the product of (a) 5 and (b) the Note Conversion Price, we may require the Note holders to convert all or part of the then        outstanding principal amount of the Note plus any accrued but unpaid interest thereon, into that number of shares of common stock that is equal to the quotient obtained by dividing (a) the sum of (i) the then outstanding principal amount of the Note and (ii) all accrued but unpaid interest specified in the notice by (b) the Note Conversion Price.

          Since we cannot predict the future trading price of our common stock, we cannot estimate the number of shares of Series Cal Cap Preferred Stock or common stock that will be issued upon conversion of the Note and the number of shares of common stock that will be issued upon conversion of the Series Cal Cap Preferred Stock (such future converted shares of common stock, together with the shares of        common stock issued upon conversion of the Series Cal Cap Preferred Stock, the “Converted Common Shares”). However, we believe that the sale or availability for sale of the Converted Common Shares in the public market could depress the market price of our common stock and would have a dilutive impact on our stockholders. As a result, our net loss per share could increase in future periods, and the market price of our common stock could decline. Additionally, the sale or        availability for sale of the Converted Common Shares may lessen the likelihood that additional equity financing will be available to us, on favorable or unfavorable terms and could limit the annual amount of net operating loss carryforwards that could be utilized. Furthermore, we may be required to register for resale the shares of common stock underlying the shares of Series Cal Cap Preferred Stock. Holders of the registered underlying shares could then resell the shares immediately        upon issuance, resulting in immediate significant downward pressure on our stock.

          ***The Company became public by means of a reverse merger, and as a result the Company is subject to the risks associated with the prior activities of the public company.***

          Additional risks may exist because the Company became public through a reverse merger with a public shell company that did not have significant operations or assets prior to the time of the transaction. The public shell corporation was a development stage company from the time of its inception until the time of the merger on August 9, 2007. For approximately 3 years prior to the merger, the        public shell corporation had no significant business operations and generated nominal revenues. The Company may require the cooperation or assistance of persons or organizations, such as auditors, previously associated with the public shell company in connection with future matters that could be costly or difficult to secure. Although the Company performed a due diligence review of the public shell company, the Company may still be exposed to undisclosed liabilities resulting from its        prior operations and the Company could incur losses, damages or other costs as a result.

          ***The Company has not paid dividends in the past and do not expect to pay dividends in the future. Any return on your investment may be limited to the value of the Company’s common stock.***

          The Company has never paid cash dividends on its common stock and does not anticipate doing so in the foreseeable future. The payment of dividends on its common stock will depend on the Company’s earnings, financial condition and other business and economic factors as the board of directors may consider relevant. If the Company does not pay dividends, its common stock may be less valuable        because a return on your investment will only occur if the Company’s stock price appreciates.

          ***The Company’s common stock may be affected by limited trading volume and price fluctuations, each of which could adversely impact the value of its common stock.***

          The Company’s common stock has experienced, and is likely to experience in the future, significant price and volume fluctuations, which could adversely affect the market price of the common stock without regard to the Company’s operating performance. In addition, the Company believes that factors such as quarterly fluctuations in its financial results and changes in the overall        economy or the condition of the financial markets could cause the price of its common stock to fluctuate substantially. These fluctuations may also cause short sellers to enter the market from time to time in the belief that the Company will have poor results in the future. The Company cannot predict the actions of market participants and, therefore, can offer no assurances that the market for its stock will be stable or appreciate over time.

- 16 -

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**Risks Relating to the Company’s Organization**

          ***The Company’s executive officers and directors own a substantial amount of the Company’s common stock and, therefore, exercise significant control over its corporate governance and affairs, which may result in their taking actions with which you do not agree.***

The Company’s executive officers and directors, and entities affiliated with them, control approximately 24% of the Company’s outstanding common stock, including exercisable stock options held by them. These stockholders, if they act together, may be able to exercise substantial influence over the outcome of all corporate actions requiring approval of the Company’s stockholders, including the election of directors and approval of        significant corporate transactions, which may result in corporate action with which you do not agree. This concentration of ownership may also have the effect of delaying or preventing a change in control, which might be in your best interest, but which might negatively affect the market price of the Company’s common stock. Additionally, on February 5, 2010, the Company issued a secured convertible promissory note (the “Note”) in the amount of $15 million to one        holder. The Note is convertible at the option of the holder at any time prior to maturity into preferred or common stock. To the extent such conversion is effectuated, the holder may hold a substantial amount of either common or preferred stock and, therefore exercise significant control over the Company’s corporate governance and affairs, which may result in the Company taking actions with which you do not agree. 

          ***The Company is subject to financial reporting and other requirements for which the Company’s accounting, internal audit and other management systems and resources may not be adequately prepared.***

          On August 9, 2007, the Company became subject to reporting and other obligations under the Securities Exchange Act of 1934, as amended, including the requirements of Section 404 of the Sarbanes-Oxley Act. Under Section 404, the Company will be required, starting in the fiscal year ending December 31, 2010, to conduct an annual management assessment of the effectiveness of its internal controls        over financial reporting and to obtain a report by its independent auditors addressing these assessments. The requirements of these rules and regulations will increase the Company’s legal and financial compliance costs, make some activities more difficult, time-consuming or costly and will place significant demands on management, administrative, operational, internal audit and accounting systems and resources. In connection with these requirements, the Company anticipates that it        will need to:

|   |   |                                                                                      |
|--------|--------|-------------------------------------------------------------------------------------------|
|   | • | upgrade its systems;                                                                      |
|   |   |                                                                                      |
|   | • | implement additional financial and management controls, reporting systems and procedures; |
|   |   |                                                                                      |
|   | • | implement an internal audit function; and                                                 |
|   |   |                                                                                      |
|   | • | hire additional accounting, internal audit and finance staff.                             |

          If the Company is unable to accomplish these objectives in a timely and effective fashion, the Company’s ability to comply with its financial reporting requirements and other rules that apply to reporting companies could be impaired. Any failure to maintain effective internal controls could have a negative impact on the Company’s ability to manage its business and on its stock        price.

          ***If securities or industry analysts do not publish research or publish inaccurate or unfavorable research about The Company’s business, its stock price and trading volume could decline.***

          The trading market for the Company’s common stock will depend in part on the research and reports that securities or industry analysts publish about the Company or its business. The Company does not currently have research coverage by securities and industry analysts. If the Company obtains securities or industry analyst coverage and if one or more of the analysts who covers the Company        downgrades the Company’s stock or publishes inaccurate or unfavorable research about the Company’s business, its stock price would likely decline. If one or more of these analysts ceases coverage of the Company or fails to publish reports on the Company regularly, demand for its stock could decrease, which could cause the stock price and trading volume to decline.

**Item 1B. Unresolved Staff Comments**

          Not Applicable.

**Item 2. Properties**

          The Company leases approximately 10,000 square feet of office space in Omaha, Nebraska for $8,222 per month, plus applicable taxes, subject to adjustments in accordance with consumer price index fluctuations. The current lease term expires on April 1, 2012, at which time KeyOn has the option to extend the lease for an additional five-year period. This facility serves as the Company’s        corporate headquarters.

- 17 -

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          The Company leases approximately 3,200 square feet of office space for a field office in Las Vegas, Nevada for approximately $2,000 per month. The current lease term expires on April 30, 2010.

          The Company leases approximately 550 square feet of office space for a field office in Grand Junction, Colorado for $400 per month. The current lease term expires on November 30, 2010.

          The Company leases approximately 2,400 square feet of office space for a field office in Centerville, Iowa for approximately $800 per month. The current lease term expires on July 31, 2010.

          The Company leases approximately 1,200 square feet of office space for a field office in Wolfforth, Texas for $525 per month on a month-to-month basis.

          The Company lease approximately 460 square feet of office space for a field office in Fort Worth, Texas for $585 per month. The current lease term expires on November 30, 2012.

          KeyOn believes that its current facilities are adequate for its immediate and near-term needs. Additional space may be required as the Company expands its activities. The Company does not currently foresee any significant difficulties in obtaining any required additional facilities. In the opinion of the management, each of its properties is adequately covered by insurance.

**Item 3. Legal Proceedings**

          To the Company’s knowledge, except as described below, no legal proceedings, government actions, administrative actions, investigations or claims are currently pending against KeyOn or involve KeyOn that, in the opinion of the Company’s management, could reasonably be expected to have a material adverse effect on the Company’s business and financial condition.

          KeyOn was previously involved in litigation as a third-party defendant in a lawsuit initially filed by a former wholesale partner against KeyOn’s existing wholesale partner. KeyOn reasonably believed that the amount of exposure is nominal and further believed that the claim is specious based on the fact that a non-contract claim was asserted despite an existing contractual relationship.        On or about March 15, 2010 the Defendant/Third-Party Plaintiff filed a Stipulation and Order for dismissal with prejudice of the Company, releasing KeyOn from any and all claims, resulting in a successful termination of this matter. 

**Item 4. (Removed and Reserved).**

          Not Applicable.

- 18 -

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**PART II**

**I****tem 5. Market for Registrant**’**s Common Equity, Related Stockholder Matters and Issuer Purchases of Equity Securities.**

          From August 23, 2007 through November 1, 2007, KeyOn’s common stock was quoted on the OTC Bulletin Board under the symbol KYCS.OB, and since November 2, 2007 KeyOn’s common stock has been quoted on the OTC Bulletin Board under the symbol KEYO.OB. Prior to August 23, 2007, there was no active market for KeyOn’s common stock. The following table sets forth the high and low bid        prices for the Company’s common stock for the periods indicated, as reported by the OTC Bulletin Board. The quotations reflect inter-dealer prices, without retail mark-up, mark-down or commission, and may not represent actual transactions.

|               |   |     |   |    |   |   |   |
|--------------------|--------|----------|--------|---------|--------|--------|--------|
| **Quarter Ended**  |   | **High** |   | **Low** |   |
|                    |   |          |   |         |   |
| March 31, 2009     |   | $        | 0.17   |    | $      | 0.04   |   |
| June 30, 2009      |   | $        | 1.50   |    | $      | 0.04   |   |
| September 30, 2009 |   | $        | 1.88   |    | $      | 0.73   |   |
| December 31, 2009  |   | $        | 2.56   |    | $      | 1.55   |   |

          The last reported sales price of KeyOn’s common stock on the OTC Bulletin Board on April 12, 2010, was $0.90 per share. As of April 12, 2010, there were approximately 125 holders of record of the Company’s common stock.

          The Company has neither paid nor declared dividends on its common stock since its inception and does not plan to pay dividends on its common stock in the foreseeable future. The Company expects that any earnings which it may realize will be retained to finance its growth. There can be no assurance that the Company will ever pay dividends on its common stock. The Company’s dividend policy        with respect to the common stock is within the discretion of the Board of Directors and its policy with respect to dividends in the future will depend on numerous factors, including the Company’s earnings, financial requirements and general business conditions. Notwithstanding the foregoing, pursuant to that certain secured convertible promissory note issued on February 5, 2010, the Company is prohibited from declaring or paying any dividends or making any distributions other than        dividends on the authorized, but presently unissued Series of Cal Cap Preferred Stock.

**Equity Compensation Plan Information**

          The following table provides information as of December 31, 2009 about compensation plans under which shares of the Company’s common stock may be issued to employees, consultants or members of the Company’s Board of Directors upon exercise of options, warrants or rights under all of the Company’s existing equity compensation plans. The Company’s existing equity        compensation plans consist of the Company’s 2007 Incentive Stock and Awards Plan in which all of the Company’s employees and directors are eligible to participate.

|                                                   |   |                                                                                                                                                                                               |    |                                                                                                                                         |   |                                                                                                                                                                                                                                                                                                        |   |   |    |   |
|--------------------------------------------------------|--------|----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|---------|----------------------------------------------------------------------------------------------------------------------------------------------|--------|-------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|--------|--------|---------|--------|
| **Plan Category**                                      |   | **(a)                    Number of Securities                    to be Issued Upon                    Exercise of                    Outstanding Options,                    Warrants and Rights** |    | **(b)                    Weighted-Average Exercise                    Price of Outstanding                    Options, Warrants and Rights** |   | **(c)                    Number of Securities                    Remaining Available                    for Future Issuance                    Under Equity                    Compensation Plans                    (Excluding Securities                    Reflected in Column                    (a))** |   |
|                                                        |   |                                                                                                                                                                                                    |    |                                                                                                                                              |   |                                                                                                                                                                                                                                                                                                             |   |
| Equity compensation plans approved by stockholders     |   |                                                                                                                                                                                               | 244,000 |                                                                                                                                         | $      | 0.72                                                                                                                                                                                                                                                                                                        |   |   | 0       |   |
| Equity compensation plans not approved by stockholders |   |                                                                                                                                                                                               | — |                                                                                                                                         |   | —                                                                                                                                                                                                                                                                                                     |   |   | — |   |
| All plans                                              |   |                                                                                                                                                                                               | 244,000 |                                                                                                                                         | $      | 0.72                                                                                                                                                                                                                                                                                                        |   |   | 0       |   |

- 19 -

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**Recent Sales of Unregistered Securities**

Set forth below is certain information concerning issuances of common stock that were not registered under the Securities Act that occurred in the fiscal year of 2009. 

|   |   |                                                                                                                                                                                                                                                                                                               |
|--------|--------|--------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|
|   | • | On May 11, 2009 we issued 2,120,000 shares to Liviakis Financial Communications, Inc, in exchange for $106,000 worth of services to be performed pursuant to a one-year consulting agreement for an effective price of $0.05 per share.                                                                            |
|   |   |                                                                                                                                                                                                                                                                                                               |
|   | • | On May 14, 2009, we entered into subscription agreements whereby the Company agreed to issue 731,317 shares of its common stock at a price per share of $0.19, for an aggregate purchase price of $138,950.23.                                                                                                     |
|   |   |                                                                                                                                                                                                                                                                                                               |
|   | • | On May 28, 2009, we entered into subscription agreements whereby the Company agreed to issue 600,000 shares of its common stock at a price per share of $0.25, for an aggregate purchase price of $150,000.                                                                                                   |
|   |   |                                                                                                                                                                                                                                                                                                               |
|   | • | On June 5, 2009, we entered into subscription agreements whereby the Company agreed to issue 650,000 shares of its common stock at a price per share of $0.50, and 325,000 warrants to purchase common stock with an exercise price of $0.75 per share, for an aggregate purchase price of $325,000.               |
|   |   |                                                                                                                                                                                                                                                                                                               |
|   | • | On or about July 18, 2009, we entered into subscription agreements whereby the Company agreed to issue 1,400,000 shares of its common stock at a price per share of $0.50, and 700,000 warrants to purchase common stock with an exercise price of $0.75 per share, for an aggregate purchase price of $700,000.   |
|   |   |                                                                                                                                                                                                                                                                                                               |
|   | • | On July 21, 2009, we issued 50,000 shares of common stock in exchange for consulting services valued at $25,000 for an effective share price of $0.50.                                                                                                                                                             |
|   |   |                                                                                                                                                                                                                                                                                                               |
|   | • | On or about August 20, 2009, we entered into subscription agreements whereby the Company agreed to issue 1,655,000 shares of its common stock at a price per share of $0.50, and 827,500 warrants to purchase common stock with an exercise price of $0.75 per share, for an aggregate purchase price of $827,500. |
|   |   |                                                                                                                                                                                                                                                                                                               |
|   | • | On August 20, 2009, we issued $15,000 shares as consideration for $7,500 of consulting services for an effective price of $0.50.                                                                                                                                                                                   |
|   |   |                                                                                                                                                                                                                                                                                                               |
|   | • | On August 31, 2009, we issued 2,376,090 shares of common stock in exchange for a reduction of notes payable and interest payable liability of $1,188,042.                                                                                                                                                          |
|   |   |                                                                                                                                                                                                                                                                                                               |
|   | • | On September 30, 2009, we issued 1,316,979 shares of common stock in exchange for a reduction of notes payable and interest payable liability of $329,244.                                                                                                                                                         |
|   |   |                                                                                                                                                                                                                                                                                                               |
|   | • | October 9. 2009, we issued 80,000 shares of common stock pursuant to a restricted stock agreement on behalf of a former executive of the Company.                                                                                                                                                                  |
|   |   |                                                                                                                                                                                                                                                                                                               |
|   | • | On October 27, 2009, we entered into subscription agreements whereby the Company agreed to issue 626,667 shares of its common stock at a price per share of $1.50 for an aggregate purchase price of $940,000.                                                                                                     |
|   |   |                                                                                                                                                                                                                                                                                                               |
|   | • | On October 27, 2009, we issued 75,000 shares of common stock in exchange for consulting services valued at $50,000 for an effective price of $1.50 per share.                                                                                                                                                      |
|   |   |                                                                                                                                                                                                                                                                                                               |
|   | • | On December 2, 2009, we issued 27,778 shares in exchange for $61,945 of consulting services for an effective price of $2.23 per share.                                                                                                                                                                             |
|   |   |                                                                                                                                                                                                                                                                                                               |
|   | • | On December 4, 2009, we issued 33,388 shares in connection with an asset purchase agreement for an effective price of $1.99 per share.                                                                                                                                                                             |
|   |   |                                                                                                                                                                                                                                                                                                               |
|   | • | On December 2, 2009, we issued 27,778 shares in exchange for $41,667 of consulting services for an effective price of $1.50 per share.                                                                                                                                                                             |
|   |   |                                                                                                                                                                                                                                                                                                               |
|   | • | On December 4, 2009, we issued 33,388 shares in connection with an asset purchase agreement for an effective price of $2.35 per share.                                                                                                                                                                             |

The issuances referenced above were consummated pursuant to Section 4(2) and Regulation D of the Securities Act and the rules and regulations promulgated thereunder on the basis that such transactions did not involve a public offering and the offerees were sophisticated accredited investors with access to the kind of information that registration would provide. The recipients of these securities represented their intention to acquire the securities for        investment or in connection with services rendered and not with a view to or for sale in connection with any distribution thereof and appropriate legends were affixed to the share certificates and other instruments issued in such transactions. 

**Item 6. Selected Financial Data**

          Not Applicable.

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**Item 7. Management’s Discussion and Analysis of Financial condition and Results of Operations**

**Overview**

          We provide wireless broadband services primarily to rural and other underserved markets under the “KeyOn,” “SpeedNet,” and “SIRIS” brands. We offer our broadband services along with VoIP services to both residential and business subscribers. We have grown our business through the acquisitions of wireless broadband companies operating contiguous or adjacent to our existing        operations and the organic growth of our subscriber base. In November 2009, we acquired substantially all of the assets of SkyWi, Inc., a provider of wireless broadband services to rural communities in north central Texas. Over the past 4 years, and continuing into 2010, we have acquired sevencompanies, including the assets of SkyWi, which have increased our subscriber base and expanded our network footprint. Our markets are located in the following 11 Western and Midwestern states:        Colorado, Idaho, Illinois, Indiana, Iowa, Kansas, Nebraska, Nevada, Ohio, South Dakota, and Texas. 

          In the face of a challenging capital market environment, we achieved numerous milestones during 2009, including financial, operational and strategic aspects of our business. A significant milestone was achieved in February of 2010 when we raised $15 million through the issuance of a secured convertible promissory note. The Company’s obligations under the secured        convertible promissory note are secured by a perfected security interest in all of the assets and properties of the Company, including the stock of its subsidiary. This financing was the Company’s largest single financing in its history, allowed for the repayment of a $4 million loan, and provides the Company with sufficient capital to pursue growth and other strategic initiatives in 2010. 

          **Financial**

          Since May 2009, the Company successfully raised approximately $3.4 million in common equity, including the exercise of warrants. In June 2009, we were able to make a principal payment of $450,000 and amend the terms of our loan with our senior lender Sun West Bank, including the extension of the maturity to June 2015. By the end of September 2009, the Company successfully eliminated over $1.5 million of        subordinated secured debt through conversion into equity, further reducing the Company’s liabilities and strengthening its balance sheet. Furthermore, as a result of cost cutting and efficiency initiatives implemented during the year, the Company generated positive EBITDA in the first and second quarters and slightly negative in the third quarter of 2009. 

          **Operational**

          In June 2009, we began the deployment of a new OSS from Logisense Corporation. In September 2009, we announced the roll-out of Google Apps, a comprehensive hosted tool-set which includes email and calendar functions, to our current subscriber base and will use this platform going forward. These deployments resulted in a more efficient workforce as well an expanded suite of related services to our customers.        

          **Strategic**

          The passage of the American Recovery and Reinvestment Act of 2009 (ARRA) and specifically, the Broadband Initiatives Program (BIP) created a new opportunity for us to potentially access federal grants and loans for the build-out of4G WiMAX networks in underserved and eligible markets. Despite the substantial efforts in furtherance of Round One of the BIP, including the submission of eleven applications        totaling approximately $150 million, the advancement of all of our applications to “phase two due diligence” and the securing of approximately $90 million of contingent third-party financing, none of our applications were awarded. Based on the significant opportunity to expand our footprint, increase subscribers and grow revenues and our experience in Round One, management continues to believe that participation in the BIP is a unique strategic opportunity that, if        successful, should result in the creation of additional significant shareholder value. To this end, on March 29, 2010, the Company submitted multiple applications under Round Two of the BIP. Pursuant to its applications, KeyOn is seeking approximately $360 million of federal grants and loans to bring 4G WiMAX to as many as 22 states and provide wireless broadband access to as many as 8.2 million people in rural America. Provided it is successful in its applications, we have arranged to        contribute up to $163 million of outside capital to some of the smallest communities in the United States to ensure the sustainability of its projects. 

          In September 2009, we launched our Rural UnFi acquisition program. We completed one acquisition in the fourth quarter of 2009 and two others in 2010, allowing the Company to grow subscribers, revenues and EBITDA. The Company remains in active dialogue with numerous targets and while management is unable to offer assurances as to the future success of the program, it believes it is        well-positioned to continue to succeed in this initiative.

**Characteristics of Our Revenues and Operating Costs and Expenses**

          We offer our services under annual, two-year or month-to-month service agreements. These services are generally billed monthly, quarterly, semiannually or annually in advance. Payments received in advance for subscriptions are deferred and recognized as the services are provided. Service initiation fees are recognized at the time of installation.

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          Operating costs and expenses consist of payroll and related expenses, network operating costs, marketing and advertising, professional fees, installation expense and general and administrative expenses. Payroll expenses consist of personnel costs, including salaries, benefits, employer taxes, bonuses and stock compensation expenses across our functional areas: executive, customer support,        engineering, accounting and billing, marketing, and local market operational staff.

          Network operating costs are comprised of costs directly associated with providing our services including tower rent, circuits to transport data to the Internet termination point and Internet termination bandwidth. 

