---

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|                                   
|-----------------------------------
|UNITED
 STATES                     
|SECURITIES
 AND EXCHANGE COMMISSION
|Washington, DC 20549               

FORM 10-Q

x QUARTERLY REPORT
PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the quarterly period ended June 30, 2008

o TRANSITION REPORT
PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the transition period from ________ to
____________

Commission file number 333-136487

|                                                      
|------------------------------------------------------
|KEYON COMMUNICATIONS HOLDINGS, INC.                   
|                                                      
|(Exact Name of Registrant as Specified in Its Charter)

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

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

|                                                                                   
|-----------------------------------------------------------------------------------
|(402) 998-4000                                                                     
|                                                                                   
|(Registrants Telephone Number, Including Area Code)                               
|                                                                                   
|                                                                                   
|(Former Name, Former Address and Former Fiscal Year, if Changed Since
 Last Report)

Indicate
by check mark whether the registrant (1) has filed all reports required to be
filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the
preceding 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 x No o

Indicate
by check mark whether the registrant is a large accelerated filer, an
accelerated filer, a non-accelerated filer, or a smaller reporting company. See
the definitions of large accelerated filer, accelerated filer and smaller
reporting company in Rule 12b-2 of the Exchange Act. (Check one):

|                                               |   |  |                            |  
|---------------------------------------------- | - |  | -------------------------- | -
|Large
 accelerated filer                       | o |  | Accelerated
 filer         | o
|                                              
|Non-accelerated
 filer                         | o |  | Smaller
 reporting company | x
|(Do not
 check if a smaller reporting company)

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

As of August
14, 2008, 8,251,142 shares of the issuers common stock, $0.001 par value per
share, were outstanding.

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KEYON COMMUNICATIONS HOLDINGS, INC.

Table of Contents

|         |  |                                                                                                                        |  |      | 
|-------- |  | ---------------------------------------------------------------------------------------------------------------------- |  | ---- | 
|         |  |                                                                                                                        |  | Page
|         |  |                                                                                                                        |  |     
|         |  |                                                                                                                        |  |     
|PART I   |  | FINANCIAL INFORMATION                                                                                                  |  |      | 
|         |  |                                                                                                                        |  |      | 
|Item 1.  |  | Financial Statements                                                                                                   |  | 1    | 
|         |  |                                                                                                                        |  |      | 
|         |  | Condensed Consolidated Balance Sheets as of June 30, 2008 (Unaudited)
 and December 31, 2007                           |  | 1    | 
|         |  |                                                                                                                        |  |      | 
|         |  | Condensed Consolidated Statements of Operations for the three and six months
 ended June 30, 2008 and 2007 (Unaudited) |  | 2    | 
|         |  |                                                                                                                        |  |      | 
|         |  | Condensed Consolidated Statements of Cash Flows for the three and six months
 ended June 30, 2008 and 2007 (Unaudited) |  | 3    | 
|         |  |                                                                                                                        |  |      | 
|         |  | Notes to Condensed Consolidated Financial Statements (Unaudited)                                                       |  | 4    | 
|         |  |                                                                                                                        |  |      | 
|Item 2.  |  | Managements Discussion and Analysis of Financial Condition and
 Results of Operations                                 |  | 17   | 
|         |  |                                                                                                                        |  |      | 
|Item 4T. |  | Controls and Procedures                                                                                                |  | 23   | 
|         |  |                                                                                                                        |  |      | 
|PART II  |  | OTHER INFORMATION                                                                                                      |  |      | 
|         |  |                                                                                                                        |  |      | 
|Item 6.  |  | Exhibits                                                                                                               |  | 23   | 

i

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PART I  FINANCIAL INFORMATION

|        |                      
|------- | ---------------------
|Item 1. | Financial Statements.