          Marketing and advertising expenses primarily consist of direct marketing and advertising costs. Professional fees relate to legal, accounting and consulting and recruiting resources that we utilize periodically in the normal course of doing business. General and administrative expenses primarily consist of the support costs of our operations, such as costs related to office real estate leases,        company insurance, travel and entertainment, banking and credit card fees, taxes and vehicle leases.

**Results of Operations**

*Year Ended December 31, 2009 Compared to the Year Ended December 31, 2008*

          *Revenues*. During the year ended December 31, 2009, we recognized revenues of $6,898,232 compared to revenues of $7,793,740 during the year ended December 31, 2008, representing a decrease of approximately 11%. This decrease was the result of decline in our customer base. While customer disconnects have remained stable, we have spent limited marketing dollars to acquire new subscribers.        In the first quarter of 2009, we initiated a cost restructuring plan which had been focused on maintaining our current customer base and resulted in a reduction in our marketing and other corporate expenses. However, in the fourth quarter of 2009, we began to increase our marketing expenses in an effort to restart the growth in our subscriber base and expect these initiatives to continue in 2010. 

          *Operating Loss*. Operating expenses, which consist of payroll, bonuses and taxes, depreciation and amortization, other general and administrative costs, network operating costs, marketing and advertising, installation expense and professional fees totaled $11,567,350 for the year ended December 31, 2009, as compared to $14,956,694 for the year ended December 31, 2008, representing a        decrease of approximately 23%. A majority of this decrease, 72%, was due to $1,041,600 for non-cash stock-based and warrant compensation expenses incurred during the year ended December 31, 2009, as compared to $3,490,503 incurred during the year ended December 31, 2008. Another contributing factor, accounting for 23% of the decrease, was the reduction in salaries and benefits resulting from our previous cost reduction initiatives. The decrease in payroll costs was partially offset by        an increase in professional fees for the year ended December 31, 2009 as compared to the year ended December 31, 2008. This increase was due to expenses incurred in connection with our Round One ARRA applications. The remaining decrease of 5% was due to a decrease in marketing expenses slightly offset by some increases in network operating costs during the year ended December 31, 2009. Non-cash expenses including stock-based and warrant compensation expense and stock granted for        professional services totaled $1,041,600 for the year ended December 31, 2009, as compared to $3,490,503 for the year ended December 31, 2008. Normalized operating expenses without these non-cash stock compensation expenses would have been $10,525,750 for the year ended December 31, 2009 as compared to $11,466,191 for the year ended December 31, 2008, representing an improvement of 8%. Our actual operating loss margin improved by 24 percentage points from a total operating loss of        $4,669,118 in the year ended December 31, 2009 as compared to a loss of $7,162,954 for the year ended December 31, 2008. By removing the non-cash stock compensation and warrant expenses of $1,041,600 for the year ended December 31, 2009 and $3,490,503 for the year ended December 31, 2008, our normalized operating loss margin increased by 5 percentage points from a total normalized operating loss $3,627,518 for the year ended December 31, 2009 as compared to a normalized operating loss        of $3,672,451 for the year ended December 31, 2008. The increase in operating loss margin was due primarily to a reduction in revenues and the increase in professional fees with the expenses associated with our Round One BIP application. Our other expense categories remained basically constant year over year. 

          *Payroll, Bonuses and Taxes*. Payroll bonuses and taxes which includes stock compensation expenses totaled $3,505,812 for the year ended December 31, 2009, as compared to $6,937,932 for the year ended December 31, 2008, representing a decrease of approximately 49%. A majority of this decrease, 77% was due to the non-cash stock compensation of $682,244 recorded for the year ended December        31, 2009 as compared to $3,337,826 for the year ended December 31, 2008. The remaining portion of the decrease, 23%, was due to our efforts to improve our internal processes which resulted in operating efficiencies.

          *Depreciation and Amortization*. Depreciation and amortization expenses totaled $2,423,657 for the year ended December 31, 2009, as compared to $2,744,705 for the year ended December 31, 2008, representing a decrease of approximately 12%. This decrease was primarily due to limited new equipment purchases resulting from decreased sales and marketing and fewer new subscribers.

          *Other General and Administrative Expenses*. Other general and administrative expenses totaled $1,256,053 for the year ended December 31, 2009, as compared to $1,258,826 for the year ended December 31, 2008, representing a decrease of less than 1%. 

          *Network Operating Costs*. Network operating costs, which consist of tower rent, local loop costs and Internet termination expense, totaled $2,804,905 for the year ended December 31, 2009, as compared to $2,751,534 for the year ended December 31, 2008, representing an increase of approximately 2%. The increase was primarily due to a modest increase in our Internet bandwidth costs due to        the addition of the SkyWi acquisition and increased contractual rates with one of our providers and a slight increase in our tower maintenance and repair costs.

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          *Marketing and Advertising Expenses*. Marketing and advertising expenses totaled $86,209 for the year ended December 31, 2009, as compared to $320,812 for the year ended December 31, 2008, representing a decrease of approximately 73%. This decrease was attributed to our concentration on programs to maintain existing customers and obtain new customer referrals from those customers during        the year ended December 31, 2009 as compared to the more broad-based marketing plan we employed during the year ended December 31, 2008. We increased our marketing initiatives during the three months ended December 31, 2009, to a total of $44,030, which represented 51% of the total 2009 marketing expenditures. Our marketing costs were 1% of revenue for the year ended December 31, 2009 and 4% for the year ended December 31, 2008, representing a 3 percentage point decrease

          *Installation Expense*. Installation expense, which consists primarily of expenses associated with installation supplies, third party installation costs and transportation expenses related to the customer install, totaled $168,761 for the year ended December 31, 2009, as compared to $419,277 for the year ended December 31, 2008, representing a decrease of approximately 60%. Installation        volumes decreased by 64%, accounting for the decline in installation expenses for the year ended December 31, 2009 as compared to the year ended December 31, 2008. 

          *Professional Fees*. Professional fees, which consist of legal, accounting, and other related expenses, totaled $1,022,631 for the year ended December 31, 2009, as compared to $393,432 for the year ended December 31, 2008, representing an increase of approximately 160%. During the year ended December 31, 2009, consulting and advisory expenses of $359,356 were recorded as non-cash        compensation as compared to $152,677 for the year ended December 31, 2008. Without these non-cash expenses, professional fees for the year ended December 31, 2009, would have been $663,275 as compared to $240,755 for the year ended December 31, 2008, or an increase of 175%. Professional fees incurred in connection with our applications under Round One of the BIP account for all of the increase for the year ended December 31, 2009, as compared to the year ended December 31, 2008.        

          *Goodwill Asset Impairment*. Goodwill asset impairment of $299,322 was expensed for the year ended December 31, 2009, as compared to $97,635 for the year ended December 31, 2008. In the fourth quarter of fiscal 2009 we conducted an impairment test of our goodwill and intangible assets which resulted in $85,906 and a $213,416 impairment charges to the goodwill balances of the subscriber        bases obtained in the Pocatello and Speednet acquisitions. As of December 31, 2009, we had $1,341,816 of goodwill and $1,541,152 of net intangible assets remaining on our balance sheet, which we currently believe to be realizable based on the estimated fair value of these assets. 

          *Cost of DISH Inventory*. There was no expense recognized for Cost of DISH inventory for the year ended December 31, 2009 as compared to $32,541 expensed for the year ended December 31, 2008. The expense for DISH inventory is recognized immediately after installation. We began installations as a DISH retailer in January 2008. During the year ended December 31, 2009, as a result of our        focus on our existing customers, we did not complete any DISH installations.

          *Other Income and Expense*. We incurred other income/(expense) of ($1,926,584) for the year ended December 31, 2009, as compared to ($887,404) for the year ended December 31, 2008, representing an increase in expense of 117%. The primary reason for the increase, 114%, resulted from the non-cash “beneficial conversion” expense associated with the secured subordinated notes that        matured on August 31, 2009. The “beneficial conversion” non-cash expense resulted from the third amendment on the subordinated secured convertible notes that allowed for conversion at a price that was roughly 50% lower than the prevailing stock price at the eventual time of conversion. The increase in other income and expense was slightly offset by a decrease in interest rate on the Sun West Bank term loan during the year ended December 31, 2009. 

          *Net Loss*. We had a net loss of $6,595,702 for the year ended December 31, 2009, as compared to a net loss of $8,050,358 for the year ended December 31, 2008, representing an improvement of approximately 18%. The major contributing factor of the improved net loss was the non-cash stock-based and warrant compensation expenses offset by the “beneficial conversion” interest        expense for the year ended December 31, 2009 of $2,229,642 as compared to $3,490,503 for the year ended December 31, 2008, which accounted for 87% of the improvement. Another contributing factor, accounting for 43% of the improvement in the net loss, was the Company’s cost reduction initiative to reduce operating expenses and create operating efficiencies. The offsetting increase in expenses of 30% is the increase in professional fees incurred in connection with our Round One of        the BIP applications. Normalized net loss without the non-cash compensation expenses in payroll and in professional fees and the non-cash beneficial conversion expense would have been $4,366,060 for the year ended December 31, 2009 as compared to $4,559,855 for the year ended December 31, 2008, representing an improvement of 4%. Our net loss margin improved by 8 percentage points from a net loss $6,595,702 for the year ended December 31, 2009 as compared to a net loss of $8,050,358 for        the year ended December 31, 2008. By removing the non-cash stock compensation expense of $1,041,600 and the beneficial ownership conversion expense of $1,188,042 for the year ended December 31, 2009 and the non-cash stock compensation expense $3,490,503 for the year ended December 31, 2008, our normalized net loss margin declined by 5 percentage points from a total normalized net loss of $4,366,060 for the year ended December 31, 2009 as compared to a net loss of $4,559,855 for the        year ended December 31, 2008. The increase in operating loss margin was due primarily to a reduction in revenues and the increase in professional fees with the spending associated with our applications under Round One of the BIP. Our other expense categories remained basically constant year over year. 

**Liquidity and Capital Resources**

*General*

          As of December 31, 2009 and 2008, we had cash of $125,083 and $28,032, respectively.

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          *Net Cash Used by Operating Activities*. Net cash used in operating activities totaled $2,220,802 for the year ended December 31, 2009, as compared to net cash used in operating activities of $1,825,314 for the year ended December 31, 2008. This change is primarily attributable to a 23% reduction in the accounts payable balance year over year. 

          *Net Cash Used in Investing Activities*. Net cash used in investing activities totaled $141,105 year ended December 31, 2009, as compared to $160,981 for the year ended December 31, 2008. The cash usage in both years is the result expenditures paid with cash for customer premise equipment, tower equipment and software purchases. 

          *Net Cash Provided By Financing Activities*. Net cash provided by financing activities totaled $2,458,958 for the year ended December 31, 2009, as compared to $1,697,328 for the year ended December 31, 2008. During 2009, we issued subordinated secured promissory notes totaling $700,000 and issued common stock totaling $3,182,708. In 2009, we paid $942,320 towards notes payable and $440,931        for leases payable. During 2008, we issued $1,001,877 subordinated secured notes. These cash inflows were offset by payments totaling $1,029,287 to capital lease obligations and cash overdraft. 

          *Working Capital*. As of December 31, 2009, we had negative working capital of $2,642,607. 

          Throughout 2009 and continuing into 2010, management has taken a variety of steps to strengthen the financial condition of the Company and continue both our acquisition and organic growth strategies. As a result of the $15 million financing from the secured convertible promissory note issuance in February 2010, management believes KeyOn is well-capitalized to sustain its current capital needs        while pursuing its growth initiatives. 

**Item 7A. Quantitative and Qualitative Disclosures About Market Risk**

          Not applicable.

**Item 8. Financial Statements.**

See the Company’s financial statements beginning on page F-1.

**Item 9. Changes in and Disagreements with Accountants on Accounting and Financial Disclosure.**

          Not applicable.

**Item 9A(T). Controls and Procedures.**

**Controls and Procedures**

          Disclosure controls and procedures include, without limitation, controls and procedures designed to ensure that information required to be disclosed by an issuer in the reports that it files or submits under the Securities Exchange Act of 1934, as amended, is accumulated and communicated to the issuer’s management, including its principal executive and principal financial officers, or        persons performing similar functions, as appropriate to allow timely decisions regarding required disclosure. As noted below, the Company was unable to conclude that its disclosure controls and procedures are effective, as of the end of the period covered by this report (December 31, 2009), in ensuring that material information that the Company is required to disclose in reports that it files or submits under the Securities Exchange Act of 1934, as amended, is recorded, processed,        summarized and reported within the time periods specified in the Securities and Exchange Commission’s rules and forms. The Company believes that it will have effective internal controls to meet this requirement prior to the filing of its annual report for the year ended December 31, 2010.

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**Changes in Internal Control Over Financial Reporting**

There were no changes in the Company’s internal control over financial reporting during its most recent fiscal quarter that have materially affected, or are reasonably likely to materially affect, the Company’s internal control over financial reporting.

**Management’s Annual Report on Internal Control over Financial Reporting**

The Company’s management is responsible for establishing and maintaining adequate internal control over financial reporting. Internal control over financial reporting is defined in Rules 13a-15(f) and 15d-15(f) under the Securities Exchange Act of 1934, as amended, as a process designed by, or under the supervision of, a company’s principal executive and principal financial officers and effected by a company’s board of directors,        management and other personnel to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles. The Company’s internal control over financial reporting includes those policies and procedures that: (i) pertain to the maintenance of records that, in reasonable detail, accurately and fairly reflect the transactions and dispositions of the        Company’s assets; (ii) provide reasonable assurance that transactions are recorded as necessary to permit preparation of financial statements in accordance with generally accepted accounting principles, and that the Company’s receipts and expenditures are being made only in accordance with authorizations of its management and directors; and (iii) provide reasonable assurance regarding prevention or timely detection of unauthorized acquisition, use or disposition of its        assets that could have a material effect on the financial statements. 

The Company is committed to maintaining disclosure controls and procedures that are designed to ensure that information required to be disclosed by the Company in the reports that it files or submits to the Securities and Exchange Commission under the Securities Exchange Act of 1934, as amended, is recorded, processed, summarized and reported within the time periods specified by the Securities and Exchange Commission’s rules and forms, and that        information is accumulated and communicated to the Company’s management, including its chief executive officer and chief financial officer, as appropriate, to allow timely decisions regarding required disclosure. The Company is in the process of designing such internal controls and procedures over financial reporting.

This annual report does not include an attestation report of the Company’s registered public accounting firm regarding internal control over financial reporting. Management’s report was not subject to attestation by the Company’s registered public accounting firm pursuant to temporary rules of the Securities and Exchange Commission that permit the Company to provide only management’s report in this annual report.

Because of its inherent limitations, a system of internal control over financial reporting can provide only reasonable assurance and may not prevent or detect misstatements. Further, because changes in conditions, effectiveness of internal control over financial reporting may vary over time. The Company’s system contains self-monitoring mechanisms, and actions are taken to correct deficiencies as they are identified.

In the fourth quarter of 2009 Management initiated an enterprise risk assessment and project plan and embarked upon the extensive evaluation of the effectiveness of internal control over financial reporting. The criteria used is set forth in the *Internal Control—Integrated Framework* issued by the Committee of Sponsoring Organizations of the Treadway Commission, or COSO. As a small company, non-accelerated filer KeyOn is not subject to        attestation under Section 404 of the Sarbanes-Oxley Act until fiscal year-end 2010. For those design and operational weaknesses and deficiencies identified in 2009, KeyOn’s compliance and management teams have been actively engaged in the implementation of remediation efforts to address the weakness and deficiency in controls. During 2010, the company’s management will continue robust efforts to implement steps from the remediation plan previously prescribed. The        effectiveness of these remediation steps will be monitored and tested throughout 2010 in preparation for attestation by our registered accounting firm in 2011 for year-end 2010.

***Limitations of Internal Control Procedures***

Our management does not expect that our internal control over financial reporting will prevent or detect all errors and all fraud. A control system, no matter how well designed and operated, can provide only reasonable, not absolute, assurance that the control system’s objectives will be met. Because of the inherent limitations in all control systems, no evaluation of controls can provide absolute assurance that misstatements due to error or fraud        will not occur or that all control issues and instances of fraud, if any, within our company will have been detected.

**Item 9B. Other Information.**

          Not applicable.

**PART III**

**Item 10. Directors, Executive Officers, and Corporate Governance**

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          The following table sets forth information regarding the members of the Company’s board of directors and the Company’s executive officers. All directors hold office for one-year terms until the election and qualification of their successors. Officers are elected annually by the board of directors and serve at the discretion of the board.

|              |   |    |   |                                                                      |
|-------------------|--------|---------|--------|---------------------------------------------------------------------------|
| **Name**          |   | **Age** |   | **Position**                                                              |
|                   |   |         |   |                                                                           |
| Jonathan Snyder   |   | 38      |   | Chief Executive Officer, President and Director                           |
| Annette Eggert    |   | 44      |   | Chief Financial Officer                                                   |
| A. Robert Handell |   | 63      |   | Executive Vice President, Chief Operating Officer, Secretary and Director |
| Jason Lazar       |   | 36      |   | Vice President, Corporate Development and General Counsel                 |
| Rory Erchul       |   | 38      |   | Vice President, Marketing                                                 |

          **Jonathan Snyder, President, Chief Executive Officer and Director.** Mr. Snyder has served as the Company’s president, chief executive officer and as a director since August 2007. Mr. Snyder has been the president, chief executive officer and a director of KeyOn Communications, Inc. since February 2002. From May 2001 through June 2005, Mr. Snyder served as chairman of Transistor 8        LLC, a Santa Monica, California-based IT services firm. From 1996 through 1999, Mr. Snyder was a member of Pacific Capital Group, Inc. From 1994 through 1996, Mr. Snyder was an investment banker at Bear, Stearns & Co. Inc. While at Pacific Capital Group, Inc., Mr. Snyder was a founding shareholder of and former management executive at Global Crossing Limited. Mr. Snyder is a graduate of the Wharton School of Business at the University of Pennsylvania and earned his MBA from the        Anderson School at UCLA. 

          Mr. Snyder has had experience financing several large-scale telecommunications companies as a private equity investor and an investment banker. As a telecommunications banker at Bear Stearns, he participated in many financings for emerging growth telecommunications companies and helped to advise on several mergers and acquisitions transactions. Mr. Snyder joined Pacific Capital Group, a        merchant bank, where he participated in the structuring and financing of Global Crossing and become a founding shareholder. He later held positions in the senior management team in sales and finance. Mr. Snyder’s knowledge of financial markets and acumen in structuring and negotiating transactions in the telecommunications industry as well as his previous management experience at a global telecommunications company and presently at KeyOn provides him with the breadth and        uniqueness of skill-sets to serve on the board of directors of the Company. 

          **Annette Eggert, Chief Financial Officer.** Ms. Eggert has served as the Company’s chief financial officer since August 2007. Ms. Eggert has been the chief financial officer of KeyOn Communications, Inc. since June 2007. From March 2005 through June 2007, Ms. Eggert was the controller for the Interpublic Group Shared Services organization in Omaha, Nebraska. From December 2002 through        March 2005, Ms. Eggert was the controller of Connectivity Solutions Manufacturing, Inc., a wholly owned subsidiary of CommScope, Inc. and from October 1990 though December 2002, Ms. Eggert held various finance and accounting positions at Connectivity Solutions Manufacturing, Inc. Ms. Eggert is a licensed CPA and holds an MBA from the University of Nebraska.

          **A. Robert Handell, Executive Vice President, Chief Operating Officer, Secretary and Director.** Mr. Handell has served as the Company’s executive vice president, chief operating officer, secretary and as a director since August 2007. Mr. Handell has served as a director of KeyOn Communications, Inc. since December 2004 and as chief operating officer since January 2007. From July 2002        through December 2006, Mr. Handell served as president and as a director of CalNevAr Ventures, Inc., an entity formed to provide operational consulting services to KeyOn Communications, Inc. From May 2000 through July 2003, Mr. Handell served as chief executive officer and president of BroadLink Communications Inc., a high-speed wireless data network operator headquartered in Santa Rosa, California. From April 1997 through April 2000, Mr. Handell served as president of Edison Source, an        Edison International company. From January 1996 through June 1997, Mr. Handell served as president and chief executive officer of AccessLine Technologies Inc., a provider of personal number software and systems to telecommunications carriers. From July 1991 through December 1995, Mr. Handell served as executive vice president and chief operating officer of BellSouth MobileComm and from April 1987 through June 1991, Mr. Handell served as vice president of sales, marketing and customer        service at Bell Atlantic Mobile Systems.

          Mr. Handell has had over 40 years experience in leading the operations of several large organizations, including senior management roles at Bell South MobileComm, Bell Atlantic, Edison Source (a division of Edison International) and Xerox. Mr. Handell has in-depth experience in the operations of telecommunications companies across a broad range of areas, which provides him with a strong        understanding of the general industry, its fundamentals and value drivers. For example, while at BellSouth Mobilecomm, after BellSouth, the parent company, purchased a nationwide paging license, Mr. Handell, as Chief Operating Officer, managed the build-out of the paging network overseeing a staff of over 1,250 people. Under Mr. Handell’s operations leadership, BellSouth MobileComm achieved over 2 million subscribers and was sold for over $1 billion. In addition, Mr. Handell was a        Vice President for Bell Atlantic Mobile Systems (predecessor to Verizon) where he ran marketing, sales and customer service for the northeast region. Prior to serving as Chief Operating Officer for KeyOn, Mr. Handell was Chief Executive Officer of one the first wireless broadband companies in the country. Mr. Handell’s overall executive management experience and specific experience with telecommunications companies across cellular, paging, and wireless broadband make him        particularly well-suited to serve on the board of directors. 

          **Jason Lazar, Vice President, Corporate Development and General Counsel.** Mr. Lazar has served as the Company’s vice president, corporate development and general counsel since August 2007. Mr. Lazar was the director of corporate development of KeyOn Communications, Inc. from March 2002 to June 2006 and has been the vice president, corporate development and general counsel of KeyOn        Communications, Inc.

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since June 2006. From May 2000 through March 2002, Mr. Lazar served as a director of ITU Ventures, a leading early-stage venture capital firm with more than $75,000,000 under management. Mr. Lazar holds a B.A. form Lehigh University and a J.D. from the Benjamin N. Cardozo School of Law at Yeshiva University.

**          Rory Erchul, Vice President, Marketing.** Mr. Erchul has served as the Company’s vice president of marketing since August 2007. Mr. Erchul has been the vice president of marketing of KeyOn Communications, Inc. since July 2007. From December 2006 through June 2007, Mr. Erchul served as vice president of marketing and customer service for Allegiance Communications, LLC, a rural cable        company based in Shawnee, Oklahoma. From February 2004 to December 2006, Mr. Erchul served as regional manager for KeyOn Communications, Inc.’s Idaho operations. From April 2001 to February 2004, Mr. Erchul served as marketing director for Cable ONE, Inc. in Pocatello, Idaho. From January 1998 to April 2001, Mr. Erchul served as marketing director for Cable ONE, Inc. in Norfolk, Nebraska and from February 1994 to January 1998 as marketing assistant and telemarketing manager for        Cable ONE, Inc. in Fargo, North Dakota. Mr. Erchul holds a B.S. from Moorhead State University.

**Board Committees**

          The Audit, Compensation and Nominating and Corporate Governance committees were dissolved on May 11, 2009.

**Code of Ethics**

          We have adopted a written code of ethics and business conduct that applies to the Company’s directors, executive officers and all employees. The Company intends to disclose any amendments to, or waivers from, the Company’s code of ethics and business conduct that are required to be publicly disclosed pursuant to rules of the Securities and Exchange Commission by filing such        amendment or waiver with the Securities and Exchange Commission. This code of ethics and business conduct can be found in the corporate governance section of the Company’s website, www.keyon.com. The Company shall provide to any person without charge a copy of its code of ethics, upon written request to the following address: KeyOn Communications Holdings, Inc., 11742 Stonegate Circle, Omaha, Nebraska 68164, Attention: General Counsel.

**Item 11. Executive Compensation.**

**Summary Compensation Table**

          The following table summarizes the annual and long-term compensation paid to Jonathan Snyder, the Company’s chief executive officer, A. Robert Handell, the Company’s executive vice president, chief operating officer and secretary and Annette Eggert, the Company’s Chief Financial Officer, whom the Company jointly refers to as the “named executive officers.”        

----

|                                                                |   |     |   |              |   |             |   |                        |    |                              |   |             |   |   |    |   |   |    |   |
|---------------------------------------------------------------------|--------|----------|--------|-------------------|--------|------------------|--------|-----------------------------|---------|-----------------------------------|--------|------------------|--------|--------|---------|--------|--------|---------|--------|
| **Name and Principal Position**                                     |   | **Year** |   | **Salary****($)** |   | **Bonus****($)** |   | **Option Awards(1)****($)** |    | **All Other Compensation****($)** |   | **Total****($)** |   |
|                                                                     |   |          |   |                   |   |                  |   |                             |    |                                   |   |                  |   |
| Jonathan Snyder                                                     |   |     | 2009   |              |   | 127,083          |   |                        | — |                              |   | 110,025          |   |   | — |   |   | 137,108 |   |
| President and Chief Executive Officer (principal executive officer) |   |     | 2008   |              |   | 120,923          |   |                        | — |                              |   | 524,174          |   |   | — |   |   | 645,097 |   |
| Annette Eggert                                                      |   |     | 2009   |              |   | 125,159          |   |                        | — |                              |   | 114,347          |   |   | — |   |   | 239,506 |   |
| Chief Financial Officer                                             |   |     | 2008   |              |   | 125,154          |   |                        | — |                              |   | 87,457           |   |   | — |   |   | 212,611 |   |
| A. Robert Handell                                                   |   |     | 2009   |              |   | 127,088          |   |                        | — |                              |   | 113,359          |   |   | — |   |   | 240,447 |   |
| Executive Vice President and Chief Operating Officer                |   |     | 2008   |              |   | 120,923          |   |                        | — |                              |   | 55,264           |   |   | — |   |   | 176,187 |   |

|   |                                                                                                                                                                                                                                                                                                                                                  |
|--------|-------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|
| (1)    | Based upon the aggregate grant date fair value calculated in accordance with the Financial Accounting Standards Board Statement of Financial Accounting Standard No. 123R, Share Based Payment. For information regarding the Company’s valuation of option awards, see “Critical Accounting Policies — Stock-Based Expense.” |

**Outstanding Equity Awards at Fiscal Year-End**

The following table summarizes the outstanding equity awards to the Company’s named executive officers as of December 31, 2009:

- 27 -

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|              |   |                                                                                                                                                                   |   |                                                                                                                                                                                        |   |                                                                |   |                                                             |   |   |   |       |   |
|-------------------|--------|------------------------------------------------------------------------------------------------------------------------------------------------------------------------|--------|---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|--------|---------------------------------------------------------------------|--------|------------------------------------------------------------------|--------|--------|--------|------------|--------|
|              |   | **Option Awards**                                                                                                                                                      |   |
|              |   |                                                                                                                                                                        |   |
| **Name**          |   | **Number of                    Securities                    Underlying                    Unexercised                    Options Exercisable                    (#)** |   | **Number of                    Securities                    Underlying                    Unexercised                    Options                    Unexercisable                    (#)** |   | **Option Exercise                    Price                    ($)** |   | **Option                    Expiration                    Date** |   |
|                   |   |                                                                                                                                                                        |   |                                                                                                                                                                                             |   |                                                                     |   |                                                                  |   |
| Jonathan Snyder   |   |                                                                                                                                                                   | 75,000 |                                                                                                                                                                                        |   | —                                                             |   |                                                             | 4.00   |   |   | 08/08/2017 |   |
|              |   |                                                                                                                                                                   |   |                                                                                                                                                                                        |   | 330,000                                                             |   |                                                             | 0.25   |   |   | 06/01/2019 |   |
|              |   |                                                                                                                                                                   |   |                                                                                                                                                                                        |   |                                                                |   |                                                             |   |   |   |       |   |
| Annette Eggert    |   |                                                                                                                                                                   | 78,072 |                                                                                                                                                                                        |   | 42,814                                                              |   |                                                             | 2.48   |   |   | 06/01/2017 |   |
|              |   |                                                                                                                                                                   |   |                                                                                                                                                                                        |   | 80,650                                                              |   |                                                             | 0.25   |   |   | 06/01/2019 |   |
|              |   |                                                                                                                                                                   |   |                                                                                                                                                                                        |   |                                                                |   |                                                             |   |   |   |       |   |
| A. Robert Handell |   |                                                                                                                                                                   | 37,500 |                                                                                                                                                                                        |   | —                                                             |   |                                                             | 4.00   |   |   | 08/08/2017 |   |
|              |   |                                                                                                                                                                   |   |                                                                                                                                                                                        |   | 340,000                                                             |   |                                                             | 0.25   |   |   | 06/01/2019 |   |

----

**2007 Incentive Stock and Awards Plan**

          On August 9, 2007, the Company’s board of directors and stockholders adopted the 2007 Incentive Stock and Awards Plan. The purpose of the 2007 Incentive Stock and Awards Plan is to provide an incentive to attract and retain directors, officers, consultants, advisors and employees whose services are considered valuable, to encourage a sense of proprietorship and to stimulate an active        interest of such persons in the Company’s development and financial success. Under the 2007 Incentive Stock and Awards Plan, the Company is authorized to issue incentive stock options intended to qualify under Section 422 of the Internal Revenue Code of 1986, as amended, non-qualified stock options, stock appreciation rights, performance shares, restricted stock and long term incentive awards. The 2007 Incentive Stock and Awards Plan is administered by the Company’s board of        directors. 

**Director Compensation**

          On May 11, 2009, by unanimous action by written consent of the Board of Directors of the Company, pursuant to Article 3, Section 3.1 of its bylaws, agreed to reduce the number of directors from seven to two. Concurrent and in furtherance of this decision, the following members of the Board of Directors tendered their resignation: Jerome Snyder, Mark Baker, Jeffrey Rice, Curt Anderson and Jason        Horowitz. At that time, only Jonathan Snyder and A. Robert Handell remained on the Company’s Board of Directors.

          This decision was initially discussed at a meeting of the Company’s Board of Directors on April 27, 2009. The resigning directors expressed continued support of the Company and reaffirmed their confidence in management. However, the Board of Directors determined that as a result of the then existing price per share of the Company’s common stock, the non-executive members of the        Board of Directors compensation was unduly burdensome to the Company’s shareholders. The Company’s existing Board compensation plan provides equity compensation in the form of stock options to the non-executive members of the Board in exchange for their service. In light of the Company’s low price per share, the Black-Scholes calculation used to determine their compensation on a quarterly basis, results in a disproportionate number of options granted to the Board        relative to the number of outstanding shares and as a result is overly dilutive to the Company’s existing equity holders for an indeterminate amount of time.

          Pursuant to its bylaws, the Company reserves the right to further expand the number of directors to the extent the compensation offered to those directors is not disproportionate to the number of shares outstanding.

**Item 12. Security Ownership of Certain Beneficial Owners and Management and Related Stockholder Matters.**

          The following table sets forth information with respect to the beneficial ownership of the Company’s common stock as of December 31, 2009 by:

|   |   |                                                                                                   |
|--------|--------|--------------------------------------------------------------------------------------------------------|
|   | • | each person known by the Company to beneficially own more than 5% of the Company’s common stock; |
|   |   |                                                                                                   |
|   | • | each of the Company’s directors;                                                                 |
|   |   |                                                                                                   |
|   | • | each of the named executive officers; and                                                              |
|   |   |                                                                                                   |
|   | • | all of the Company’s directors and executive officers as a group.                                |

- 28 -

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The percentages of common stock beneficially owned are reported on the basis of regulations of the Securities and Exchange Commission governing the determination of beneficial ownership of securities. Under the rules of the Securities and Exchange Commission, a person is deemed to be a beneficial owner of a security if that person has or shares voting power, which includes the power to vote or to direct the voting of the security, or investment power,        which includes the power to dispose of or to direct the disposition of the security. Except as indicated in the footnotes to this table, each beneficial owner named in the table below has sole voting and sole investment power with respect to all shares beneficially owned and each person’s address is c/o KeyOn Communications Holdings, Inc., 11742 Stonegate Circle, Omaha, Nebraska 68164. As of December 31, 2009, the Company had 20,686,056 shares outstanding.

|                                                        |   |                                                                                                |      |                                                                       |   |   |   |
|-------------------------------------------------------------|--------|-----------------------------------------------------------------------------------------------------|-----------|----------------------------------------------------------------------------|--------|--------|--------|
| **Name of Beneficial Owner**                                |   | **Number of                    Shares                    Beneficially                    Owned(1)** |      | **Percentage                    Beneficially                    Owned(1)** |   |
|                                                             |   |                                                                                                     |      |                                                                            |   |
| Jerome Snyder                                               |   |                                                                                                | 2,165,440 | (2)                                                                        |   | 9.48   | %      |
| Liviakis Financial Communications, Inc.                     |   |                                                                                                | 2,000,000 | (3)                                                                        |   | 8.82   | %      |
| Jonathan Snyder                                             |   |                                                                                                | 1,420,336 | (4)                                                                        |   | 6.43   | %      |
| A. Robert Handell                                           |   |                                                                                                | 386,563   | (5)                                                                        |   | 1.83   | %      |
| Jason Lazar                                                 |   |                                                                                                | 348,559   | (6)                                                                        |   | 1.66   | %      |
| Annette Eggert                                              |   |                                                                                                | 83,109    | (7)                                                                        |   | *      |   |
| Rory Erchul                                                 |   |                                                                                                | 40,295    | (8)                                                                        |   | *      |   |
| All directors and executive officers as a group (5 persons) |   |                                                                                                | 6,459,302 |                                                                       |   | 23.75  | %      |

----

* Less than 1%.

|   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                               |
|--------|--------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|
| (1)    | Shares of common stock beneficially owned and the respective percentages of beneficial ownership of common stock assumes the exercise of all options, warrants and other securities convertible into common stock beneficially owned by such person or entity currently exercisable or exercisable within 60 days of December 31, 2009. Shares issuable pursuant to the exercise of stock options and warrants exercisable within 60 days are deemed                    outstanding and held by the holder of such options or warrants for computing the percentage of outstanding common stock beneficially owned by such person, but are not deemed outstanding for computing the percentage of outstanding common stock beneficially owned by any other person. |
|   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                               |
| (2)    | Includes 96,072 shares of common stock issuable upon the exercise of options; 346,875 shares of common stock issuable upon the exercise of guaranty warrants; 100,000 shares of common stock issuable upon the exercise of warrants                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                |
|   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                               |
| (3)    | Common stock issued for professional services rendered May 2009 through April 2010.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                |
|   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                               |
| (4)    | Includes 75,000 shares of common stock issuable upon the exercise of options; 346,875 shares of common stock issuable upon the exercise of guaranty warrants                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                       |
|   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                               |
| (5)    | Includes 37,500 shares of common stock issuable upon the exercise of options; 74,345 shares of common stock that are held jointly by A. Robert Handell and Dani Jo Handell, A. Robert Handell’s spouse.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                      |
|   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                               |
| (6)    | Includes 37,500 shares of common stock issuable upon the exercise of options                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                       |
|   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                               |
| (7)    | Includes 83,109 shares of common stock issuable upon the exercise of options                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                       |
|   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                               |
| (8)    | Includes 40,295 shares of common stock issuable upon the exercise of options.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                      |

**Item 13. Certain Relationships and Related Transactions, and Director Independence.**

          The Company executed a loan agreement with Sun West Bank on February 8, 2008, totaling $4.5 million (the “Loan”). On June 18, 2009, the Company entered into a Change in Terms Agreement with Sun West Bank, whereby the Company made a principal reduction payment of $450,000. Pursuant to the Change in Terms Agreement, the payment reduced the Loan to $4.05 million with Sun West Bank and        extended its 

- 29 -

----

maturity until June 4, 2015. Pursuant to the Note Purchase Agreement and Note entered into and issued on February 1 and 5, 2010, respectively, the Company satisfied all indebtedness and other obligations of the Company to Sun West Bank arising under the Loan, the Change of Terms Agreement, and the other loan and security documents executed by the Company in connection with those agreements. The Company also repaid the revolving line of credit with Sun        West Bank, entered into on December 18, 2006, thereby extinguishing all current and future liability to Sun West Bank.

          Prior to August 31, 2009, the Company had a series of subordinated secured notes outstanding of $1,281,878 (“Sub Notes”). The Sub Notes, whose terms were approved by the independent members of the Company’s board, were issued to certain of its present investors and certain members of senior management to fund working capital obligations and to also allow the Company time to        seek longer term financing and/or to pursue other strategic options. These notes bear interest at 17% per annum (compounded monthly) and three percent of the amount of the subordinated secured notes was retained by the investors in the form of a closing payment. In the original terms, the Sub Notes were due to mature upon the earlier of January 29, 2009 or upon a change of control, among other things. These Sub Notes were amended to extend the maturity date until August 31, 2009 and        include a conversion into shares of the Company’s common stock at the option of the holder. On or before August 31, 2009, all holders elected to convert their Sub Notes to stock and the Company issued 2,376,090 shares to the holders, of which 1,130,942 were to related parties. 

          A second set of senior secured subordinated notes were issued beginning in March 2009 (“Second Sub Notes”). An aggregate amount of $300,000 was issued to certain of the Company’s existing shareholders to fund current working capital obligations. These Second Sub Notes bear interest at 17% per annum (compounded monthly) and matured on September 30, 2009. The notes were        convertible at any time prior to maturity into shares of the Company’s common stock at a price per share of $0.25 at the option of the holder. These notes include detachable warrants at 50% of the face value of the note exercisable at $0.50 per warrant. All holders elected to convert their Second Sub Notes to stock on September 29, 2009. The total stock payable as of September 30, 2009 for this conversion was 1,316,979 shares, of which 220,944 were to related parties. 

**Director Independence**

By written unanimous consent of the board of directors, the Company’s independent directors resigned, effective May 11, 2009 as disclosed on Form 8-K. At this time, the Company’s board of directors are not independent as defined by Nasdaq Marketplace Rule 4200 (a)(15). 

**Item 14. Principal Accounting Fees and Services.**

          L.L. Bradford & Company, LLC has served as independent registered public accounting firm since August 2007 when KeyOn became a publicly held Company. L.L. Bradford & Company, LLC was also the Company’s independent registered public accounting firm for periods prior to August 2007 when it was privately held.

**(1) Audit Fees**

          L.L. Bradford & Company, LLC billed the Company audit fees in the aggregate amount of $87,500 in the year ended December 31, 2009. These fees relate to the audit of the Company’s annual financial statements and the review of the Company’s interim quarterly financial statements.

**(2) Audit-Related Fees**

          L.L. Bradford & Company, LLC, billed the Company audit-related fees in the aggregate amount of $850 in the year ended December 31, 2009. These fees relate primarily to the auditors review of the Company’s registration statements and related consents, audit of acquired companies or assets and audit related consulting.

**(3) Tax Fees**

          L.L. Bradford & Company, LLC, billed the Company tax fees in the aggregate amount of $10,000 in the year ended December 31, 2009.

**(4) All Other Fees**

          No fees of this sort were billed by L.L. Bradford & Company, LLC during 2009.

**PART IV**

**Item 15. Exhibits, Financial Statements Schedules**

- 30 -

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|            |   |                                                                                                                                                                                                                                                                                                                                                   |
|-----------------|--------|--------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|
| **Exhibit No.** |   | **Description**                                                                                                                                                                                                                                                                                                                                        |
|                 |   |                                                                                                                                                                                                                                                                                                                                                        |
|            |   |                                                                                                                                                                                                                                                                                                                                                   |
| 2.1             |   | Asset Purchase Agreement dated as of November 12, 2009, by and between KeyOn Communications Holdings, Inc. and Data Sales Co., Inc., (Incorporated by reference to Exhibit 2.1 to the Current Report on Form 8-K of KeyOn Communications Holdings, Inc. filed with the Securities and Exchange Commission on November 13, 2009).                       |
|            |   |                                                                                                                                                                                                                                                                                                                                                   |
| 3.1             |   | Amended and Restated Certificate of Incorporation of KeyOn Communications Holdings, Inc. (Incorporated by reference to Exhibit 3.1 to the Current Report on Form 8-K of KeyOn Communications Holdings, Inc. filed with the Securities and Exchange Commission on February 5, 2010).                                                                    |
|            |   |                                                                                                                                                                                                                                                                                                                                                   |
| 10.1*           |   | KeyOn Communications Holdings, Inc. 2007 Stock and Awards Plan (Incorporated by reference to Exhibit 10.1 to the Current Report on Form 8-K of KeyOn Communications Holdings, Inc. filed with the Securities and Exchange Commission on August 10, 2007).                                                                                              |
|            |   |                                                                                                                                                                                                                                                                                                                                                   |
| 10.2*           |   | Form of Stock Option Award Agreement (Incorporated by reference to Exhibit 10.2 to the Current Report on Form 8-K of KeyOn Communications Holdings, Inc. filed with the Securities and Exchange Commission on August 10, 2007).                                                                                                                        |
|            |   |                                                                                                                                                                                                                                                                                                                                                   |
| 10.3*           |   | Form of Restricted Stock Agreement (Incorporated by reference to Exhibit 10.3 to the Current Report on Form 8-K of KeyOn Communications Holdings, Inc. filed with the Securities and Exchange Commission on August 10, 2007).                                                                                                                          |
|            |   |                                                                                                                                                                                                                                                                                                                                                   |
| 10.4            |   | Change in Terms Agreement, dated June 18, 2009 by and between KeyOn Communications Holdings, Inc. and Sun West Bank (Incorporated by reference to Exhibit 10.1 to the Current Report on Form 8-K filed with the Securities and Exchange Commission on June 19, 2009).                                                                                  |
|            |   |                                                                                                                                                                                                                                                                                                                                                   |
| 10.5            |   | Change in Terms Agreement executed by and between KeyOn Communications Holdings, Inc, and Sun West Bank on March 27, 2009 (Incorporated by reference to Exhibit 10.1 to the Current Report on Form 8-K of KeyOn Communications Holdings, Inc. filed with the Securities and Exchange Commission on April 2, 2009).                                     |
|            |   |                                                                                                                                                                                                                                                                                                                                                   |
| 10.6            |   | Commercial Security Agreement, dated February 8, 2008, by and between KeyOn Communications Holdings, Inc. and Sun West Bank (Incorporated by reference to Exhibit 10.3 to the Current Report on Form 8-K of KeyOn Communications Holdings, Inc. filed with the Securities and Exchange Commission on February 14, 2008).                               |
|            |
| 10.7            |   | Commercial Guaranty, dated February 8, 2008, executed by Jerome Snyder in favor of Sun West Bank (Incorporated by reference to Exhibit 10.4 to the Current Report on Form 8-K of KeyOn Communications Holdings, Inc. filed with the Securities and Exchange Commission on February 14, 2008).                                                          |
|            |   |                                                                                                                                                                                                                                                                                                                                                   |
| 10.8            |   | Commercial Guaranty, dated February 8, 2008, executed by Jonathan Snyder in favor of Sun West Bank (Incorporated by reference to Exhibit 10.5 to the Current Report on Form 8-K of KeyOn Communications Holdings, Inc. filed with the Securities and Exchange Commission on February 14, 2008).                                                        |
|            |   |                                                                                                                                                                                                                                                                                                                                                   |
| 10.9            |   | Commercial Guaranty, dated February 8, 2008, executed by Barry Becker in favor of Sun West Bank (Incorporated by reference to Exhibit 10.6 to the Current Report on Form 8-K of KeyOn Communications Holdings, Inc. filed with the Securities and Exchange Commission on February 14, 2008).                                                           |
|            |   |                                                                                                                                                                                                                                                                                                                                                   |
| 10.10           |   | Form of Warrant issued to Guarantors of Business Loan Agreement with Sun West Bank (Incorporated by reference to Exhibit 10.7 to the Current Report on Form 8-K of KeyOn Communications Holdings, Inc. filed with the Securities and Exchange Commission on February 14, 2008).                                                                        |
|            |   |                                                                                                                                                                                                                                                                                                                                                   |
| 10.11           |   | Amendment to Master Equipment Lease Agreement executed by and between KeyOn Communications Holdings, Inc. and Data Sales Co., Inc. on September 16, 2008 (Incorporated by reference to Exhibit 10.1 to the Current Report on Form 8-K of KeyOn Communications Holdings, Inc. filed with the Securities and Exchange Commission on September 23, 2008). |
|            |   |                                                                                                                                                                                                                                                                                                                                                   |
| 14.1            |   | Code of Ethics                                                                                                                                                                                                                                                                                                                                         |
|            |   |                                                                                                                                                                                                                                                                                                                                                   |
| 21.1            |   | Subsidiaries of Registrant (Incorporated by reference to Exhibit 21.1 to the Current Report on Form 8-K of KeyOn Communications Holdings, Inc. filed with the Securities and Exchange Commission on August 10, 2007).                                                                                                                                  |
|            |   |                                                                                                                                                                                                                                                                                                                                                   |
| 31.1            |   | Certification by the Chief Executive Officer Pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.                                                                                                                                                                                                                                                |
|            |   |                                                                                                                                                                                                                                                                                                                                                   |
| 31.2            |   | Certification by the Chief Financial Officer Pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.                                                                                                                                                                                                                                                |
|            |   |                                                                                                                                                                                                                                                                                                                                                   |
| 32.1            |   | Certification by the Chief Executive Officer Pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.                                                                                                                                                                                                 |

- 31 -

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|   |   |                                                                                                                                                   |
|--------|--------|--------------------------------------------------------------------------------------------------------------------------------------------------------|
| 32.2   |   | Certification by the Chief Financial Officer Pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002. |

----

* Management compensatory plan.