1

---



KEYON COMMUNICATIONS HOLDINGS INC. AND RELATED
ENTITIES

CONDENSED CONSOLIDATD BALANCE SHEETSAS
OF JUNE 30, 2008 (UNAUDITED) AND DECEMBER 31, 2007

|                                                                                                                                                                                                                                                                                                                                              |  |      |             |      |   |             |  
|--------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------- |  | ---- | ----------- | ---- | - | ----------- | -
|                                                                                                                                                                                                                                                                                                                                              |  | 2008 |             | 2007 |  
|                                                                                                                                                                                                                                                                                                                                             
|ASSETS                                                                                                                                                                                                                                                                                                                                        |  |      |             |      |   |             |  
|                                                                                                                                                                                                                                                                                                                                              |  |      |             |      |   |             |  
|CURRENT ASSETS:                                                                                                                                                                                                                                                                                                                               |  |      |             |      |   |             |  
|Cash                                                                                                                                                                                                                                                                                                                                          |  | $    | 21,549      |      | $ | 316,999     |  
|Accounts receivable, net of allowance for doubtful
accounts                                                                                                                                                                                                                                                                                   |  |      | 148,601     |      |   | 94,098      |  
|Inventories                                                                                                                                                                                                                                                                                                                                   |  |      | 235,738     |      |   | 300,610     |  
|Prepaid expenses and other current assets                                                                                                                                                                                                                                                                                                     |  |      | 66,764      |      |   | 75,259      |  
|                                                                                                                                                                                                                                                                                                                                              |  |      |             |      |   |             |  
|Total current assets                                                                                                                                                                                                                                                                                                                          |  |      | 472,652     |      |   | 786,966     |  
|                                                                                                                                                                                                                                                                                                                                              |  |      |             |      |   |             |  
|                                                                                                                                                                                                                                                                                                                                              |  |      |             |      |   |             |  
|PROPERTY AND EQUIPMENT - Net                                                                                                                                                                                                                                                                                                                  |  |      | 4,179,441   |      |   | 4,571,220   |  
|                                                                                                                                                                                                                                                                                                                                              |  |      |             |      |   |             |  
|OTHER ASSETS                                                                                                                                                                                                                                                                                                                                  |  |      |             |      |   |             |  
|Goodwill                                                                                                                                                                                                                                                                                                                                      |  |      | 1,738,773   |      |   | 1,738,773   |  
|Subscriber base -net                                                                                                                                                                                                                                                                                                                          |  |      | 763,765     |      |   | 964,787     |  
|Trademarks                                                                                                                                                                                                                                                                                                                                    |  |      | 16,667      |      |   | 16,667      |  
|Refundable deposits                                                                                                                                                                                                                                                                                                                           |  |      | 66,758      |      |   | 65,624      |  
|Debt issuance costs - net                                                                                                                                                                                                                                                                                                                     |  |      | 2,686       |      |   | 10,065      |  
|                                                                                                                                                                                                                                                                                                                                              |  |      |             |      |   |             |  
|Total other assets                                                                                                                                                                                                                                                                                                                            |  |      | 2,588,649   |      |   | 2,795,916   |  
|                                                                                                                                                                                                                                                                                                                                              |  |      |             |      |   |             |  
|                                                                                                                                                                                                                                                                                                                                              |  |      |             |      |   |             |  
|TOTAL ASSETS                                                                                                                                                                                                                                                                                                                                  |  | $    | 7,240,742   |      | $ | 8,154,102   |  
|                                                                                                                                                                                                                                                                                                                                              |  |      |             |      |   |             |  
|                                                                                                                                                                                                                                                                                                                                              |  |      |             |      |   |             |  
|LIABILITIES AND STOCKHOLDERS EQUITY (DEFICIT)                                                                                                                                                                                                                                                                                                |  |      |             |      |   |             |  
|                                                                                                                                                                                                                                                                                                                                              |  |      |             |      |   |             |  
|CURRENT LIABILITIES:                                                                                                                                                                                                                                                                                                                          |  |      |             |      |   |             |  