- 32 -

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**SIGNATURES**

          In accordance with Section 13 or 15(d) of the Exchange Act, the Registrant caused this report to be signed on its behalf by the undersigned, thereunto duly authorized.

|                 |                                    |                                                                     |
|----------------------|-----------------------------------------|--------------------------------------------------------------------------|
|                 | **KEYON COMMUNICATIONS HOLDINGS, INC.** |
|                 |                                    |                                                                     |
| Date: April 13, 2010 | By:                                     | /s/ Jonathan Snyder                                                      |
|                 |                                    |                                                                          |
|                 |                                    | Jonathan Snyder                    President and Chief Executive Officer |

          In accordance with the Exchange Act, this report has been signed below by the following persons on behalf of the Registrant and in the capacities and the dates indicated.

|                  |   |                                                                                                      |   |           |
|-----------------------|--------|-----------------------------------------------------------------------------------------------------------|--------|----------------|
| **Signature**         |   | **Title**                                                                                                 |   | **Date**       |
|                       |   |                                                                                                           |   |                |
|                  |   |                                                                                                      |   |           |
| /s/ Jonathan Snyder   |   | President, Chief Executive Officer and Director                    (Principal Executive Officer)          |   | April 13, 2010 |
|                       |   |                                                                                                      |   |
| Jonathan Snyder       |   |                                                                                                      |   |
|                  |   |                                                                                                      |   |           |
| /s/ Annette Eggert    |   | Chief Financial Officer (Principal Financial                    Officer and Principal Accounting Officer) |   | April 13, 2010 |
|                       |   |                                                                                                      |   |
| Annette Eggert        |   |                                                                                                      |   |
|                  |   |                                                                                                      |   |           |
| /s/ A. Robert Handell |   | Director                                                                                                  |   | April 13, 2010 |
|                       |   |                                                                                                      |   |           |
| A. Robert Handell     |   |                                                                                                      |   |           |

- 33 -

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**KEYON COMMUNICATIONS HOLDINGS, INC.        AND SUBSIDIARIES**

REPORT ON CONSOLIDATED FINANCIAL STATEMENTS

FOR THE YEAR ENDED DECEMBER 31, 2009

1

----

**KEYON COMMUNICATIONS HOLDINGS, INC.        AND RELATED ENTITIES        INDEX TO CONSOLIDATED FINANCIAL STATEMENTS**

|                                                                                                 |   |   |
|------------------------------------------------------------------------------------------------------|--------|--------|
| Report of Independent Registered Accounting Firm                                                     |   | F-2    |
| Consolidated Balance Sheets as of December 31, 2009 and 2008                                         |   | F-3    |
| Consolidated Statements of Operations for the Years Ended December 31, 2009 and 2008                 |   | F-4    |
| Consolidated Statements of Shareholders’ Equity for the Years Ended December 31, 2009 and 2008 |   | F-5    |
| Consolidated Statements of Cash Flows for the Years Ended December 31, 2009 and 2008                 |   | F-7    |
| Notes to Consolidated Financial Statements                                                           |   | F-8    |

F-1

----

**REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM**

To the Board of Directors and Stockholders of        KeyOn Communications Holdings, Inc.

We have audited the accompanying consolidated balance sheets of KeyOn Communications Holdings, Inc. and Subsidiaries as of December 31, 2009 and 2008, and the related consolidated statements of operations, stockholders’ deficit, and cash flows for each of the years in the two-year period ended December 31, 2009. KeyOn Communications Holdings, Inc.’s management are responsible for these financial statements. Our responsibility is to express        an opinion on these consolidated financial statements based on our audit.

We conducted our audits in accordance with the standards of the Public Company Accounting Oversight Board (United States). Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement. The Company is not required to have, nor were we engaged to perform, an audit of its internal control over financial reporting. Our audit included consideration of        internal control over financial reporting as a basis for designing audit procedures that are appropriate in the circumstances, but not for the purpose of expressing an opinion on the effectiveness of the Company’s internal control over financial reporting. Accordingly, we express no such opinion. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements. An audit also includes assessing the accounting principles used        and significant estimates made by management, as well as evaluating the overall financial statement presentation. We believe that our audits provides a reasonable basis for our opinion.

In our opinion, the financial statements referred to above present fairly, in all material respects, the financial position of KeyOn Communications Holdings, Inc. and Subsidiaries as of December 31, 2009 and 2008, and the results of its operations and cash flows for each of the years in the two-year period ended December 31, 2009 in conformity with accounting principles generally accepted in the United States of America.

/s/ L.L. Bradford & Company, LLC        L.L. Bradford & Company, LLC        April 9, 2010        Las Vegas, Nevada

F-2

----

|                                                    |
|---------------------------------------------------------|
| **KEYON COMMUNICATIONS HOLDINGS INC. AND SUBSIDIARIES** |
|                                                    |
| **CONSOLIDATED BALANCE SHEETS**                         |
| **AS OF DECEMBER 31, 2009 AND DECEMBER 31, 2008**       |
|                                                         |

|                                                                                                                                                                                                                             |   |     |        |     |   |        |   |
|----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|--------|----------|-------------|----------|--------|-------------|--------|
|                                                                                                                                                                                                                             |   | **2009** |        | **2008** |   |
| **ASSETS**                                                                                                                                                                                                                       |   |     |        |     |   |        |   |
|                                                                                                                                                                                                                             |   |     |        |     |   |        |   |
| CURRENT ASSETS:                                                                                                                                                                                                                  |   |     |        |     |   |        |   |
| Cash                                                                                                                                                                                                                             |   | $        | 125,083     |     | $      | 28,032      |   |
| Accounts receivable, net of allowance for doubtful accounts                                                                                                                                                                      |   |     | 155,228     |     |   | 129,592     |   |
| Inventories                                                                                                                                                                                                                      |   |     | 114,150     |     |   | 172,434     |   |
| Prepaid expenses and other current assets                                                                                                                                                                                        |   |     | 114,296     |     |   | 74,198      |   |
|                                                                                                                                                                                                                             |   |          |             |     |        |             |   |
| Total current assets                                                                                                                                                                                                             |   |     | 508,757     |     |   | 404,256     |   |
|                                                                                                                                                                                                                             |   |          |             |     |        |             |   |
|                                                                                                                                                                                                                             |   |     |        |     |   |        |   |
| PROPERTY AND EQUIPMENT - Net                                                                                                                                                                                                     |   |     | 1,614,454   |     |   | 3,292,245   |   |
|                                                                                                                                                                                                                             |   |     |        |     |   |        |   |
| OTHER ASSETS                                                                                                                                                                                                                     |   |     |        |     |   |        |   |
| Goodwill                                                                                                                                                                                                                         |   |     | 1,341,816   |     |   | 1,641,138   |   |
| Subscriber base - net                                                                                                                                                                                                            |   |     | 182,669     |     |   | 562,743     |   |
| Trademarks                                                                                                                                                                                                                       |   |     | 16,667      |     |   | 16,667      |   |
| Refundable deposits                                                                                                                                                                                                              |   |     | 70,416      |     |   | 66,827      |   |
| Debt issuance costs - net                                                                                                                                                                                                        |   |     | 117,548     |     |   | 189,638     |   |
|                                                                                                                                                                                                                             |   |          |             |     |        |             |   |
| Total other assets                                                                                                                                                                                                               |   |     | 1,729,116   |     |   | 2,477,013   |   |
|                                                                                                                                                                                                                             |   |          |             |     |        |             |   |
|                                                                                                                                                                                                                             |   |     |        |     |   |        |   |
| TOTAL ASSETS                                                                                                                                                                                                                     |   | $        | 3,852,327   |     | $      | 6,173,514   |   |
|                                                                                                                                                                                                                             |   |          |             |     |        |             |   |
|                                                                                                                                                                                                                             |   |     |        |     |   |        |   |
| **LIABILITIES AND STOCKHOLDERS’ (DEFICIT)**                                                                                                                                                                                |   |     |        |     |   |        |   |
|                                                                                                                                                                                                                             |   |     |        |     |   |        |   |
| CURRENT LIABILITIES:                                                                                                                                                                                                             |   |     |        |     |   |        |   |
| Accounts payable and accrued expenses                                                                                                                                                                                            |   | $        | 1,782,559   |     | $      | 2,522,884   |   |
| Accounts payable and accrued expenses - related parties                                                                                                                                                                          |   |     | —     |     |   | 43,139      |   |
| Cash overdraft                                                                                                                                                                                                                   |   |     | 50,961      |     |   | 120,553     |   |
| Revolving line of credit - related party                                                                                                                                                                                         |   |     | 100,000     |     |   | 100,000     |   |
| Term loan payable - related party                                                                                                                                                                                                |   |     | 147,016     |     |   | 4,500,000   |   |
| Current portion of notes payable - related parties                                                                                                                                                                               |   |     | —     |     |   | 567,011     |   |
| Current portion of long term debt                                                                                                                                                                                                |   |     | —     |     |   | —     |   |
| Current portion of notes payable                                                                                                                                                                                                 |   |     | 150,450     |     |   | 648,610     |   |
| Current portion of deferred rent liability                                                                                                                                                                                       |   |     | 63,665      |     |   | 58,945      |   |
| Current portion of capital lease obligations                                                                                                                                                                                     |   |     | 643,039     |     |   | 596,411     |   |
| Deferred revenue                                                                                                                                                                                                                 |   |     | 213,674     |     |   | 310,689     |   |
|                                                                                                                                                                                                                             |   |          |             |     |        |             |   |
| Total current liabilities                                                                                                                                                                                                        |   |     | 3,151,364   |     |   | 9,468,242   |   |
|                                                                                                                                                                                                                             |   |          |             |     |        |             |   |
|                                                                                                                                                                                                                             |   |     |        |     |   |        |   |
| LONG-TERM LIABILITIES:                                                                                                                                                                                                           |   |     |        |     |   |        |   |
| Deferred rent liability, less current maturities                                                                                                                                                                                 |   |     | 80,094      |     |   | 141,463     |   |
| Term loan payable - related party                                                                                                                                                                                                |   |     | 3,902,984   |     |   | —     |   |
| Notes payable, less current maturities                                                                                                                                                                                           |   |     | 7,842       |     |   | 36,867      |   |
| Capital lease obligations, less current maturities                                                                                                                                                                               |   |     | 503,477     |     |   | 854,390     |   |
|                                                                                                                                                                                                                             |   |          |             |     |        |             |   |
| Total long term liabilities                                                                                                                                                                                                      |   |     | 4,494,397   |     |   | 1,032,720   |   |
|                                                                                                                                                                                                                             |   |          |             |     |        |             |   |
|                                                                                                                                                                                                                             |   |     |        |     |   |        |   |
| COMMITMENTS AND CONTINGENCIES                                                                                                                                                                                                    |   |     |        |     |   |        |   |
|                                                                                                                                                                                                                             |   |     |        |     |   |        |   |
| STOCKHOLDERS’ (DEFICIT):                                                                                                                                                                                                   |   |     |        |     |   |        |   |
| Series A preferred stock, $0.001 par value; 5,000,000 shares authorized;                     0 shares issued and outstanding at December 31, 2008 and at December 31, 2009                                                       |   |     | —     |     |   | —     |   |
| Common stock, $0.001 par value; 95,000,000 shares authorized;                    8,771,350 shares issued and outstanding at December 31, 2008;                     20,686,056 shares issued and outstanding at December 31, 2009 |   |     | 20,686      |     |   | 8,771       |   |
| Common stock payable                                                                                                                                                                                                             |   |     | 101,433     |     |   | 14,372      |   |
| Additional paid-in capital                                                                                                                                                                                                       |   |     | 24,428,922  |     |   | 17,358,431  |   |
| Deferred compensation                                                                                                                                                                                                            |   |     | (39,751     | )        |   | —     |   |
| Accumulated deficit                                                                                                                                                                                                              |   |     | (28,304,724 | )        |   | (21,709,022 | )      |
|                                                                                                                                                                                                                             |   |          |             |     |        |             |   |
| Total stockholders’ (deficit)                                                                                                                                                                                              |   |     | (3,793,434  | )        |   | (4,327,448  | )      |
|                                                                                                                                                                                                                             |   |          |             |     |        |             |   |
|                                                                                                                                                                                                                             |   |     |        |     |   |        |   |
| TOTAL LIABILITIES AND STOCKHOLDERS’ (DEFICIT)                                                                                                                                                                              |   | $        | 3,852,327   |     | $      | 6,173,514   |   |
|                                                                                                                                                                                                                             |   |          |             |     |        |             |   |

See notes to consolidated financial statements.

F-3

----

|                                                    |
|---------------------------------------------------------|
| **KEYON COMMUNICATIONS HOLDINGS INC. AND SUBSIDIARIES** |
|                                                    |
| **CONSOLIDATED STATEMENTS OF OPERATIONS**               |
|                                                         |

|                                                               |   |                                |       |     |   |       |   |
|--------------------------------------------------------------------|--------|-------------------------------------|------------|----------|--------|------------|--------|
|                                                               |   | **For the Year Ended December 31,** |       |
|                                                               |   | **2009**                            |       | **2008** |   |
|                                                               |   |                                |       |     |   |
| REVENUES:                                                          |   |                                |       |     |   |       |   |
| Service and installation revenue                                   |   | $                                   | 6,724,710  |     | $      | 7,646,536  |   |
| Support and other revenue                                          |   |                                | 173,522    |     |   | 147,204    |   |
|                                                               |   |                                     |            |     |        |            |   |
|                                                               |   |                                |       |     |   |       |   |
| Total revenues                                                     |   |                                | 6,898,232  |     |   | 7,793,740  |   |
|                                                               |   |                                     |            |     |        |            |   |
|                                                               |   |                                |       |     |   |       |   |
| OPERATING COSTS AND EXPENSES:                                      |   |                                |       |     |   |       |   |
| Payroll, bonuses and taxes                                         |   |                                | 3,505,812  |     |   | 6,937,932  |   |
| Depreciation and amortization                                      |   |                                | 2,423,657  |     |   | 2,744,705  |   |
| Network operating costs                                            |   |                                | 2,804,905  |     |   | 2,751,534  |   |
| Other general and administrative expense                           |   |                                | 1,256,053  |     |   | 1,258,826  |   |
| Installation expense                                               |   |                                | 168,761    |     |   | 419,277    |   |
| Professional fees                                                  |   |                                | 1,022,631  |     |   | 393,432    |   |
| Marketing and advertising                                          |   |                                | 86,209     |     |   | 320,812    |   |
| Goodwill asset impairment                                          |   |                                | 299,322    |     |   | 97,635     |   |
| Cost of DISH inventory                                             |   |                                | —    |     |   | 32,541     |   |
|                                                               |   |                                     |            |     |        |            |   |
|                                                               |   |                                |       |     |   |       |   |
| Total operating costs and expenses                                 |   |                                | 11,567,350 |     |   | 14,956,694 |   |
|                                                               |   |                                     |            |     |        |            |   |
|                                                               |   |                                |       |     |   |       |   |
| LOSS FROM OPERATIONS                                               |   |                                | (4,669,118 | )        |   | (7,162,954 | )      |
|                                                               |   |                                |       |     |   |       |   |
| OTHER INCOME (EXPENSE):                                            |   |                                |       |     |   |       |   |
| Gain/(loss) on disposal of equipment                               |   |                                | (88        | )        |   | 10,782     |   |
| Gain on Acquisition                                                |   |                                | 21,686     |     |   |       |   |
| Other Income - Other                                               |   |                                | 307,887    |     |   |       |   |
| Interest income                                                    |   |                                | 2          |     |   | 686        |   |
| Interest expense                                                   |   |                                | (2,256,071 | )        |   | (898,872   | )      |
|                                                               |   |                                     |            |     |        |            |   |
| Total other income (expense)                                       |   |                                | (1,926,584 | )        |   | (887,404   | )      |
|                                                               |   |                                     |            |     |        |            |   |
|                                                               |   |                                |       |     |   |       |   |
| PROVISION FOR INCOME TAXES                                         |   |                                | —    |     |   | —    |   |
|                                                               |   |                                     |            |     |        |            |   |
|                                                               |   |                                |       |     |   |       |   |
| NET LOSS                                                           |   | $                                   | (6,595,702 | )        | $      | (8,050,358 | )      |
|                                                               |   |                                     |            |     |        |            |   |
|                                                               |   |                                |       |     |   |       |   |
| Net loss per common share—basic and diluted                  |   | $                                   | (0.49      | )        | $      | (0.96      | )      |
|                                                               |   |                                     |            |     |        |            |   |
|                                                               |   |                                |       |     |   |       |   |
| Weighted average common shares outstanding—basic and diluted |   |                                | 13,496,761 |     |   | 8,392,016  |   |
|                                                               |   |                                     |            |     |        |            |   |

See notes to consolidated financial statements

F-4

----

|                                                                                                                                 |
|--------------------------------------------------------------------------------------------------------------------------------------|
| **KEYON COMMUNICATIONS HOLDINGS INC. AND SUBSIDIARIES**                                                                              |
|                                                                                                                                 |
| **CONSOLIDATED STATEMENT OF STOCKHOLDERS’ EQUITY (DEFICIT)                    FOR THE YEARS ENDED DECEMBER 31, 2009 AND 2008** |
|                                                                                                                                      |

|                                                                                   |   |             |      |                                               |   |                                        |   |                                       |       |                                         |   |                                                                                 |   |   |        |   |   |     |   |   |       |   |
|----------------------------------------------------------------------------------------|--------|------------------|-----------|----------------------------------------------------|--------|---------------------------------------------|--------|--------------------------------------------|------------|----------------------------------------------|--------|--------------------------------------------------------------------------------------|--------|--------|-------------|--------|--------|----------|--------|--------|------------|--------|
|                                                                                   |   | **Common Stock** |      | **Additional Paid-                    In Capital** |   | **Common Stock                    Payable** |   | **Accumulated                    Deficit** |       | **Deferred                    Compensation** |   | **Total                    Stockholders’                    Equity (Deficit)** |   |
|                                                                                   |   |                  |      |
|                                                                                   |   | **Shares**       |      | **Amount**                                         |   |
|                                                                                   |   |                  |      |                                                    |   |                                             |   |                                            |       |                                              |   |                                                                                      |   |        |        |
| BALANCE, January 1, 2008 (see Note 1)                                                  |   |             | 8,249,106 |                                               | $      | 8,249                                       |   | $                                          | 13,739,714 |                                         | $      | —                                                                              |   | $      | (13,658,664 | )      | $      | —  |   | $      | 89,299     |   |
|                                                                                   |   |             |      |                                               |   |                                        |   |                                       |       |                                         |   |                                                                                 |   |   |        |   |   |     |   |   |       |   |
| Stock Based Compensation, March 31, 2008                                               |   |             | —   |                                               |   | —                                     |   |                                       | 415,778    |                                         |   |                                                                                 |   |   | —     |   |   | —  |   |   | 415,778    |   |
| Director Stock Based Compensation, March 31, 2008                                      |   |             | —   |                                               |   | —                                     |   |                                       | 62,875     |                                         |   |                                                                                 |   |   | —     |   |   | —  |   |   | 62,875     |   |
| Restricted Stock Based Compensation, March 31, 2008                                    |   |             | —   |                                               |   | —                                     |   |                                       | 37,500     |                                         |   |                                                                                 |   |   | —     |   |   | —  |   |   | 37,500     |   |
| Guaranty Warrant Expense, March 31, 2008                                               |   |             | —   |                                               |   | —                                     |   |                                       | 606,233    |                                         |   |                                                                                 |   |   | —     |   |   | —  |   |   | 606,233    |   |
|                                                                                   |   |             |      |                                               |   |                                        |   |                                       |       |                                         |   |                                                                                 |   |   |        |   |   |     |   |   |       |   |
| Common Stock Exchanged for Professional Services, June, 2008                           |   |             | 2,036     |                                               |   | 2                                           |   |                                       | 11,998     |                                         |   |                                                                                 |   |   | —     |   |   | —  |   |   | 12,000     |   |
| Stock Based Compensation, June 30, 2008                                                |   |             | —   |                                               |   | —                                     |   |                                       | 242,221    |                                         |   |                                                                                 |   |   | —     |   |   | —  |   |   | 242,221    |   |
| Director Stock Based Compensation, June 30, 2008                                       |   |             | —   |                                               |   | —                                     |   |                                       | 62,875     |                                         |   |                                                                                 |   |   | —     |   |   | —  |   |   | 62,875     |   |
| Restricted Stock Based Compensation, June 30, 2008                                     |   |             | —   |                                               |   | —                                     |   |                                       | 37,500     |                                         |   |                                                                                 |   |   | —     |   |   | —  |   |   | 37,500     |   |
| Guaranty Warrant Expense, June 30, 2008                                                |   |             | —   |                                               |   | —                                     |   |                                       | 1,095,849  |                                         |   |                                                                                 |   |   | —     |   |   | —  |   |   | 1,095,849  |   |
|                                                                                   |   |             |      |                                               |   |                                        |   |                                       |       |                                         |   |                                                                                 |   |   |        |   |   |     |   |   |       |   |
| Common Stock Exchanged for Professional Services, July 11, 2008                        |   |             | 11,620    |                                               |   | 12                                          |   |                                       | 24,401     |                                         |   |                                                                                 |   |   | —     |   |   | —  |   |   | 24,413     |   |
| Guaranty Warrant Expense, July 31, 2008                                                |   |             | —   |                                               |   | —                                     |   |                                       | 340,417    |                                         |   |                                                                                 |   |   | —     |   |   | —  |   |   | 340,417    |   |
| Stock Based Compensation, September 30, 2008                                           |   |             | —   |                                               |   | —                                     |   |                                       | 96,503     |                                         |   |                                                                                 |   |   | —     |   |   | —  |   |   | 96,503     |   |
| Director Stock Based Compensation, September 30, 2008                                  |   |             | —   |                                               |   | —                                     |   |                                       | 62,875     |                                         |   |                                                                                 |   |   | —     |   |   | —  |   |   | 62,875     |   |
| Restricted Stock Based Compensation, September 30, 2008                                |   |             | —   |                                               |   | —                                     |   |                                       | 37,500     |                                         |   |                                                                                 |   |   | —     |   |   | —  |   |   | 37,500     |   |
| Common Stock Exchanged for Professional Services, September 5, 2008                    |   |             | 18,750    |                                               |   | 19                                          |   |                                       | 14,981     |                                         |   |                                                                                 |   |   | —     |   |   | —  |   |   | 15,000     |   |
| Common Stock Issued for Restricted Stock Options, September 8, 2008                    |   |             | 20,000    |                                               |   | 20                                          |   |                                       | (20        | )                                            |   |                                                                                 |   |   | —     |   |   | —  |   |   | —    |   |
| Common Stock Issued for Debt Issuance Costs, September 24, 2008                        |   |             | 333,333   |                                               |   | 333                                         |   |                                       | 199,667    |                                         |   |                                                                                 |   |   | —     |   |   | —  |   |   | 200,000    |   |
|                                                                                   |   |             |      |                                               |   |                                        |   |                                       |       |                                         |   |                                                                                 |   |   |        |   |   |     |   |   |       |   |
| Common Stock Issued for Professional Services, December 4, 2008                        |   |             | 136,505   |                                               |   | 136                                         |   |                                       | 29,864     |                                         |   |                                                                                 |   |   | 30,000      |   |   |     |   |   |       |   |
| Stock Based Compensation, December 31, 2008                                            |   |             | —   |                                               |   | —                                     |   |                                       | 139,325    |                                         |   |                                                                                 |   |   | —     |   |   | —  |   |   | 139,325    |   |
| Director Stock Based Compensation, December 31, 2008                                   |   |             | —   |                                               |   | —                                     |   |                                       | 62,875     |                                         |   |                                                                                 |   |   | —     |   |   | —  |   |   | 62,875     |   |
| Restricted Stock Based Compensation, December 31, 2008                                 |   |             | —   |                                               |   | —                                     |   |                                       | 37,500     |                                         |   |                                                                                 |   |   | —     |   |   | —  |   |   | 37,500     |   |
| Stock Options Payable, December 31, 2008                                               |   |             | —   |                                               |   | —                                     |   |                                       |       |                                         |   | 14,372                                                                               |   |   | —     |   |   | —  |   |   | 14,372     |   |
| Net loss for the year ended December 31, 2008                                          |   |             | —   |                                               |   | —                                     |   |                                       | —    |                                         |   | —                                                                              |   |   | (8,050,358  | )      |   | —  |   |   | (8,050,358 | )      |
|                                                                                   |   |                  |           |                                               |        |                                             |   |                                            |            |                                         |        |                                                                                      |   |        |             |   |        |          |   |        |            |   |
|                                                                                   |   |             |      |                                               |   |                                        |   |                                       |       |                                         |   |                                                                                 |   |   |        |   |   |     |   |   |       |   |
| BALANCE, January 1, 2009                                                               |   |             | 8,771,350 |                                               |   | 8,771                                       |   |                                       | 17,358,431 |                                         |   | 14,372                                                                               |   |   | (21,709,022 | )      |   | —  |   |   | (4,327,448 | )      |
|                                                                                   |   |             |      |                                               |   |                                        |   |                                       |       |                                         |   |                                                                                 |   |   |        |   |   |     |   |   |       |   |
| Stock Issued for Stock Option Payable, January 5, 2009                                 |   |             | 57,487    |                                               |   | 57                                          |   |                                       | 14,315     |                                         |   | (14,372                                                                              | )      |   | —     |   |   | —  |   |   | —    |   |
| Stock Based Compensation, March 31, 2009                                               |   |             | —   |                                               |   | —                                     |   |                                       | 37,482     |                                         |   | —                                                                              |   |   | —     |   |   | —  |   |   | 37,482     |   |
| Restricted Stock Based Compensation, March 31, 2009                                    |   |             | —   |                                               |   | —                                     |   |                                       | 150,000    |                                         |   | —                                                                              |   |   | —     |   |   | —  |   |   | 150,000    |   |
| Stock Based Compensation, April 30, 2009                                               |   |             | —   |                                               |   | —                                     |   |                                       | 12,494     |                                         |   | —                                                                              |   |   | —     |   |   | —  |   |   | 12,494     |   |
|                                                                                   |   |             |      |                                               |   |                                        |   |                                       |       |                                         |   |                                                                                 |   |   |        |   |   |     |   |   |       |   |
| Common Stock Exchanged for Professional Services, May 11, 2009                         |   |             | 2,120,000 |                                               |   | 2,120                                       |   |                                       | 103,880    |                                         |   | —                                                                              |   |   | —     |   |   | (106,000 | )      |   | —    |   |
| Common Stock Issued - Subscription sale, May, 2009                                     |   |             | 731,317   |                                               |   | 731                                         |   |                                       | 138,219    |                                         |   |                                                                                 |   |   |        |   |   |     |   |   | 138,950    |   |
| Common Stock Issued - Subscription sale, June, 2009                                    |   |             | 600,000   |                                               |   | 600                                         |   |                                       | 149,400    |                                         |   |                                                                                 |   |   |        |   |   |     |   |   | 150,000    |   |
| Stock Based Compensation, May 31, 2009                                                 |   |             | —   |                                               |   | —                                     |   |                                       | 12,494     |                                         |   | —                                                                              |   |   | —     |   |   | —  |   |   | 12,494     |   |
| Common Stock Issued - Subscription sale, June 23, 2009                                 |   |             | 650,000   |                                               |   | 650                                         |   |                                       | 324,350    |                                         |   |                                                                                 |   |   |        |   |   |     |   |   | 325,000    |   |
| Stock Based Compensation, June 30, 2009                                                |   |             | —   |                                               |   | —                                     |   |                                       | 12,494     |                                         |   | —                                                                              |   |   | —     |   |   | —  |   |   | 12,494     |   |
| Warrant Expense, Short Term Loan, June 30, 2009                                        |   |             | —   |                                               |   | —                                     |   |                                       | 91,245     |                                         |   |                                                                                 |   |   | —     |   |   | —  |   |   | 91,245     |   |
| Debt Issuance Costs on Convertible Notes, June 30, 2009                                |   |             | —   |                                               |   | —                                     |   |                                       | 14,753     |                                         |   |                                                                                 |   |   | —     |   |   | —  |   |   | 14,753     |   |
| Amortization of deferred compensation for stock issued for professional fees Q2 2009   |   |             |      |                                               |   |                                        |   |                                       |       |                                         |   |                                                                                 |   |   |        |   |   | 13,250   |   |   | 13,250     |   |
| Stock Based Compensation on warrants tied to subscription sales, June 30, 2009         |   |             | —   |                                               |   | —                                     |   |                                       | 5,167      |                                         |   |                                                                                 |   |   | —     |   |   | —  |   |   | 5,167      |   |
| Common Stock Issued - Subscription sale, July, 2009                                    |   |             | 1,400,000 |                                               |   | 1,400                                       |   |                                       | 698,600    |                                         |   |                                                                                 |   |   |        |   |   |     |   |   | 700,000    |   |
| Common Stock Issued - Secured Subordinated note converted, July 31, 2009               |   |             | 43,734    |                                               |   | 44                                          |   |                                       | 21,823     |                                         |   |                                                                                 |   |   |        |   |   |     |   |   | 21,867     |   |
| Stock Based Compensation, July 31, 2009                                                |   |             | —   |                                               |   | —                                     |   |                                       | 11,383     |                                         |   | —                                                                              |   |   | —     |   |   | —  |   |   | 11,383     |   |
| Warrant Expense, Short Term Loan, July 31, 2009                                        |   |             | —   |                                               |   | —                                     |   |                                       | 27,640     |                                         |   |                                                                                 |   |   | —     |   |   | —  |   |   | 27,640     |   |
|                                                                                   |   |             |      |                                               |   |                                        |   |                                       |       |                                         |   |                                                                                 |   |   |        |   |   |     |   |   |       |   |
| Common Stock Exchanged for Professional Services, July 31, 2009                        |   |             | 50,000    |                                               |   | 50                                          |   |                                       | 47,450     |                                         |   | —                                                                              |   |   | —     |   |   | —  |   |   | 47,500     |   |
| Common Stock Issued - Subscription sale, August, 2009                                  |   |             | 1,670,000 |                                               |   | 1,670                                       |   |                                       | 833,330    |                                         |   |                                                                                 |   |   |        |   |   |     |   |   | 835,000    |   |
| Common Stock Issued - Secured Subordinated note converted, August 31, 2009             |   |             | 2,332,356 |                                               |   | 2,332                                       |   |                                       | 1,163,843  |                                         |   |                                                                                 |   |   |        |   |   |     |   |   | 1,166,175  |   |
| Stock Based Compensation, August 31, 2009                                              |   |             |      |                                               |   |                                        |   |                                       | 198,755    |                                         |   |                                                                                 |   |   |        |   |   |     |   |   | 198,755    |   |
| Beneficial Conversion Interest on Secured Subordinated Notes August 31, 2009           |   |             |      |                                               |   |                                        |   |                                       | 1,188,042  |                                         |   |                                                                                 |   |   |        |   |   |     |   |   | 1,188,042  |   |
| Warrant Expense for Professional Services, August 31, 2009                             |   |             |      |                                               |   |                                        |   |                                       | 53,764     |                                         |   | —                                                                              |   |   | —     |   |   | —  |   |   | 53,764     |   |
| Reverse Stock Based Compensation on warrants tied to subscription sales, June 30, 2009 |   |             |      |                                               |   |                                        |   |                                       | (5,167     | )                                            |   |                                                                                 |   |   |        |   |   |     |   |   | (5,167     | )      |
|                                                                                   |   |             |      |                                               |   |                                        |   |                                       |       |                                         |   |                                                                                 |   |   |        |   |   |     |   |   |       |   |
| Exercise of Warrants, Common Stock Payable September 30, 2009                          |   |             |      |                                               |   |                                        |   |                                       |       |                                         |   | 50,000                                                                               |   |   |        |   |   |     |   |   | 50,000     |   |
|                                                                                   |   |             |      |                                               |   |                                        |   |                                       |       |                                         |   |                                                                                 |   |   |        |   |   |     |   |   |       |   |
| Common Stock Payable - Subscription sale, September 23, 2009                           |   |             |      |                                               |   |                                        |   |                                       |       |                                         |   | 75,000                                                                               |   |   |        |   |   |     |   |   | 75,000     |   |
| Common Stock Payable - Secured Subordinated note converted, September 29, 2009         |   |             |      |                                               |   |                                        |   |                                       |       |                                         |   | 329,244                                                                              |   |   |        |   |   |     |   |   | 329,244    |   |
|                                                                                   |   |             |      |                                               |   |                                        |   |                                       |       |                                         |   |                                                                                 |   |   |        |   |   |     |   |   |       |   |
| Common Stock Payable - Subscription sale, September 23, 2009                           |   |             |      |                                               |   |                                        |   |                                       |       |                                         |   | 150,000                                                                              |   |   |        |   |   |     |   |   | 150,000    |   |
|                                                                                   |   |             |      |                                               |   |                                        |   |                                       |       |                                         |   |                                                                                 |   |   |        |   |   |     |   |   |       |   |
| Common Stock Payable - Subscription sale, September 29, 2009                           |   |             |      |                                               |   |                                        |   |                                       |       |                                         |   | 70,000                                                                               |   |   |        |   |   |     |   |   | 70,000     |   |
|                                                                                   |   |             |      |                                               |   |                                        |   |                                       |       |                                         |   |                                                                                 |   |   |        |   |   |     |   |   |       |   |
| Common Stock Payable - Professional fees, September 29, 2009                           |   |             |      |                                               |   |                                        |   |                                       |       |                                         |   | 112,500                                                                              |   |   |        |   |   |     |   |   | 112,500    |   |
| Amortization of deferred compensation for stock issued for professional fees Q3 2009   |   |             |      |                                               |   |                                        |   |                                       |       |                                         |   |                                                                                 |   |   |        |   |   | 26,500   |   |   | 26,500     |   |
| Stock Based Compensation, September 30, 2009                                           |   |             |      |                                               |   |                                        |   |                                       | 77,505     |                                         |   |                                                                                 |   |   |        |   |   |     |   |   | 77,505     |   |
| Stock Based Compensation-cancel director’s Q4 2008 options, September 30, 2009   |   |             |      |                                               |   |                                        |   |                                       | (62,875    | )                                            |   |                                                                                 |   |   |        |   |   |     |   |   | (62,875    | )      |
|                                                                                   |   |             |      |                                               |   |                                        |   |                                       |       |                                         |   |                                                                                 |   |   |        |   |   |     |   |   |       |   |
| Warrant Expense for Professional Services, September 30, 2009                          |   |             |      |                                               |   |                                        |   |                                       | 71,162     |                                         |   | —                                                                              |   |   | —     |   |   | —  |   |   | 71,162     |   |
| Commissions Paid for Subscription Sales, September 30, 2009                            |   |             |      |                                               |   |                                        |   |                                       | (99,189    | )                                            |   |                                                                                 |   |   |        |   |   |     |   |   | (99,189    | )      |
| Common Stock Issued - Subscription sale, October 1, 2009                               |   |             | 66,667    |                                               |   | 67                                          |   |                                       | 99,933     |                                         |   |                                                                                 |   |   |        |   |   |     |   |   | 100,000    |   |
| Secured Subordinated Notes Issued, October 6, 2009                                     |   |             | 1,316,979 |                                               |   | 1,317                                       |   |                                       | 327,927    |                                         |   | (329,244                                                                             | )      |   |        |   |   |     |   |   | —    |   |
| Exercise of Warrants, Common Stock Issued October 6, 2009                              |   |             | 100,000   |                                               |   | 100                                         |   |                                       | 49,900     |                                         |   | (50,000                                                                              | )      |   |        |   |   |     |   |   | —    |   |
| Common Stock Issued - Subscription sale, October 6, 2009                               |   |             | 50,000    |                                               |   | 50                                          |   |                                       | 74,950     |                                         |   | (75,000                                                                              | )      |   |        |   |   |     |   |   | —    |   |
| Common Stock Issued - Subscription sale, October 31, 2009                              |   |             | 66,667    |                                               |   | 67                                          |   |                                       | 99,933     |                                         |   |                                                                                 |   |   |        |   |   |     |   |   | 100,000    |   |

F-5

----

|                                                                           |
|--------------------------------------------------------------------------------|
| **CONSOLIDATED STATEMENT OF STOCKHOLDERS’ EQUITY (DEFICIT) (CONTINUED)** |
| **FOR THE YEARS ENDED DECEMBER 31, 2009 AND 2008**                             |
|                                                                                |

|                                                                                         |   |             |       |                               |   |                        |   |                       |       |                         |   |                                                                 |   |   |        |   |   |    |   |   |       |   |
|----------------------------------------------------------------------------------------------|--------|------------------|------------|------------------------------------|--------|-----------------------------|--------|----------------------------|------------|------------------------------|--------|----------------------------------------------------------------------|--------|--------|-------------|--------|--------|---------|--------|--------|------------|--------|
|                                                                                         |   | **Common Stock** |       | **Additional Paid-****In Capital** |   | **Common Stock****Payable** |   | **Accumulated****Deficit** |       | **Deferred****Compensation** |   | **Total                    Stockholders’****Equity (Deficit)** |   |
|                                                                                         |   |                  |       |                               |   |                        |   |                       |
|                                                                                         |   | **Shares**       |       | **Amount**                         |   |                        |   |                       |       |                         |
|                                                                                         |   |                  |       |                                    |   |                             |   |                            |       |                              |   |                                                                      |   |        |        |
| Common Stock Exchanged for Professional Services, October 31, 2009                           |   |             | 75,000     |                               |   | 75                          |   |                       | 112,425    |                         |   | (112,500                                                             | )      |   |        |   |   |    |   |   | —    |   |
| Common Stock Issued - Subscription sale, October 31, 2009                                    |   |             | 46,667     |                               |   | 47                          |   |                       | 69,953     |                         |   | (70,000                                                              | )      |   |        |   |   |    |   |   | —    |   |
| Common Stock Issued - Subscription sale, October 31, 2009                                    |   |             | 350,000    |                               |   | 350                         |   |                       | 524,650    |                         |   |                                                                 |   |   |        |   |   |    |   |   | 525,000    |   |
| Amortization of deferred compensation for stock issued for professional fees - October 2009  |   |             |       |                               |   |                        |   |                       |       |                         |   |                                                                 |   |   |        |   |   | 8,833   |   |   | 8,833      |   |
| Stock Based Compensation, October 31, 2009                                                   |   |             |       |                               |   |                        |   |                       | 77,504     |                         |   |                                                                 |   |   |        |   |   |    |   |   | 77,504     |   |
| Common Stock Issued - Subscription sale, November 2, 2009                                    |   |             | 13,333     |                               |   | 13                          |   |                       | 19,987     |                         |   |                                                                 |   |   |        |   |   |    |   |   | 20,000     |   |
| Investment Refund, November 9, 2009                                                          |   |             |       |                               |   |                        |   |                       |       |                         |   | (150,000                                                             | )      |   |        |   |   |    |   |   | (150,000   | )      |
| Commissions Paid for Subscription Sales, November 17, 2009                                   |   |             |       |                               |   |                        |   |                       | (5,250     | )                            |   |                                                                 |   |   |        |   |   |    |   |   | (5,250     | )      |
| Common Stock Issued - Subscription sale, November 30, 2009                                   |   |             | 33,333     |                               |   | 33                          |   |                       | 49,967     |                         |   |                                                                 |   |   |        |   |   |    |   |   | 50,000     |   |
|                                                                                         |
| Amortization of deferred compensation for stock issued for professional fees - November 2009 |   |             |       |                               |   |                        |   |                       |       |                         |   |                                                                 |   |   |        |   |   | 8,833   |   |   | 8,833      |   |
| Stock Based Compensation, November 30, 2009                                                  |   |             |       |                               |   |                        |   |                       | 77,504     |                         |   |                                                                 |   |   |        |   |   |    |   |   | 77,504     |   |
| Common Stock Exchanged for Professional Services, December 31, 2009                          |   |             | 27,778     |                               |   | 28                          |   |                       | 61,917     |                         |   |                                                                 |   |   |        |   |   |    |   |   | 61,945     |   |
| Common Stock Issued for Restricted Stock Options, December 31, 2009                          |   |             | 80,000     |                               |   | 80                          |   |                       | (80        | )                            |   |                                                                 |   |   |        |   |   |    |   |   | —    |   |
| Acquisition of SkyWi, December 31, 2009                                                      |   |             | 33,388     |                               |   | 33                          |   |                       | 66,409     |                         |   |                                                                 |   |   |        |   |   |    |   |   | 66,442     |   |
| Exercise of Warrants, December 31, 2009                                                      |   |             |       |                               |   |                        |   |                       |       |                         |   | 1,433                                                                |   |   |        |   |   |    |   |   | 1,433      |   |
|                                                                                         |   |             |       |                               |   |                        |   |                       |       |                         |   |                                                                 |   |   |        |   |   |    |   |   |       |   |
| Common Stock Payable - Subscription sale, December 31, 2009                                  |   |             |       |                               |   |                        |   |                       |       |                         |   | 100,000                                                              |   |   |        |   |   |    |   |   | 100,000    |   |
| Amortization of deferred compensation for stock issued for professional fees - December 2009 |   |             |       |                               |   |                        |   |                       |       |                         |   |                                                                 |   |   |        |   |   | 8,833   |   |   | 8,833      |   |
| Stock Based Compensation, December 31, 2009                                                  |   |             |       |                               |   |                        |   |                       | 77,504     |                         |   |                                                                 |   |   |        |   |   |    |   |   | 77,504     |   |
|                                                                                         |   |             |       |                               |   |                        |   |                       |       |                         |   |                                                                 |   |   |        |   |   |    |   |   |       |   |
| Commissions Accrued for Subscription Sales, December 31, 2009                                |   |             |       |                               |   |                        |   |                       | (7,000     | )                            |   |                                                                 |   |   |        |   |   |    |   |   | (7,000     | )      |
| Net loss for the year ended December 31, 2009                                                |   |             | —    |                               |   | —                     |   |                       | —    |                         |   | —                                                              |   |   | (6,595,702  | )      |   | — |   |   | (6,595,702 | )      |
|                                                                                         |   |                  |            |                               |        |                             |   |                            |            |                         |        |                                                                      |   |        |             |   |        |         |   |        |            |   |
|                                                                                         |   |             |       |                               |   |                        |   |                       |       |                         |   |                                                                 |   |   |        |   |   |    |   |   |       |   |
| BALANCE, December 31, 2009                                                                   |   |             | 20,686,056 |                               | $      | 20,686                      |   | $                          | 24,428,922 |                         | $      | 101,433                                                              |   | $      | (28,304,724 | )      | $      | (39,751 | )      | $      | (3,793,434 | )      |
|                                                                                         |   |                  |            |                               |        |                             |   |                            |            |                         |        |                                                                      |   |        |             |   |        |         |   |        |            |   |

See notes to consolidated financial statements.