|Accounts payable and accrued expenses                                                                                                                                                                                                                                                                                                         |  | $    | 2,525,657   |      | $ | 2,389,356   |  
|Cash overdraft                                                                                                                                                                                                                                                                                                                                |  |      | 217,172     |      |   | 298,516     |  
|Revolving line of credit                                                                                                                                                                                                                                                                                                                      |  |      | 100,000     |      |   | 100,000     |  
|Term loan payable - related party                                                                                                                                                                                                                                                                                                             |  |      | 4,500,000   |      |   | 3,000,000   |  
|Current portion of notes payable                                                                                                                                                                                                                                                                                                              |  |      | 261,364     |      |   | 149,685     |  
|Current portion of deferred rent liability                                                                                                                                                                                                                                                                                                    |  |      | 57,642      |      |   | 57,007      |  
|Current portion of capital lease
obligations                                                                                                                                                                                                                                                                                                  |  |      | 889,908     |      |   | 742,562     |  
|Deferred revenue                                                                                                                                                                                                                                                                                                                              |  |      | 388,294     |      |   | 391,193     |  
|                                                                                                                                                                                                                                                                                                                                              |  |      |             |      |   |             |  
|Total current liabilities                                                                                                                                                                                                                                                                                                                     |  |      | 8,940,037   |      |   | 7,128,319   |  
|                                                                                                                                                                                                                                                                                                                                              |  |      |             |      |   |             |  
|                                                                                                                                                                                                                                                                                                                                              |  |      |             |      |   |             |  
|LONG-TERM LIABILITIES                                                                                                                                                                                                                                                                                                                         |  |      |             |      |   |             |  
|Deferred rent liability, less current
maturities                                                                                                                                                                                                                                                                                              |  |      | 171,200     |      |   | 200,320     |  
|Notes payable, less current maturities                                                                                                                                                                                                                                                                                                        |  |      | 56,613      |      |   | 68,525      |  
|Notes payable to shareholders, less current
maturities                                                                                                                                                                                                                                                                                        |  |      |            |      |   |            |  
|Capital lease obligations, less current
maturities                                                                                                                                                                                                                                                                                            |  |      | 714,549     |      |   | 667,639     |  
|                                                                                                                                                                                                                                                                                                                                              |  |      |             |      |   |             |  
|Total long term liabilities                                                                                                                                                                                                                                                                                                                   |  |      | 942,362     |      |   | 936,484     |  
|                                                                                                                                                                                                                                                                                                                                              |  |      |             |      |   |             |  
|                                                                                                                                                                                                                                                                                                                                              |  |      |             |      |   |             |  
|COMMITMENTS AND CONTINGENCIES                                                                                                                                                                                                                                                                                                                 |  |      |             |      |   |             |  
|                                                                                                                                                                                                                                                                                                                                              |  |      |             |      |   |             |  
|STOCKHOLDERS EQUITY (DEFICIT):                                                                                                                                                                                                                                                                                                               |  |      |             |      |   |             |  
|Series A preferred stock, $0.001 par value;
5,000,000 shares
 authorized 0 shares issued and outstanding at June 30, 2008 and at December
 31, 2007 Common stock, $0.001 par value; 95,000,000 shares authorized;
 8,251,142 shares issued and outstanding at June 30, 2008; 8,249,106 shares
 issued and outstanding as of December 31, 2007 |  |      | 8,251       |      |   | 8,249       |  
|Additional paid-in capital                                                                                                                                                                                                                                                                                                                    |  |      | 16,312,543  |      |   | 13,739,714  |  
|Accumulated deficit                                                                                                                                                                                                                                                                                                                           |  |      | (18,962,451 | )    |   | (13,658,664 | )
|                                                                                                                                                                                                                                                                                                                                              |  |      |             |      |   |             |  
|Total stockholders equity (deficit)                                                                                                                                                                                                                                                                                                          |  |      | (2,641,657  | )    |   | 89,299      |  
|                                                                                                                                                                                                                                                                                                                                              |  |      |             |      |   |             |  
|                                                                                                                                                                                                                                                                                                                                              |  |      |             |      |   |             |  
|TOTAL LIABILITIES AND STOCKHOLDERS EQUITY (DEFICIT)                                                                                                                                                                                                                                                                                          |  | $    | 7,240,742   |      | $ | 8,154,102   |  
|                                                                                                                                                                                                                                                                                                                                              |  |      |             |      |   |             |  