F-6

----

|                                                    |
|---------------------------------------------------------|
| **KEYON COMMUNICATIONS HOLDINGS INC. AND SUBSIDIARIES** |
|                                                    |
| **CONSOLIDATED STATEMENTS OF CASH FLOWS**               |
| **FOR THE YEAR ENDED DECEMBER 31, 2009 AND 2008**       |
|                                                         |

|                                                                                 |   |     |       |     |   |       |   |
|--------------------------------------------------------------------------------------|--------|----------|------------|----------|--------|------------|--------|
|                                                                                 |   | **2009** |       | **2008** |   |
| **CASH FLOWS FROM OPERATIONS:**                                                      |   |     |       |     |   |       |   |
| Net loss                                                                             |   | $        | (6,595,702 | )        | $      | (8,050,358 | )      |
| Adjustments to reconcile net loss to net cash flows from operations:                 |   |     |       |     |   |       |   |
| Depreciation expense                                                                 |   |     | 2,021,055  |     |   | 2,342,661  |   |
| Goodwill asset impairment                                                            |   |     | 299,322    |     |   | 97,635     |   |
| (Gain) Loss on disposal of equipment                                                 |   |     | 88         |     |   | (10,782    | )      |
| Amortization expense on subscriber base                                              |   |     | 402,602    |     |   | 402,044    |   |
| Stock based compensation expense                                                     |   |     | 682,244    |     |   | 3,337,826  |   |
| Amortization of debt issuance costs                                                  |   |     | 246,228    |     |   | —    |   |
| Beneficial conversion interest                                                       |   |     | 1,188,042  |     |   | —    |   |
| Warrant expense for professional services                                            |   |     | 71,162     |     |   | 71,264     |   |
| Professional services paid for or to be paid in common stock                         |   |     | 288,194    |     |   | 81,413     |   |
| Gain on acquisition of SkyWi                                                         |   |     | (21,686    | )        |   | —    |   |
|                                                                                 |   |     |       |     |   |       |   |
| Change in assets and liabilities, net of effect of acquisitions:                     |   |     |       |     |   |       |   |
| Accounts receivable                                                                  |   |     | (25,636    | )        |   | (35,494    | )      |
| Inventories                                                                          |   |     | 58,284     |     |   | 128,176    |   |
| Prepaid expenses and other current assets                                            |   |     | (40,098    | )        |   | 1,061      |   |
| Refundable deposits                                                                  |   |     | (3,589     | )        |   | (1,203     | )      |
| Other assets                                                                         |   |     | —    |     |   | (50,837    | )      |
| Accounts payable and accrued expenses                                                |   |     | (568,056   | )        |   | 176,666    |   |
| Payment on cash overdraft                                                            |   |     | (69,592    | )        |   | (177,963   | )      |
| Deferred rent liability                                                              |   |     | (56,649    | )        |   | (56,919    | )      |
| Deferred revenue                                                                     |   |     | (97,015    | )        |   | (80,504    | )      |
|                                                                                 |   |          |            |     |        |            |   |
| **Net cash flows from operations**                                                   |   |     | (2,220,802 | )        |   | (1,825,314 | )      |
|                                                                                 |   |     |       |     |   |       |   |
| **CASH FLOWS FROM INVESTING ACTIVITIES:**                                            |   |     |       |     |   |       |   |
|                                                                                 |   |     |       |     |   |       |   |
| Capital expenditures for property and equipment                                      |   |     | (141,896   | )        |   | (165,348   | )      |
| Proceeds on disposal of equipment                                                    |   |     | 791        |     |   | 4,367      |   |
|                                                                                 |   |          |            |     |        |            |   |
| **Net cash flows from investing activities**                                         |   |     | (141,105   | )        |   | (160,981   | )      |
|                                                                                 |   |     |       |     |   |       |   |
| **CASH FLOWS FROM FINANCING ACTIVITIES:**                                            |   |     |       |     |   |       |   |
| Additions to debt issuance costs                                                     |   |     | (40,500    | )        |   | —    |   |
| Proceeds from term note payable - related parties                                    |   |     | —    |     |   | 1,500,000  |   |
| Payments on term note payable - related parties                                      |   |     | (450,000   | )        |   | —    |   |
| Payments on notes payable                                                            |   |     | (492,320   | )        |   | (64,026    | )      |
| Proceeds from notes payable                                                          |   |     | 600,000    |     |   | 531,293    |   |
| Proceeds from subscription sales                                                     |   |     | 3,182,708  |     |   | —    |   |
| Payments on capital lease obligations                                                |   |     | (440,931   | )        |   | (851,322   | )      |
| Proceeds from notes payable - related party                                          |   |     | 100,001    |     |   | 567,011    |   |
| Proceeds from stock issuance                                                         |   |     | —    |     |   | 14,372     |   |
|                                                                                 |   |          |            |     |        |            |   |
| **Net cash flows from financing activities**                                         |   |     | 2,458,958  |     |   | 1,697,328  |   |
|                                                                                 |   |          |            |     |        |            |   |
| **NET INCREASE/ (DECREASE) IN CASH**                                                 |   |     | 97,051     |     |   | (288,967   | )      |
|                                                                                 |   |     |       |     |   |       |   |
| **CASH - Beginning of period**                                                       |   |     | 28,032     |     |   | 316,999    |   |
|                                                                                 |   |          |            |     |        |            |   |
| **CASH - End of period**                                                             |   | $        | 125,083    |     | $      | 28,032     |   |
|                                                                                 |   |          |            |     |        |            |   |
|                                                                                 |   |     |       |     |   |       |   |
| **SUPPLEMENTAL NON-CASH DISCLOSURES FROM INVESTING & FINANCING ACTIVITIES:**     |
|                                                                                 |   |     |       |     |   |       |   |
| Stock issued for acquisition - SkyWi:                                                |   |     |       |     |   |       |   |
| Subscriber Base                                                                      |   | $        | 22,528     |     | $      | —    |   |
| Property and equipment                                                               |   |     | 65,600     |     | $      | —    |   |
| Less: Gain on acquisition                                                            |   |     | (21,686    | )        | $      | —    |   |
|                                                                                 |   |          |            |     |        |            |   |
| Total consideration                                                                  |   | $        | 66,442     |     | $      | —    |   |
|                                                                                 |   |          |            |     |        |            |   |
|                                                                                 |   |     |       |     |   |       |   |
| Warrants granted for debt issuance costs                                             |   | $        | 133,638    |     | $      | 200,000    |   |
|                                                                                 |   |          |            |     |        |            |   |
| Warrant interest expense                                                             |   | $        | —    |     | $      | 71,264     |   |
|                                                                                 |   |          |            |     |        |            |   |
| Cash received from shareholders for option exercise                                  |   | $        | —    |     | $      | 14,372     |   |
|                                                                                 |   |          |            |     |        |            |   |
| Common stock payable-secured subordinated note conversion                            |   | $        | 329,244    |     | $      | —    |   |
|                                                                                 |   |          |            |     |        |            |   |
| Common stock payable-subscription sales                                              |   | $        | 296,433    |     | $      | —    |   |
|                                                                                 |   |          |            |     |        |            |   |
| Common stock payable-professional services                                           |   | $        | 112,500    |     | $      | 81,413     |   |
|                                                                                 |   |          |            |     |        |            |   |
| Common stock issued-secured subordinated note conversion, including accrued interest |   | $        | 1,188,042  |     | $      | —    |   |
|                                                                                 |   |          |            |     |        |            |   |
| Deferred stock compensation for professional services                                |   | $        | 106,000    |     | $      | —    |   |
|                                                                                 |   |          |            |     |        |            |   |
| Capital lease obligations for property and equipment                                 |   | $        | 136,647    |     | $      | 898,811    |   |
|                                                                                 |   |          |            |     |        |            |   |
| Stock issued for common stock payable                                                |   | $        | 651,116    |     | $      | —    |   |
|                                                                                 |   |          |            |     |        |            |   |
| **Cash payments for:**                                                               |   |     |       |     |   |       |   |
| Interest                                                                             |   | $        | 697,907    |     | $      | 873,118    |   |
|                                                                                 |   |          |            |     |        |            |   |
| Tax                                                                                  |   | $        | —    |     | $      | —    |   |
|                                                                                 |   |          |            |     |        |            |   |

See notes to consolidated financial statements.

F-7

----

**KEYON COMMUNICATIONS HOLDINGS, INC.        AND SUBSIDIARIES**

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

**Note 1 – Organization and Nature of Business**

          On August 9, 2007, KeyOn Communications, Inc. became a publicly-traded company by virtue of a merger with a publicly-traded company, Grant Enterprises, Inc. (“Grant”), a holding company with no operating business (the “Merger”). In connection with the merger, 900,001 shares of Grant remained outstanding and all other outstanding shares of Grant were cancelled. Also, in        connection with the merger, Grant issued 6,650,069 shares of its common stock for all outstanding common stock of KeyOn. Upon closing of the Merger transaction, a wholly owned subsidiary of Grant merged with and into KeyOn, and KeyOn, as the surviving corporation, became a wholly-owned subsidiary of Grant. All pre-merger assets and liabilities of Grant were split-off from Grant, leaving KeyOn’s business as the surviving operations of Grant. As a result of the transaction, the        former owners of KeyOn became the controlling stockholders of Grant and Grant changed its name to KeyOn Communications Holdings, Inc. Accordingly, the merger of KeyOn and Grant is a reverse merger. Effective on August 9, 2007, and for all reporting periods thereafter, the Company’s operating activities, including any prior comparative period, will include only those of KeyOn Communications Holdings, Inc. 

          KeyOn Communications, Inc., was incorporated on December 16, 2004, under the laws of the State of Nevada. The Company provides wireless broadband, satellite video and voice-over-IP (VoIP) services primarily to small and rural markets in the Western and Midwestern United States. KeyOn’s markets are located in eleven (11) Western and Midwestern states: Colorado, Idaho, Illinois, Indiana,        Iowa, Kansas, Nebraska, Nevada, Ohio, South Dakota, and Texas. The Company has eight wholly-owned organizations (in combination referred to as the “related entities”): KeyOn Communications, LLC; KeyOn SIRIS, LLC; KeyOn Grand Junction, LLC; KeyOn Idaho Falls, LLC; KeyOn Pahrump, LLC; KeyOn Pocatello, LLC and KeyOn SpeedNet LLC and KeyOn Spectrum Holdings, LLC. 

          KeyOn Communications, LLC (KeyOn LLC), a wholly-owned limited liability operating entity of the Company, was organized on February 26, 2002 under the laws of the State of Nevada, to serve a market located in Las Vegas, Nevada and its surrounding areas with wireless broadband services. It will continue its operations until February 26, 2502 or until dissolved, if sooner. 

          KeyOn Pahrump, LLC (Pahrump), a wholly-owned limited liability operating entity of the Company, was organized on September 26, 2003 under the laws of the State of Nevada, to serve a market located in Pahrump, Nevada and its surrounding areas with a wireless broadband service as previously described. It will continue its operations until September 26, 2503 or until dissolved, if sooner.        

          KeyOn SIRIS, LLC (SIRIS), a wholly-owned limited liability operating entity of the Company, was organized on June 16, 2005 under the laws of the State of Nevada, to serve markets KeyOn acquired in June 2005 located in southern Iowa with a wireless broadband 

F-8

----

**KEYON COMMUNICATIONS HOLDINGS, INC.        AND SUBSIDIARIES**

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

service as previously described. It will continue its operations until June 16, 2505 or until dissolved, if sooner. 

          KeyOn Grand Junction, LLC (Grand Junction), a wholly-owned limited liability operating entity of the Company, was organized on May 31, 2005 under the laws of the State of Nevada, to serve a market located in Grand Junction, Colorado and its surrounding areas with a wireless broadband service as previously described. It will continue its operations until May 31, 2505 or until dissolved, if        sooner. 

          KeyOn Idaho Falls, LLC (Idaho Falls), a wholly-owned limited liability operating entity of the Company, was organized on May 31, 2005 under the laws of the State of Nevada, to serve a market located in Idaho Falls, Idaho and its surrounding areas with a wireless broadband service as previously described. It will continue its operations until May 31, 2505 or until dissolved, if sooner.        

          KeyOn Pocatello, LLC (Pocatello), a wholly-owned limited liability operating entity of the Company, was organized on May 31, 2005 under the laws of the State of Nevada to serve a market located in Pocatello, Idaho and its surrounding areas with a wireless broadband service as previously described. It will continue its operations until May 31, 2505 or until dissolved, if sooner. 

          KeyOn SpeedNet, LLC (SpeedNet LLC), a wholly-owned limited liability operating entity of the Company, was organized on June 27, 2006 under the laws of the State of Nevada. It served as an acquisition subsidiary in the acquisition of SpeedNet. SpeedNet LLC houses the previous operations of SpeedNet, including wireless broadband markets operating the states of Idaho, Illinois, Indiana, Iowa,        Kansas, Nebraska, Ohio, South Dakota, and Texas. It will continue its operations until June 27, 2506 or until dissolved, if sooner. 

          KeyOn Spectrum Holdings, LLC (Spectrum Holdings), a wholly-owned limited liability operating entity of the Company, was organized on November 26, 2007 under the laws of the State of Nevada. It has no current operations and serves as a subsidiary to pursue potential spectrum acquisitions. It will continue its operations until November 26, 2507 or until dissolved, if sooner.

**Note 2 – Summary of Significant Accounting Policies**

**          Estimates**

          Management uses estimates and assumptions in preparing these financial statements in accordance with U.S. generally accepted accounting principles. Those estimates and assumptions affect the reported amounts of assets and liabilities, the disclosure of contingent assets and liabilities, and the reported revenues and expenses. Actual results could vary from the estimates that were used, and such        variances could be significant. 

F-9

----

**KEYON COMMUNICATIONS HOLDINGS, INC.        AND SUBSIDIARIES**

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

**          Revenue Recognition**

          The Company prepares its financial statements on the accrual method of accounting. Under this basis, income is recognized when earned, and expenses are generally recognized when incurred. The Company charges a recurring subscription fee for providing its various Internet access services to its subscribers and recognizes revenues when they are earned, which generally occurs as the service is        provided. Subscriptions to the services are in the form of annual or two year contracts and are generally billed monthly, quarterly, semiannually or annually in advance. Payments received in advance for subscriptions are deferred and recognized as the services are provided. Service initiation fees are recognized at time of installation. For the DISH retailer line of business, the Company recognizes revenues at the time of installation. 

**          Cash and Cash Equivalents**

          The Company considers all highly liquid investments with a maturity of three months or less when purchased to be cash equivalents. For financial statement purposes, investments in money market funds are considered a cash equivalent and are included in cash and cash equivalents.

**          Property and Equipment**

          Property and equipment are carried at cost. Depreciation has been calculated using the straight-line method over the estimated useful lives of the respective classes of assets or the life of the capital lease which range from 2 years to 7 years. An asset begins to be depreciated once that asset has been placed into service. 

          The Company reviews property and equipment for impairment whenever events or changes in business circumstances indicate that the carrying amount of the assets may not be fully recoverable. Recoverability of any asset “held-for-use” is determined by comparing the carrying amount of the asset to the undiscounted net cash flows expected to be generated from the use of the asset. If the        carrying amount is greater than the undiscounted net cash flows expected to be generated by the asset, the asset’s carrying amount is reduced to its fair value. An asset “held-for-sale” is reported at the lower of the carrying value amount or the fair value less the cost to sell. 

**          Accounts Receivable**

          The billing policy of the Company and its related entities is to bill the majority of its subscribers through electronic transactions, such as credit or debit card, and electronic check. Accounts receivable arise from providing services to clients whose credit cards are expired or 

F-10

----

**KEYON COMMUNICATIONS HOLDINGS, INC.        AND SUBSIDIARIES**

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

invalid, or who are not billed electronically. These accounts receivable are stated at their estimated realizable amounts, net of an allowance of doubtful collections, based on a review of outstanding receivables, historical collection information, and existing economic conditions. The allowance totaled $86,162 and $70,793 as of December 31, 2009 and 2008 respectively. 

**          Inventories**

          The Company maintains a consistent stock supply of customer premise equipment, installation supplies, and tower replacement parts. The value of this inventory was $99,950 and $158,019 as of December 31, 2009 and 2008, respectively. The Company also began to carry in inventory in 2007 in support of its launch as a reseller of satellite video service from DISH. The value of this inventory was        $14,200 and $14,415 as of December 31, 2009 and 2008, respectively. The inventory is carried at the incurred cost value of the invoiced amount from the suppliers. Once the DISH installation is complete, the revenue is recognized and the cost of inventory is expensed to operating expense.

**          Acquisition Costs and Intangible Assets**

          Intangible assets with indefinite lives (e.g., trademarks) are not amortized and are tested annually for impairment of value. Impairment occurs when the fair value of the asset is less than its carrying amount. If impaired, the asset’s carrying amount is reduced to its fair value. 

          Intangible assets with definite lives (e.g., subscriber lists and non-compete agreements) are amortized over their estimated useful lives and tested for impairment whenever events or changes in circumstances indicate the carrying amount of the asset may be impaired. Amortization has been calculated using the straight-line method over the estimated useful lives of the intangible assets which        range from 3 years to 7 years. An asset begins to be amortized once that asset has been placed into service. Impairment occurs when the fair value of the asset is less than its carrying amount. If impaired, the asset is written down to its fair value.

          Intangible assets, including goodwill, are accounted for under the provisions of Accounting Standards Codification (“ASC”) 350, “Intangibles—Goodwill and Other”. Under ASC 350, intangible assets, other than goodwill, are identified and segregated between amortizable and non-amortizable assets. Amortizable intangibles are amortized over their estimated, contractual,        or regulated useful lives. Goodwill and other non-amortizable assets are reviewed, at least annually, for impairment in the carrying value of the intangible asset. In addition, this review also includes the net carrying value of amortizable intangible assets. If impairment is deemed to have occurred, a loss for such impairment is recorded as part of current operations. We test our goodwill for impairment annually during our fourth fiscal quarter and in interim periods if certain events        occur indicating that the carrying value of goodwill may be 

F-11

----

**KEYON COMMUNICATIONS HOLDINGS, INC.        AND SUBSIDIARIES**

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

impaired. We review the value of our intangible assets in accordance with the applicable accounting literature for impairment whenever events or changes in business circumstances indicate that the carrying amount of the assets may not be fully recoverable or that the useful lives of these assets are no longer appropriate. In the fourth quarter of fiscal 2009 we conducted an impairment test of our goodwill and intangible assets which resulted in a        $85,906 impairment charge to our Pocatello goodwill and a $213,416 impairment charge to our Speednet goodwill as discussed in Note 4. As of December 31, 2009, we had $1,341,816 of goodwill and $1,541,152 of net intangible assets remaining on our balance sheet, which we currently believe to be realizable based on the estimated fair value of these assets. As of December 31, 2008, we had $1,641,138 of goodwill and $2,220,548 of net intangible assets. Goodwill for Pocatello was impaired        $97,635 as of December 31, 2008. 

**          Deferred Revenues**

          Payments received in advance for subscriptions are deferred and recognized as the services are provided. The amount of revenue that was deferred was $213,674 and $310,689 at December 31, 2009 and 2008, respectively. 

**          Fair Value of Financial Instruments**

          The carrying amount of the financial instruments including cash and cash equivalents, receivables and payables (including accrued expenses and debt borrowings) are reasonable estimates of their fair value, as such financial instruments are short-term in nature, bear interest at current market rates, or are subject to frequent re-pricing. 

**          Advertising and Marketing Costs**

          Advertising and marketing costs of $86,209 and $320,812, respectively, for the years ended December 31, 2009 and 2008 were expensed as incurred. 

**          Income Taxes**

          The Company accounts for income taxes under the asset and liability method, which requires the recognition of deferred tax assets and liabilities for the expected future tax consequences of events that have been included in the financial statements. Under this method, deferred tax assets and liabilities are determined based on the differences between the financial statements and tax basis of        assets and liabilities using enacted tax rates in effect for the year in which the differences are expected to reverse. The effect of a change in tax rates on deferred tax assets and liabilities is recognized in income in the period that includes the enactment date. 

          The Company records net deferred tax assets to the extent the Company believes these assets will more likely than not be realized. In making such determination, the Company 

F-12

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**KEYON COMMUNICATIONS HOLDINGS, INC.        AND SUBSIDIARIES**

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

considers all available positive and negative evidence, including future reversals of existing taxable temporary differences, projected future taxable income, tax planning strategies and recent financial operations. A valuation allowance is established against deferred tax assets that do not meet the criteria for recognition. In the event the Company were to determine that it would be able to realize deferred income tax assets in the future in excess of        their net recorded amount, the would make an adjustment to the valuation allowance which would reduce the provision for income taxes. 

          The Company follows the accounting guidance which provides that a tax benefit from an uncertain tax position may be recognized when it is more likely than not that the position will be sustained upon examination, including resolutions of any related appeals or litigation processes, based on the technical merits. Income tax positions must meet a more-likely-than-not recognition threshold at the        effective date to be recognized initially and in subsequent periods. Also included is guidance on measurement, derecognition, classification, interest and penalties, accounting in interim periods, disclosure and transition. 

**          Stock-Based Compensation**

          The Company accounts for all compensation related to stock, options or warrants using a fair value based method whereby compensation cost is measured at the grant date based on the value of the award and is recognized over the service period, which is usually the vesting period. The Company uses the Black-Scholes pricing model to calculate the fair value of options and warrants issued to both        employees and non-employees. Stock issued for compensation is valued using the market price of the stock on the date of the related agreement. The Company recorded total stock-based compensation of $682,244 for the year ended December 31, 2009, compared to $3,333,826 for the same period in 2008. 

          The table summarizes the value of outstanding options as of December 31, 2009 and as of December 31, 2008.

|                                                    |   |     |    |     |   |    |   |
|---------------------------------------------------------|--------|----------|---------|----------|--------|---------|--------|
| **Black-Scholes Option Valuation Assumptions**          |   | **2009** |    | **2008** |   |
|                                                    |   |     |    |     |   |
| Average fair value of options granted during the period |   | $        | 0.87    |     | $      | 1.32    |   |
| Average Expected term (in years)                        |   |     | 5       |     |   | 5       |   |
| Average Expected volatility                             |   |     | 141.58  | %        |   | 123.02  | %      |
| Average Expected dividend yield                         |   |     | — |     |   | — |   |
| Average Risk free rate                                  |   |     | 2.27    | %        |   | 2.81    | %      |

**Consolidation Policy**

          The accompanying consolidated balance sheets and consolidated statements of 

F-13

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**KEYON COMMUNICATIONS HOLDINGS, INC.        AND SUBSIDIARIES**

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

operations, stockholders’ equity, and cash flows, referred to as “KeyOn Communications Holdings, Inc.,” includes the accounts of KeyOn Communications, Inc., KeyOn Communications, LLC, KeyOn Pahrump, LLC, KeyOn SIRIS, LLC, KeyOn Grand Junction, LLC, KeyOn Idaho Falls, LLC, KeyOn Pocatello, LLC, and KeyOn SpeedNet LLC (as of February 1, 2007) all of which are under common ownership. Intercompany balances and transactions have been        eliminated in consolidation. 

**          Recent Accounting Pronouncements**

          The following pronouncements have been issued by the Financial Accounting Standards Board (“FASB”): 

          In December 2007, the FASB issued an update to FASB ASC 810, “Consolidation”, which establishes accounting and reporting standards for ownership interests in subsidiaries held by parties other than the parent, the amount of consolidated net income attributable to the parent and to the non-controlling interest, changes in a parent’s ownership interest, and the valuation of        retained non-controlling equity investments when a subsidiary is deconsolidated. SFAS 160 also establishes disclosure requirements that clearly identify and distinguish between the interests of the parent and the interests of non-controlling owners. This update is effective for the Company as of January 1, 2009. The Company adopted this update in January 2009 without significant impact on the consolidated financial position, results of operations, and disclosures. 

          In March 2008, the FASB issued an update to FASB ASC 815, “Derivatives and Hedging”. This update is intended to enhance the current disclosure framework in FASB ASC 815. Under this update, entities will have to provide disclosures about (a) how and why and entity uses derivative instruments, (b) how derivative instruments and related hedged items are accounted for under FASB ASC 815        and its related interpretations, and (c), how derivative instruments and related hedged items effect an entity’s financial position, financial performance and cash flows. This update is effective for all financial statements issued for fiscal and interim periods beginning after November 15, 2008. The Company does not currently have any derivative instruments, nor does it engage in hedging activities, therefore, the Company’s adoption of this update in the first quarter of        2009 was without significant financial impact. 

          In May 2008, the FASB issued an update to FASB ASC 470, “Debt”, with respect to accounting for convertible debt instruments that may be settled in cash upon conversion including partial cash settlement. This update applies to convertible debt instruments that, by their stated terms, may be settled in cash (or other assets) upon conversion, including partial cash settlement, unless        the embedded conversion option is required to be separately accounted for as a derivative under FASB ASC 815, “Derivatives and Hedging”. Additionally, this update specifies that issuers of such instruments should separately account for the liability and equity components in a manner that will reflect the entity’s nonconvertible debt borrowing 

F-14

----

**KEYON COMMUNICATIONS HOLDINGS, INC.        AND SUBSIDIARIES**

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

rate when interest cost recognized in subsequent periods. The update is effective for financial statements issued for fiscal years beginning after December 15, 2008, and interim periods within those fiscal years. The Company does not currently have any debt instruments for which this update would apply. This update was adopted in January 2009 without significant financial impact. 

          In September 2008, the FASB issued exposure drafts that eliminate qualifying special purpose entities from the guidance of SFAS No. 140 (ASC Topic 860), “Accounting for Transfers and Servicing of Financial Assets and Extinguishments of Liabilities,” and FASB Interpretation 46 (ASC Topic 810) (revised December 2003), “Consolidation of Variable Interest Entities an        interpretation of ARB No. 51 (ASC Topic 810),” as well as other modifications. While the proposed revised pronouncements have not been finalized and the proposals are subject to further public comment, the Company anticipates the changes will not have a significant impact on the Company’s financial statements. The changes would be effective March 1, 2010, on a prospective basis. 

          In April 2009, the FASB issued an update to FASB ASC 805, “Business Combinations”, that clarifies and amends FASB ASC 805, as it applies to all assets acquired and liabilities assumed in a business combination that arise from contingencies. This update addresses initial recognition and measurement issues, subsequent measurement and accounting, and disclosures regarding these assets        and liabilities arising from contingencies in a business combination. The Company adopted this Statement in the second quarter of 2009 without significant impact to the financial statements. 

          In April 2009, the FASB issued FSP FAS 157-4, “Determining Fair Value When the Volume and Level of Activity for the Asset or Liability Have Significantly Decreased and Identifying Transactions That Are Not Orderly” (“FSP FAS 157-4;”), to address challenges in estimating fair value when the volume and level of activity for an asset or liability have significantly        decreased. This FSP emphasizes that even if there has been a significant decrease in the volume and level of activity for the asset or liability and regardless of the valuation technique(s) used, the objective of a fair value measurement remains the same. Fair value is the price that would be received to sell an asset or paid to transfer a liability in an orderly transaction (that is, not a forced liquidation or distressed sale) between market participants at the measurement date under        current market conditions. This FSP is effective for interim and annual reporting periods ending after June 15, 2009. The Company is currently evaluating FSP FAS 157-4 to determine its impact on its future consolidated financial position, results of operations, or cash flows. 

          In June 2009, the FASB issued SFAS No. 166, “Accounting for Transfers of Financial Assets – an amendment of FASB Statement No. 140”. SFAS No. 166 amends SFAS No. 140, “Accounting for Transfers and Servicing of Financial Assets and Extinguishments of Liabilities” by eliminating the concept of special-purpose entity, requiring the reporting entity to provide more        information about sales of securitized financial assets and similar 

F-15

----

**KEYON COMMUNICATIONS HOLDINGS, INC.        AND SUBSIDIARIES**

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

transactions, particularly if the seller retains some risk to the assets, changes the requirements for the de-recognition of financial assets, and provides for the sellers of the assets to make additional disclosures. This Statement shall be effective as of the Company’s first interim reporting period that begins after November 15, 2009. Earlier application is prohibited. The Company does not anticipate any significant financial impact from        adoption of SFAS No. 166. 

          In December 2009, the FASB issued Accounting Standards Update 2009-16, Transfers and Servicing (Topic 860): Accounting for Transfers of Financial Assets. This Accounting Standards Update amends the FASB Accounting Standards Codification for Statement 166. (See FAS 166 effective date below) 

          In June 2009, the FASB issued SFAS No. 167, “Amendments to FASB Interpretation No. 46(R)”. SFAS No. 167 addresses the effect on FASB Interpretation 46(R), “Consolidation of Variable Interest Entities” of the elimination of the qualifying special-purpose entity concept of SFAS No. 166, “Accounting for Transfers of Financial Assets”. SFAS No. 167 also amends        the accounting and disclosure requirements of FASB Interpretation 46(R) to enhance the timeliness and usefulness of information about an enterprise’s involvement in a variable interest entity. This Statement shall be effective as of the Company’s first interim reporting period that begins after November 15, 2009. Earlier application is prohibited. The Company does not anticipate any significant financial impact from adoption of SFAS No. 167. 

          In June 2009, the Securities and Exchange Commission’s Office of the Chief Accountant and Division of Corporation Finance announced the release of Staff Accounting Bulletin (SAB) No. 112. This staff accounting bulletin amends or rescinds portions of the interpretive guidance included in the Staff Accounting Bulletin Series in order to make the relevant interpretive guidance consistent        with current authoritative accounting and auditing guidance and Securities and Exchange Commission rules and regulations. Specifically, the staff is updating the Series in order to bring existing guidance into conformity with recent pronouncements by the Financial Accounting Standards Board, namely, Statement of Financial Accounting Standards No. 141 (revised 2007) (ASC Topic 805), Business Combinations, and Statement of Financial Accounting Standards No. 160 (ASC Topic 810),        Non-controlling Interests in Consolidated Financial Statements. The statements in staff accounting bulletins are not rules or interpretations of the Commission, nor are they published as bearing the Commission’s official approval. They represent interpretations and practices followed by the Division of Corporation Finance and the Office of the Chief Accountant in administering the disclosure requirements of the Federal securities laws. 

          On June 30, 2009, the FASB issued Accounting Standard Update (ASU) No. 2009-01 (Topic 105) – Generally Accepted Accounting Principles – amendments based on – Statement of Financial Accounting Standards No. 168 – The FASB Accounting and Standards Codification and the Hierarchy of Generally Accepted Accounting Principles. Beginning with 

F-16

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**KEYON COMMUNICATIONS HOLDINGS, INC.        AND SUBSIDIARIES**

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

this Statement the FASB will no longer issue new standards in the form of Statements, FASB Staff Positions, or Emerging Issues Task Force Abstracts. Instead, it will issue Accounting Standard Updates. This ASU includes FASB Statement No. 168 in its entirety. While ASU’s will not be considered authoritative in their own right, they will serve to update the Codification, provide the bases for conclusions and changes in the Codification, and provide        background information about the guidance. The Codification modifies the GAAP hierarchy to include only two levels of GAAP: authoritative and non-authoritative. ASU No. 2009-01 is effective for financial statements issued for the interim and annual periods ending after September 15, 2009, and the Company does not expect any significant financial impact upon adoption. 

          On July 1, 2009, the FASB officially launched the FASB ASC 105 — *Generally Accepted Accounting Principles*, which established the FASB Accounting Standards Codification (“the Codification”), as the single official source of authoritative, nongovernmental, U.S. GAAP, in addition to guidance issued by the Securities and Exchange Commission. The Codification is designed to        simplify U.S. GAAP into a single, topically ordered structure. All guidance contained in the Codification carries an equal level of authority. The Codification is effective for interim and annual periods ending after September 15, 2009. Accordingly, the Company refers to the Codification in respect of the appropriate accounting standards throughout this document as “FASB ASC”. Implementation of the Codification did not have any impact on the Company’s consolidated        financial statements. 

          In August 2009, the FASB issued ASU No. 2009-05 – Fair Value Measurements and Disclosures (Topic 820) – Measuring Liabilities at Fair Value. This ASU clarifies the fair market value measurement of liabilities. In circumstances where a quoted price in an active market for the identical liability is not available, a reporting entity is required to measure fair value using one or more        of the following techniques: a technique that uses quoted price of the identical or a similar liability or liabilities when traded as an asset or assets, or another valuation technique that is consistent with the principles of Topic 820 such as an income or market approach. ASU No. 2009-05 was effective upon issuance and it did not result in any significant financial impact on the Company upon adoption. 

          In September 2009, the FASB issued ASU No. 2009-12 – Fair Value Measurements and Disclosures (Topic 820) – Investments in Certain Entities That Calculate Net Asset Value per Share (or its equivalent). This ASU permits use of a practical expedient, with appropriate disclosures, when measuring the fair value of an alternative investment that does not have a readily determinable fair        value. ASU No. 2009-12 is effective for interim and annual periods ending after December 15, 2009, with early application permitted. Since the Company does not currently have any such investments, it does not anticipate any impact on its financial statements upon adoption. 

          In February 2010, the FASB issued ASU No. 2010-09 regarding subsequent events and amendments to certain recognition and disclosure requirements. Under this ASU, a 

F-17

----

**KEYON COMMUNICATIONS HOLDINGS, INC.        AND SUBSIDIARIES**

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

public company that is a SEC filer, as defined, is not required to disclose the date through which subsequent events have been evaluated. This ASU is effective upon the issuance of this ASU. The adoption of this ASU did not have a material impact on our consolidated financial statements. 

**Note 3 – Equipment**

          Equipment at December 31, 2009 and at December 31, 2008, consisted of the following: 

|                                |   |           |       |           |   |       |   |
|-------------------------------------|--------|----------------|------------|----------------|--------|------------|--------|
|                                |   | **12/31/2009** |       | **12/31/2008** |   |
|                                |   |           |       |           |   |
| Subscriber equipment                |   | $              | 6,206,078  |           | $      | 6,051,100  |   |
| Fixed wireless tower site equipment |   |           | 2,816,295  |           |   | 2,656,229  |   |
| Software and consulting costs       |   |           | 594,170    |           |   | 611,649    |   |
| Computer and office equipment       |   |           | 459,089    |           |   | 418,030    |   |
| Vehicles                            |   |           | 242,574    |           |   | 241,106    |   |
| Leasehold improvements              |   |           | 312,100    |           |   | 312,100    |   |
|                                |   |                |            |                |        |            |        |
|                                |   |           | 10,630,306 |           |   | 10,290,214 |   |
| Less: accumulated depreciation      |   |           | (9,015,852 | )              |   | (6,997,969 | )      |
|                                |   |                |            |                |        |            |        |
|                                |   |           |       |           |   |       |   |
| Fixed assets - net                  |   | $              | 1,614,454  |           | $      | 3,292,245  |   |
|                                |   |                |            |                |        |            |        |

          Depreciation for the company is recorded on a straight-line basis. Depreciation expense for the year ended December 31, 2009 and 2008 was $2,021,055 and $2,342,661 respectively. 

**Note 4 – Intangible Assets**

          We completed the annual testing of goodwill for impairment as of December 31, 2009, the end of our fourth fiscal quarter, concluding that the goodwill for two of our business units was impaired. As a result, we determined the fair value of the goodwill for the Pocatello and Speednet reporting units were below their carrying values and needed to be adjusted to $165,016 and $1,176,800,        respectively. The fair value of the goodwill for the Pocatello unit was impaired as of December 31, 2008, by $97,635 to a carrying value of $250,922 as of December 31, 2008, from the original book value of $348,557. 

          The following table summarizes the changes in goodwill related to the subscriber bases obtained in the Pocatello and Speednet acquisitions: 

F-18

----

**KEYON COMMUNICATIONS HOLDINGS, INC.        AND SUBSIDIARIES**

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

|                               |   |          |    |         |   |      |   |   |      |   |
|------------------------------------|--------|---------------|---------|--------------|--------|-----------|--------|--------|-----------|--------|
| **Goodwill Details**               |   | **Pocatello** |    | **Speednet** |   | **Total** |   |
|                                    |   |               |    |              |   |           |   |
| Goodwill balance December 31, 2008 |   | $             | 250,922 |         | $      | 1,390,216 |   | $      | 1,641,138 |   |
| Impairment charge                  |   |          | (85,906 | )            |   | (213,416  | )      |   | (299,322  | )      |
|                               |   |               |         |              |        |           |        |        |           |        |
| Goodwill balance December 31,2009  |   | $             | 165,016 |         | $      | 1,176,800 |   | $      | 1,341,816 |   |
|                               |   |               |         |              |        |           |        |        |           |        |

          Intangible assets at December 31, 2009 and at December 31, 2008, consisted of the following: 

|                           |   |           |       |           |   |      |   |
|--------------------------------|--------|----------------|------------|----------------|--------|-----------|--------|
|                           |   | **12/31/2009** |       | **12/31/2008** |   |
|                           |   |           |       |           |   |      |   |
| Goodwill                       |   | $              | 1,341,816  |           | $      | 1,641,138 |   |
| Subscriber base                |   |           | 1,313,415  |           |   | 1,290,887 |   |
| Trademark                      |   |           | 16,667     |           |   | 16,667    |   |
|                           |   |                |            |           |        |           |   |
|                           |   |           | 2,671,898  |           |   | 2,948,692 |   |
| Less: accumulated amortization |   |           | (1,130,746 | )              |   | (728,144  | )      |
|                           |   |                |            |           |        |           |   |
|                           |   |           |       |           |   |      |   |
| Intangible assets - net        |   | $              | 1,541,152  |           | $      | 2,220,548 |   |
|                           |   |                |            |           |        |           |   |

          Amortization expense is recorded for the customer list asset on a straight-line basis. Amortization expense for the year ended December 31, 2009 and 2008 was $402,602 and $402,044, respectively. 

          Estimated amortization expense for future fiscal years is as follows: 

|       |   |   |    |   |
|------------|--------|--------|---------|--------|
| 2010       |   | $      | 117,002 |   |
| 2011       |   |   | 28,698  |   |
| 2012       |   |   | 28,140  |   |
| 2013       |   |   | 8,829   |   |
| 2014       |   |   | — |   |
| Thereafter |   |   | — |   |
|       |   |        |         |   |
|       |   | $      | 182,669 |   |
|       |   |        |         |   |

**Note 5 – Line of Credit and Other Debt**

          The Company executed a loan agreement with Sun West Bank on February 8, 2008, totaling $4.5 million (the “Loan”). On June 18, 2009, the Company entered into a Change in Terms Agreement with Sun West Bank, whereby the Company made a principal reduction payment of $450,000. Pursuant to the Change in Terms Agreement, the payment reduced the 

F-19

----

**KEYON COMMUNICATIONS HOLDINGS, INC.        AND SUBSIDIARIES**

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

Loan to $4.05 million with Sun West Bank and extended its maturity until June 4, 2015. Payments for the first year are interest only at 7.25% fixed interest rate. Beginning in June, 2010 through May, 2015, the payment is $48,604 per month. A final payment of $2,483,129 is due at maturity. A shareholder in the Company is also a minority shareholder and Board member of the lending institution. As a member of the bank’s Board and Loan Committee, the        shareholder abstained from voting on this transaction as required under the appropriate banking regulations. The Loan is guaranteed by three shareholders of the Company, one being an officer of the Company. The interest is payable monthly. 

          The Company holds a line of credit loan for $100,000 with Sun West Bank. The line of credit agreement was entered into on December 18, 2006. The line is a variable rate revolving line of credit loan for $100,000 due upon demand. The interest rate is the base rate plus an added margin rate of 3%. The base rate for floating commercial loans is published by Sun West Bank and varies weekly. The        variable interest rate as of December 31, 2009 was 7.75%. The interest on the line of credit is paid monthly. The line of credit is guaranteed by a shareholder and officer of the Company. 

          Prior to August 31, 2009, the Company had a series of subordinated secured notes outstanding of $1,281,878 (“Sub Notes”). The Sub Notes, whose terms were approved by the independent members of the Company’s board, were issued to certain of its present investors and certain members of senior management to fund working capital obligations and to also allow the Company time to        seek longer term financing and/or to pursue other strategic options. These notes bear interest at 17% per annum (compounded monthly) and three percent of the amount of the subordinated secured notes was retained by the investors in the form of a closing payment. In the original terms, the Sub Notes were due to mature upon the earlier of January 29, 2009 or upon a change of control, among other things. These Sub Notes were amended to extend the maturity date until August 31, 2009 and        include a conversion into shares of the Company’s common stock at the option of the holder. On or before August 31, 2009, all holders elected to convert their Sub Notes to stock and the Company issued 2,376,090 shares to the holders. 

          A second set of senior secured subordinated notes were issued beginning in March 2009 (“Second Sub Notes”). An aggregate amount of $300,000 was issued to certain of the Company’s existing shareholders to fund current working capital obligations. These Second Sub Notes bear interest at 17% per annum (compounded monthly) and matured on September 30, 2009. The notes were        convertible at any time prior to maturity into shares of the Company’s common stock at a price per share of $0.25 at the option of the holder. These notes include detachable warrants at 50% of the face value of the note exercisable at $0.50 per warrant. On or before September 29, 2009, all holders elected to convert their Sub Notes to stock and the Company issued 1,316,979 shares to the holders. 

The Company had the following notes payable at December 31, 2009 and December 31, 2008: 

F-20

----

**KEYON COMMUNICATIONS HOLDINGS, INC.        AND SUBSIDIARIES**

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

|                                                                                                                                                                  |   |           |     |           |   |     |   |
|-----------------------------------------------------------------------------------------------------------------------------------------------------------------------|--------|----------------|----------|----------------|--------|----------|--------|
|                                                                                                                                                                  |   |           |     |           |   |     |   |
| **Notes payable**                                                                                                                                                     |   | **12/31/2009** |     | **12/31/2008** |   |
|                                                                                                                                                                  |   |           |     |           |   |     |   |
|      A series of 17.0% subordinated secured notes payable maturing on August 31, 2009                                                        |   | $              | —  |           | $      | 414,866  |   |
|      One 5.0% notes payable matured from October 9, 2008, with interest payable at maturity; converted to secured subordinated note 7/9/2009 |   |           | —  |           |   | 20,000   |   |
|                                                                                                                                                                  |   |           |     |           |   |     |   |
|      An unsecured, non-interest bearing notes payable maturing June 2009 from the conversion of accounts payable.                            |   |           | —  |           |   | 50,000   |   |
|                                                                                                                                                                  |   |           |     |           |   |     |   |
|      An unsecured, non-interest bearing notes payable maturing November 2009 resulting from the conversion of accounts payable.              |   |           | —  |           |   | 11,223   |   |
|      Note and loan payable for professional services non-interest bearing                                                                    |   |           | 121,737  |           |   | 121,737  |   |
|      7.8% note payable to American National Bank, payable monthly for 48 months for the purchase of vans                                     |   |           | 30,181   |           |   | 50,845   |   |
|      9.1% note payable to GMAC, payable monthly for 60 months for the purchase of two trucks                                                 |   |           | 6,374    |           |   | 16,806   |   |
|                                                                                                                                                                  |   |                |          |           |        |          |   |
|                                                                                                                                                                  |   |           | 158,292  |           |   | 685,477  |   |
| Current portion                                                                                                                                                       |   |           | (150,450 | )              |   | (648,610 | )      |
|                                                                                                                                                                  |   |                |          |           |        |          |   |
| Long term portion                                                                                                                                                     |   | $              | 7,842    |           | $      | 36,867   |   |
|                                                                                                                                                                  |   |                |          |           |        |          |   |

          Future minimum payments on the notes payable, which are stated at their principal amounts with initial or remaining terms of one year or more consist of the following as of December 31, 2009: 

|   |   |   |    |   |
|--------|--------|--------|---------|--------|
| 2010   |   | $      | 150,450 |   |
| 2011   |   |   | 7,842   |   |
| 2012   |   |   | — |   |
| 2013   |   |   | — |   |
| 2014   |   |   | — |   |
|   |   |        |         |   |
|   |   | $      | 158,292 |   |
|   |   |        |         |   |

**Note 6 - Operating and Capital Leases**

          The Company and its related entities lease equipment from certain parties under various capital leases expiring in 2008 through 2013. Pursuant to those capital lease financing arrangements, the Company has drawn down an additional $136,647 in the year ended December 31, 2009. On September 22, 2008, the Company entered into an Amendment of a certain Master Equipment Lease Agreement with Data        Sales Co., Inc. (the “Lender”) (the “Amendment”), pursuant to which the Lender agreed to restructure certain lease schedules, 

F-21

----

**KEYON COMMUNICATIONS HOLDINGS, INC.        AND SUBSIDIARIES**

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

payment and purchase terms arising under that certain Master Equipment Lease Agreement executed by the Company and the Lender on December 13, 2007 (the “Master Lease”). The Lender agreed to suspend all rental payments due and owing by the Company for the months of September, October and November 2008. The Lender also has agreed to extend and restructure the payments due and owing under the Master Lease such that in December 2008, the Company        will begin to make reduced payments for the first of 24 scheduled monthly payments. Restricted stock shares of 333,333 valued at $200,000 were issued as part of the amended agreement with the Lender. On March 12, 2009, the Company entered into an Amendment of a certain Master Equipment Lease Agreement (the “Amendment”) one of the Company’s leasing lenders (the “Lender”), pursuant to which the Lender agreed to restructure certain lease schedules, payment and        purchase terms arising under that certain Master Equipment Lease Agreement executed by the Company and the Lender on November 9, 2005 (the “Master Lease”). The Lender agreed to suspend certain rental payments due and owing by the Company during the first quarter of 2009. Beginning in April 2009, the Company began to make the restructured payments with the final payment in March 2011. 

          In addition, the related entities lease tower and roof-top space under operating leases with terms that are typically for 5 years and contain automatic renewals for 2 or 3 additional 5 year terms. Finally, several also have various operating leases for office space, equipment, and vehicles that generally are for 3 to 5 year terms. The total amount of fixed assets capitalized through leasing is        $3,625,706 as of December 31, 2009. 