See notes to condensed
consolidated financial statements.

2

---



KEYON
COMMUNICATIONS HOLDINGS INC. AND RELATED ENTITIES

CONDENSED CONSOLIDATED
STATEMENTS OF OPERATIONS
FOR THE THREE AND SIX MONTHS ENDED JUNE 30, 2008 AND 2007
(Unaudited)

|                                                             |  |                           |            |                         |   |            |   |      |            |   |   |            |  
|------------------------------------------------------------ |  | ------------------------- | ---------- | ----------------------- | - | ---------- | - | ---- | ---------- | - | - | ---------- | -
|                                                             |  | Three Months EndedJune 30 |            | Six Months EndedJune 30 |  
|                                                             |  | 2008                      |            | 2007                    |   | 2008       |   | 2007 |           
|                                                             |  |                           |            |                         |   |            |   |      |            |   |   |            |  
|REVENUES:                                                    |  |                           |            |                         |   |            |   |      |            |   |   |            |  
|Service and installation revenue                             |  | $                         | 1,951,059  |                         | $ | 1,823,378  |   | $    | 3,932,017  |   | $ | 3,289,569  |  
|Support and other revenue                                    |  |                           | 35,229     |                         |   | 33,801     |   |      | 100,302    |   |   | 63,985     |  
|                                                             |  |                           |            |                         |   |            |   |      |            |   |   |            |  
|                                                             |  |                           |            |                         |   |            |   |      |            |   |   |            |  
|Total revenues                                               |  |                           | 1,986,288  |                         |   | 1,857,179  |   |      | 4,032,319  |   |   | 3,353,554  |  
|                                                             |  |                           |            |                         |   |            |   |      |            |   |   |            |  
|                                                             |  |                           |            |                         |   |            |   |      |            |   |   |            |  
|OPERATING COSTS AND EXPENSES:                                |  |                           |            |                         |   |            |   |      |            |   |   |            |  
|Payroll, bonuses and taxes                                   |  |                           | 1,037,908  |                         |   | 853,976    |   |      | 2,045,596  |   |   | 1,489,854  |  
|Depreciation and amortization                                |  |                           | 688,934    |                         |   | 658,937    |   |      | 1,399,314  |   |   | 1,194,291  |  
|Other general and administrative expense                     |  |                           | 310,697    |                         |   | 316,236    |   |      | 676,880    |   |   | 855,058    |  
|Network operating costs                                      |  |                           | 726,876    |                         |   | 634,328    |   |      | 1,470,274  |   |   | 988,832    |  
|Marketing and advertising                                    |  |                           | 136,746    |                         |   | 169,894    |   |      | 301,080    |   |   | 230,635    |  
|Installation expense                                         |  |                           | 121,535    |                         |   | 134,217    |   |      | 243,421    |   |   | 174,557    |  
|Professional fees                                            |  |                           | 56,304     |                         |   | 87,101     |   |      | 245,141    |   |   | 110,650    |  
|Stock based compensation                                     |  |                           | 1,438,446  |                         |   |           |   |      | 2,560,832  |   |   | 4,585      |  
|Cost of DISH inventory                                       |  |                           | 14,308     |                         |   |           |   |      | 31,113     |   |   |           |  
|                                                             |  |                           |            |                         |   |            |   |      |            |   |   |            |  
|                                                             |  |                           |            |                         |   |            |   |      |            |   |   |            |  
|Total operating costs and expenses                           |  |                           | 4,531,754  |                         |   | 2,854,689  |   |      | 8,973,651  |   |   | 5,048,462  |  
|                                                             |  |                           |            |                         |   |            |   |      |            |   |   |            |  
|                                                             |  |                           |            |                         |   |            |   |      |            |   |   |            |  
|LOSS FROM OPERATIONS                                         |  |                           | (2,545,466 | )                       |   | (997,510   | ) |      | (4,941,332 | ) |   | (1,694,908 | )
|                                                             |  |                           |            |                         |   |            |   |      |            |   |   |            |  
|OTHER INCOME (EXPENSE):                                      |  |                           |            |                         |   |            |   |      |            |   |   |            |  
|Interest expense - Net of interest income                    |  |                           | (186,688   | )                       |   | (133,061   | ) |      | (362,455   | ) |   | (292,899   | )
|Minority interest in income                                  |  |                           |           |                         |   |           |   |      |           |   |   |           |  
|                                                             |  |                           |            |                         |   |            |   |      |            |   |   |            |  
|Total other income (expense)                                 |  |                           | (186,688   | )                       |   | (133,061   | ) |      | (362,455   | ) |   | (292,899   | )
|                                                             |  |                           |            |                         |   |            |   |      |            |   |   |            |  
|                                                             |  |                           |            |                         |   |            |   |      |            |   |   |            |  
|PROVISION FOR INCOME TAXES                                   |  |                           |           |                         |   |           |   |      |           |   |   |           |  
|                                                             |  |                           |            |                         |   |            |   |      |            |   |   |            |  
|                                                             |  |                           |            |                         |   |            |   |      |            |   |   |            |  
|NET LOSS                                                     |  | $                         | (2,732,154 | )                       | $ | (1,130,571 | ) | $    | (5,303,787 | ) | $ | (1,987,807 | )
|                                                             |  |                           |            |                         |   |            |   |      |            |   |   |            |  
|                                                             |  |                           |            |                         |   |            |   |      |            |   |   |            |  
|Net loss per common sharebasic and diluted                  |  | $                         | (0.33      | )                       | $ | (0.21      | ) | $    | (0.64      | ) | $ | (0.38      | )
|                                                             |  |                           |            |                         |   |            |   |      |            |   |   |            |  
|                                                             |  |                           |            |                         |   |            |   |      |            |   |   |            |  
|Weighted average common shares outstandingbasic and diluted |  |                           | 8,251,142  |                         |   | 5,448,352  |   |      | 8,250,463  |   |   | 5,221,202  |  