          Future minimum lease payments under the capital leases, which are stated at their principal amounts with initial or remaining terms of one year or more consist of the following as of December 31, 2009: 

|                                |   |   |      |   |
|-------------------------------------|--------|--------|-----------|--------|
| 2010                                |   | $      | 845,202   |   |
| 2011                                |   |   | 570,556   |   |
| 2012                                |   |   | 21,489    |   |
| 2013                                |   |   | 2,423     |   |
| 2014                                |   |   | —   |   |
|                                |   |        |           |   |
| Total mimimum lease payments        |   |   | 1,439,670 |   |
| Less amounts representing interest  |   |   | (293,153  | )      |
|                                |   |        |           |   |
|                                |   |   | 1,146,516 |   |
|                                |   |   |      |   |
| Less current portion                |   |   | (643,039  | )      |
|                                |   |        |           |   |
|                                |   |   |      |   |
| Long term capital lease obligations |   | $      | 503,477   |   |
|                                |   |        |           |   |

F-22

----

**KEYON COMMUNICATIONS HOLDINGS, INC.        AND SUBSIDIARIES**

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

          Future minimum lease payments under the operating leases with initial or remaining terms of one year or more consist of the following at December 31, 2009: 

|       |   |   |      |   |
|------------|--------|--------|-----------|--------|
| 2010       |   | $      | 833,829   |   |
| 2011       |   |   | 669,185   |   |
| 2012       |   |   | 347,504   |   |
| 2013       |   |   | 143,393   |   |
| 2014       |   |   | 36,814    |   |
| Thereafter |   |   | 13,808    |   |
|       |   |        |           |   |
|       |   |   |      |   |
| Total      |   | $      | 2,044,533 |   |
|       |   |        |           |   |

          The total rental expense included in operating expenses for operating leases included above is $1,329,602 and $1,284,715 for the year ended December 31, 2009 and December 31, 2008, respectively. 

**Note 7 - Related Party Transactions**

          Related parties that entered into transactions with the Company include officers and stockholders. At December 31, 2008, the following Company officers and directors held the principal amount of subordinated secured notes as related parties: Jerome Snyder - $103,093; Jonathan Snyder - $335,052 and Jason Lazar - $128,866. In aggregate, the amount of accrued interest payable to these officers        totaled $43,139 as of December 31, 2008. In the original terms, the Sub Notes were due to mature upon the earlier of January 29, 2009 or upon a change of control, among other things. These Sub Notes were amended to extend the maturity date until August 31, 2009 and include a conversion into shares of the Company’s common stock at the option of the holder. On or before August 31, 2009, all holders elected to convert their Sub Notes to stock and the Company issued 2,376,090 shares        to the holders. 

          Transactions with related parties as of and for the year ended December 31, 2009 and for the year ended December 31, 2008: 

|                                                                 |   |           |      |           |   |      |   |
|----------------------------------------------------------------------|--------|----------------|-----------|----------------|--------|-----------|--------|
|                                                                 |   | **12/31/2009** |      | **12/31/2008** |   |
|                                                                 |   |           |      |           |   |
| Term loan payable-curent - related party (see also Note 5)           |   | $              | 147,016   |           | $      | 4,500,000 |   |
| Term loan payable-long term - related party (see also Note 5)        |   |           | 3,902,984 |           |   | —   |   |
| Current portion of notes payable - related parties (see also Note 5) |   |           | —   |           |   | 567,011   |   |
| Accounts payable and accrued expenses - related parties              |   |           | —   |           |   | 43,139    |   |
| Revolving line of credit - related party (see also Note 5)           |   |           | 100,000   |           |   | 100,000   |   |
|                                                                 |   |                |           |           |        |           |   |
|                                                                 |   | $              | 4,150,000 |           | $      | 5,210,150 |   |
|                                                                 |   |                |           |           |        |           |   |

F-23

----

**KEYON COMMUNICATIONS HOLDINGS, INC.        AND SUBSIDIARIES**

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

**Note 8 - Business Combinations**

          On November 12, 2009, KeyOn Communications Holdings, Inc. purchased the assets of SkyWi, Inc., pursuant to an Asset Purchase Agreement, from Data Sales, Inc., including subscriber contracts, accounts, and fixed assets for 33,388 shares of common stock. The value of the stock on the date of issuance was $1.99 per share for a total purchase value of $66,442. The purchase valuation breakdown is as        follows: 

|                      |   |   |    |   |
|---------------------------|--------|--------|---------|--------|
| Subscriber Base           |   | $      | 22,528  |   |
| Property and equipment    |   |   | 65,600  |   |
| Less: Gain on acquisition |   |   | (21,686 | )      |
|                      |   |        |         |   |
| Total consideration       |   | $      | 66,442  |   |
|                      |   |        |         |   |

**Note 9 - Capital Stock, Stock Based Compensation, and Warrants**

          The Company accounts for all compensation related to stock, options or warrants using a fair value based method whereby compensation cost is measured at the grant date based on the value of the award and is recognized over the service period, which is usually the vesting period. The Company uses the Black-Scholes pricing model to calculate the fair value of options and warrants issued to both        employees and non-employees. Stock issued for compensation is valued using the market price of the stock on the date of the related agreement. 

***Common Shareholders’ Equity***

          On August 9, 2007, KeyOn Communications, Inc. became a publicly-traded company by virtue of a merger with a publicly-traded company, Grant Enterprises, Inc. (“Grant”), a holding company with no operating business (the “Merger”). Upon closing of the Merger transaction, a wholly owned subsidiary of Grant merged with and into KeyOn, and KeyOn, as the surviving corporation,        became a wholly-owned subsidiary of Grant. All pre-merger assets and liabilities of Grant were split off from Grant leaving KeyOn’s business as the surviving operations of Grant. After accounting for the Merger and the equity financing, KeyOn Holdings had 8,101,770 shares outstanding. KeyOn later changed the name of Grant to KeyOn Communications Holdings, Inc. (“KeyOn Holdings”) and KeyOn and its subsidiaries became wholly owned subsidiaries of KeyOn Holdings. KeyOn        Holdings’ shares are listed on the OTC Bulletin Board under the symbol “KEYO”. 

          The Company is authorized to issue up to 95,000,000 shares of common stock with a par value of $.001 for each share. 20,686,056 and 8,771,350 shares were issued and outstanding as of December 31, 2009 and December 31, 2008, respectively. 

F-24

----

**KEYON COMMUNICATIONS HOLDINGS, INC.        AND SUBSIDIARIES**

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

          During the year ended December 31, 2009, 11,914,706 shares of common stock were issued. Stock was issued during the year ended December 31, 2009 as follows: 5,677,984 shares of stock priced at $3,088,951 pursuant to subscription agreements, 3,693,069 were issued for secured subordinated notes and accrued interest totaling $1,517,286, 80,000 shares of stock were issued as part of restricted        stock agreement, 2,272,778 shares of stock valued at $327,945 were issued as payment for contractual agreements for professional services, 100,000 shares were issued for warrants exercised totaling $50,000, 57,487 were issued for common stock payable as of December 31, 2008, and 33,388 were issued for the purchase of the SkyWi assets. 

          During the year ended December 31, 2008, 522,244 shares of common stock were issued. Stock was issued during the year ended December 31, 2008 as follows: 333,333 shares of stock valued at $200,000 were issued as part of the amended lease agreement with Data Sales, Inc. 20,000 shares of stock were issued as part of the restricted stock agreement with Sid Ganju. 166,875 shares of stock valued at        $69,414 were issued as payment for prior period professional services rendered. Additionally, 2,036 shares were issued as part of a contractual agreement for professional services rendered. 

F-25

----

**KEYON COMMUNICATIONS HOLDINGS, INC.        AND SUBSIDIARIES**

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

|                                                                           |   |                                       |       |   |
|--------------------------------------------------------------------------------|--------|--------------------------------------------|------------|--------|
|                                                                           |   | **Common Stock                    Shares** |       |
|                                                                           |   |                                            |       |
| **BALANCE, January 1, 2008**                                                   |   |                                       | 8,249,106  |   |
|                                                                           |   |                                       |       |   |
| Common Stock Issued for Restricted Stock Options, September 8, 2008            |   |                                       | 20,000     |   |
| Common Stock Issued for Debt Issuance Costs, September 24, 2008                |   |                                       | 333,333    |   |
| Common Stock Issued for Professional Services, Year Ended December 31, 2008    |   |                                       | 168,911    |   |
|                                                                           |   |                                            |            |   |
|                                                                           |   |                                       |       |   |
| **BALANCE, January 1, 2009**                                                   |   |                                       | 8,771,350  |   |
|                                                                           |   |                                       |       |   |
| Stock Issued for Stock Option Payable, January 5, 2009                         |   |                                       | 57,487     |   |
| Common Stock Issued - Subscription sale, @ $.19/share                          |   |                                       | 731,317    |   |
| Common Stock Issued - Subscription sale, @ $.25/share                          |   |                                       | 600,000    |   |
| Common Stock Issued - Subscription sale, @ $.50/share                          |   |                                       | 3,720,000  |   |
| Common Stock Issued - Secured Subordinated Note Conversions                    |   |                                       | 3,693,069  |   |
| Warrant Exercised @ $0.50/share                                                |   |                                       | 100,000    |   |
| Common Stock Issued - Subscription sale, @ $1.50/share                         |   |                                       | 626,667    |   |
| Common Stock Exchanged for Professional Services, Year Ended December 31, 2009 |   |                                       | 2,272,778  |   |
| Common Stock Issued for Restricted Stock Options, December, 2009               |   |                                       | 80,000     |   |
| Acquisition of SkyWi, December 4, 2009                                         |   |                                       | 33,388     |   |
|                                                                           |   |                                            |            |   |
|                                                                           |   |                                       |       |   |
| **BALANCE, December 31, 2009**                                                 |   |                                       | 20,686,056 |   |
|                                                                           |   |                                            |            |   |

***Preferred Shareholders’ Equity***

          The Company is authorized to issue up to 5,000,000 shares of Series A Convertible Preferred Stock (“preferred stock”) with a par value of $0.001 for each share. No shares of preferred stock were issued and outstanding as of December 31, 2009 and 2008, respectively. 

***Warrants***

          The Company has issued common stock warrants with a warrant strike price ranging from $0.75 to $8.00 for each share of common stock and an average price of $2.68 for each share of common stock. These warrants have expiration dates of three to seven years from their date of issue. 

          As of December 31, 2009, a total of 3,936,291 warrants to purchase shares of our common stock remain outstanding and are currently exercisable as follows: 

F-26

----

**KEYON COMMUNICATIONS HOLDINGS, INC.        AND SUBSIDIARIES**

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

|                   |   |                                              |   |                |       |
|------------------------|--------|---------------------------------------------------|--------|---------------------|------------|
| **Number of Warrants** |   | **Exercise Price ($                    / share)** |   | **Expiration Date** |
|                        |   |                                                   |   |                     |
|                   |
| 3,295                  |   | $                                                 | 3.31   |                | 1/17/2010  |
| 109,354                |   | $                                                 | 3.81   |                | 1/31/2010  |
| 3,567                  |   | $                                                 | 3.31   |                | 4/16/2010  |
| 2,992                  |   | $                                                 | 3.31   |                | 6/5/2010   |
| 13,146                 |   | $                                                 | 3.81   |                | 6/7/2010   |
| 6,166                  |   | $                                                 | 3.31   |                | 6/22/2010  |
| 4,745                  |   | $                                                 | 3.31   |                | 7/19/2010  |
| 281,875                |   | $                                                 | 6.70   |                | 8/9/2012   |
| 750,000                |   | $                                                 | 4.00   |                | 2/4/2013   |
| 250,000                |   | $                                                 | 6.00   |                | 2/4/2013   |
| 250,000                |   | $                                                 | 8.00   |                | 2/4/2013   |
| 200,000                |   | $                                                 | 0.50   |                | 5/11/2014  |
| 325,000                |   | $                                                 | 0.75   |                | 6/5/2014   |
| 400,000                |   | $                                                 | 0.75   |                | 7/13/2014  |
| 300,000                |   | $                                                 | 0.75   |                | 7/15/2014  |
| 100,000                |   | $                                                 | 0.75   |                | 8/1/2014   |
| 27,500                 |   | $                                                 | 0.75   |                | 8/5/2014   |
| 300,000                |   | $                                                 | 0.75   |                | 8/6/2014   |
| 100,000                |   | $                                                 | 0.75   |                | 8/7/2014   |
| 207,500                |   | $                                                 | 0.75   |                | 8/10/2014  |
| 100,000                |   | $                                                 | 0.75   |                | 8/16/2014  |
| 130,000                |   | $                                                 | 0.75   |                | 6/5/2014   |
| 6,000                  |   | $                                                 | 0.50   |                | 7/21/2014  |
| 28,650                 |   | $                                                 | 0.50   |                | 8/24/2014  |
| 32,000                 |   | $                                                 | 0.75   |                | 9/30/2014  |
| 4,501                  |   | $                                                 | 1.50   |                | 11/17/2014 |

          As of December 31, 2008, a total of 1,712,735 warrants to purchase shares of our common stock were outstanding and exercisable. A total of 2,361,151 warrants were issued during the year ended December 31, 2009. 1,860,000 were issued with stock purchases with an exercise price of $0.75. 300,000 were issued with secured subordinated notes with an exercise price of $0.50. 130,000 were issued with        an exercise price $0.75 with short term note agreements. 71,151 were issued with consulting agreements with the exercise price ranging from $0.50 to $1.50. 100,000 warrants were exercised at an exercise price of $0.50. 37,595 warrants expired unexercised and were forfeited during the year ended December 31, 2009. The amount capitalized for debt issuance costs during the year ended December 31, 2009 was $174,138. The amount expensed to interest expense for the amortization of the debt        issuance costs during the year ended December 31, 2009, was $246,228. 

F-27

----

**KEYON COMMUNICATIONS HOLDINGS, INC.        AND SUBSIDIARIES**

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

***Stock Option Plans***

          On August 9, 2007, our Board of Directors and stockholders adopted the 2007 Incentive Stock and Awards Plan (the “2007 Plan”). The purpose of the 2007 Plan is to provide an incentive to attract and retain directors, officers, consultants, advisors and employees whose services are considered valuable, to encourage a sense of proprietorship and to stimulate an active interest of such        persons into our development and financial success. Under the 2007 Plan, we are authorized to issue incentive stock options intended to qualify under Section 422 of the Code, non-qualified stock options, stock appreciation rights, performance shares, restricted stock and long term incentive awards. The 2007 Plan is administered by the Board of Directors. 

          Activity for stock options for the fiscal years ended December 31, 2009 and 2008 is as follows: 

|                       |   |                  |      |                         |   |                                |   |   |   |   |
|----------------------------|--------|-----------------------|-----------|------------------------------|--------|-------------------------------------|--------|--------|--------|--------|
|                       |   | **Number of Options** |      | **Range of Price Per Share** |   | **Weighted Average Exercise Price** |   |
|                            |   |                       |      |                              |   |                                     |   |
| Balance, December 31, 2007 |   |                  | 612,867   |                         |   | $2.48 - $8.16                       |   | $      | 3.07   |   |
| Granted                    |   |                  | 1,322,143 |                         |   | $0.09 - $3.00                       |   | $      | 0.66   |   |
| Exercised                  |   |                  | —   |                         |   | $0.00                               |   | $      | 0.00   |   |
| Forfeited                  |   |                  | (69,729   | )                            |   | $2.48 - $8.16                       |   | $      | 3.74   |   |
| Balance, December 31, 2008 |   |                  | 1,865,281 |                         |   | $2.48 - $5.00                       |   | $      | 1.32   |   |
| Granted                    |   |                  | 1,401,300 |                         |   | $0.25 - $2.35                       |   | $      | 0.38   |   |
| Exercised                  |   |                  | (57,487   | )                            |   | $0.25                               |   | $      | 0.25   |   |
| Cancelled                  |   |                  | (731,317  | )                            |   | $0.09                               |   | $      | 0.09   |   |
| Forfeited                  |   |                  | (37,777   | )                            |   | $2.48                               |   | $      | 2.48   |   |
| Balance, December 31, 2009 |   |                  | 2,440,000 |                         |   | $0.25 - $5.00                       |   | $      | 1.16   |   |

          As of December 31, 2009, 2,440,000 options are outstanding. As of January 1, 2009, 1,865,281 options were outstanding. For the year ended December 31, 2009, 1,401,300 options were granted, 57,487 were exercised, 731,317 were cancelled, and 37,777 were forfeited. The amount recorded for stock compensation expense for stock options for the year ended December 31, 2009 totaled $682.244.        Compensation expense recorded on stock options for the year ended December 31, 2009 totaled $595,119. The cancellation of options resulted in a reversal of $62,875 for stock compensation expense. Compensation expense recorded on restricted stock options for the year ended December 31, 2009, totaled $150,000. The range of strike price per outstanding option as of December 31, 2009, is $0.25 to $5.00 and the weighted average strike price is $1.16 per share. 

          As of December 31, 2008, 1,865,281 options were outstanding. As of January 1, 2008, 612,867 options were outstanding. For the year ended December 31, 2008, 1,322,143 options were granted, 69,729 were forfeited and none were exercised. Compensation expense recorded on stock options for the year ended December 31, 2008 totaled $1,145,327. Compensation expense recorded on restricted stock options for the year        ended December 31, 

F-28

----

**KEYON COMMUNICATIONS HOLDINGS, INC.        AND SUBSIDIARIES**

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

2008, totaled $150,000. The range of strike price per outstanding option as of December 31, 2008, is $0.09 to $5.00 and the weighted average strike price is $1.32 per share. 

**Note 10 - Subsequent Events**

**Issuance of Secured Convertible Promissory Note**

          On February 1, 2010,we entered into a Note Purchase Agreement (the “Note Purchase Agreement”) with an institutional investor (the “Buyer”). On February 5, 2010, pursuant to the Note Purchase Agreement, the Company issued the Buyer a secured convertible promissory note for the principal sum of $15,000,000 (the “Note”). The Note generally bears interest at the        rate of 8% per annum and matures on February 5, 2015 (the “Maturity Date”), which date may be accelerated at the option of the Buyer upon an event of default. 

          The Note is convertible into shares of Series Cal Cap Preferred Stock as well as common stock, at the option of Buyer, upon maturity or mandatorily in certain circumstances, as fully described in the Company’s Current Report on Form 8-K filed on February 5, 2010. The holders of the Note may elect to convert all or a portion of our indebtedness then outstanding under the Note into that        number of shares of Series Cal Cap Preferred Stock which is equal to the quotient obtained by dividing (a) the sum of (i) the then outstanding principal amount of the Note and (ii) any accrued but unpaid interest thereon elected by the Note holders to be so converted by (b) the lesser of (i) $0.75  and (ii) the average volume weighted average price of our common stock for the 40 trading days following March 3, 2010 (such lesser price, the “Note Conversion Price”).        Pursuant to the terms of the Note, if the Company was successful in any of its ARRA applications, the Note would have mandatorily converted into shares of Series Cal Cap Preferred Stock. The Company also entered into a Registration Rights Agreement (the “Registration Rights Agreement”), a Security Agreement (the “Security Agreement”) and various ancillary certificates, dated February 5, 2010. Pursuant to the Security Agreement between the Buyer and the Company,        the Company’s obligations under the Note are secured by a perfected security interest in all of the assets and properties of the Company, including the stock of its subsidiaries. 

**Acquisitions**

          On February 3, 2010, upon the satisfaction of certain closing conditions as described in the Affinity Asset Purchase Agreement (as described in the Current Report on Form 8-K filed on December 22, 2009), the Company completed the purchase of the assets and assumed certain liabilities from Affinity Wireless Solutions, LLC. At Closing, as consideration for these acquired assets, we issued 141,521        shares of common stock of the Company. 

          On April 1, 2010, upon the satisfaction of certain closing conditions as described in the RVT Asset Purchase Agreement, the Company completed the purchase of the assets and 

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**KEYON COMMUNICATIONS HOLDINGS, INC.        AND SUBSIDIARIES**

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

assumed certain liabilities from RideviewTel, LLC. At Closing, as partial consideration for these acquired assets, we issued 150,944 shares of common stock of the Company. The balance of the consideration will be issued prior to April 30, 2010. 

**Round One and Round Two ARRA Applications**

          On March 2, 2010, the Company was notified by the Rural Utilities Service that its applications under the Broadband Initiatives Program (“BIP”) of the American Recovery and Reinvestment Act of 2009 did not advance to an award. 

               On March 29, 2010, the Company submitted multiple applications under Round Two of the BIP. Pursuant to its applications, KeyOn is seeking approximately $360 million of federal grants and loans to bring 4G WiMAX to as many as 22 states and provide wireless broadband access to as many as 8.2 million people in rural America. 

**Warrants Exercised**

          On or about January 31, 2010, in connection with the modification of a certain series of warrant agreements (“January 31, 2007 Warrants”) and an exercise of the modified January 31, 2007 Warrants by their holders, the Company issued 98,774 restricted shares of its common stock at a price per share of $1.75, for an aggregate exercise price of $172,855. The modification of the January        31, 2007 Warrants were fully described on Current Report on Form 8-K filed on February 3, 2010. After the modification and exercise set forth above, there are no remaining warrants outstanding from the series of the January 31, 2007 Warrants. 

**Warrants Issued**

               On February 19, 2010, KeyOn Communications Holdings, Inc., a Delaware corporation (the “Company”), issued a series of warrants to purchase up to an aggregate of 150,000 shares of common stock, $.001 par value per share, of the Company at an exercise price of $1.50 per share (the “Warrants”). The Warrants, which are exercisable only upon the        occurrence of certain conditions set forth therein, were issued in connection with the Company’s receipt of a commitment to provide equipment financing to the Company, contingent upon the success of the Company’s pending applications for awards under the federal government’s Broadband Initiative Program of the American Recovery and Reinvestment Act of 2009. Unless previously exercised in full, the Warrants expire on February 3, 2015. 

               Also on February 19, 2010, the Company issued a warrant to purchase up to an aggregate of 150,000 shares of common stock, $.001 par value per share, of the Company, at an exercise price of $1.50 per share. This warrant was issued in connection with a consulting 

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**KEYON COMMUNICATIONS HOLDINGS, INC.        AND SUBSIDIARIES**

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS 

agreement, entered into by and between the Company and the warrant holder, whereby the holder agreed to perform strategic advisory services to the Company. Unless previously exercised in full, the warrant for 150,000 shares of common stock expires on August 19, 2010. 

          Finally, on February 19, 2010 the Company issued a warrant to purchase up to an aggregate of 100,000 shares of common stock, $.001 par value per share, of the Company, at an exercise price of $1.50 per share. This warrant was issued in connection with a consulting agreement, entered into by and between the Company and the warrant holder, whereby the holder agreed to perform strategic advisory        services to the Company. Unless previously exercised in full, the warrant for 100,000 shares of common stock expires on February 19, 2015. 

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