See notes to condensed
consolidated financial statements

3

---



KEYON
COMMUNICATIONS HOLDINGS INC. AND RELATED ENTITIES

CONDENSED CONSOLIDATED
STATEMENTS OF CASH FLOWS
FOR THE SIX MONTHS ENDED JUNE 30, 2008 AND 2007 (UNAUDITED)

|                                                                      |  |      |            |      |   |            |  
|--------------------------------------------------------------------- |  | ---- | ---------- | ---- | - | ---------- | -
|                                                                      |  | 2008 |            | 2007 |  
|                                                                      |  |      |            |      |   |            |  
|CASH
 FLOWS FROM OPERATING ACTIVITIES:                                |  |      |            |      |   |            |  
|Net loss                                                              |  | $    | (5,303,787 | )    | $ | (1,987,807 | )
|Adjustments to reconcile net loss to net
 cash flows from operations: |  |      |            |      |   |            |  
|Depreciation expense                                                  |  |      | 1,198,292  |      |   | 1,056,432  |  
|Amortization expense on subscriber base                               |  |      | 201,022    |      |   | 137,859    |  
|Stock based compensation expense                                      |  |      | 2,560,832  |      |   | 4,585      |  
|Warrant interest expense                                              |  |      |           |      |   | 54,139     |  
|Professional services in exchange for stock                           |  |      |           |      |   | 26,105     |  
|                                                                      |  |      |            |      |   |            |  
|Change in assets and liabilities, net of
 effect of acquisitions:     |  |      |            |      |   |            |  
|(Increase) in accounts receivable                                     |  |      | (54,503    | )    |   | (19,050    | )
|Decrease in inventory                                                 |  |      | 64,872     |      |   |           |  
|(Increase) decrease in prepaid expenses and
 other current assets     |  |      | 8,495      |      |   | 45,448     |  
|(Increase) in refundable deposits                                     |  |      | (1,134     | )    |   | (9,208     | )
|Decrease in other assets                                              |  |      | 7,379      |      |   | 36,761     |  
|Increase in accounts payable and accrued
 expenses                    |  |      | 148,301    |      |   | 400,015    |  
|(Decrease) in deferred rent liability                                 |  |      | (28,485    | )    |   |           |  
|Increase (decrease) in deferred revenue                               |  |      | (2,899     | )    |   | 23,512     |  
|                                                                      |  |      |            |      |   |            |  
|                                                                      |  |      |            |      |   |            |  
|Net cash provided by (used in) operating
 activities                  |  |      | (1,201,615 | )    |   | (231,209   | )
|                                                                      |  |      |            |      |   |            |  
|CASH
 FLOWS FROM INVESTING ACTIVITIES:                                |  |      |            |      |   |            |  
|                                                                      |  |      |            |      |   |            |  
|Capital expenditures for property and
 equipment                      |  |      | (81,870    | )    |   | (126,810   | )
|Acquisition of SpeedNet and Microlnk                                  |  |      |           |      |   | (3,458,255 | )
|                                                                      |  |      |            |      |   |            |  
|                                                                      |  |      |            |      |   |            |  
|Net cash (used in) investing activities                               |  |      | (81,870    | )    |   | (3,585,065 | )
|                                                                      |  |      |            |      |   |            |  
|CASH
 FLOWS FROM FINANCING ACTIVITIES:                                |  |      |            |      |   |            |  
|Proceeds from cash overdraft                                          |  |      |           |      |   | 132,566    |  
|Payment on cash overdraft                                             |  |      | (81,344    | )    |   |           |  
|Payments on line of credit                                            |  |      |           |      |   |           |  
|Payments on loans payable to shareholder                              |  |      |           |      |   | (160,000   | )
|Proceeds from term note payable                                       |  |      | 1,500,000  |      |   | 3,000,000  |  
|Payments on notes payable                                             |  |      | 99,767     |      |   | (20,927    | )
|Proceeds from notes payable                                           |  |      |           |      |   | 112,728    |  
|Payments on capital lease obligations                                 |  |      | (530,388   | )    |   | (341,610   | )
|Proceeds from stock issuance                                          |  |      |           |      |   | 1,608,050  |  
|                                                                      |  |      |            |      |   |            |  
|                                                                      |  |      |            |      |   |            |  
|Net cash provided by financing activities                             |  |      | 988,035    |      |   | 4,330,807  |  
|                                                                      |  |      |            |      |   |            |  
|                                                                      |  |      |            |      |   |            |  
|NET
 INCREASE (DECREASE) IN CASH                                      |  |      | (295,450   | )    |   | 514,533    |  
|                                                                      |  |      |            |      |   |            |  
|CASH -
 Beginning of period                                           |  |      | 316,999    |      |   | 4,690      |  
|                                                                      |  |      |            |      |   |            |  
|                                                                      |  |      |            |      |   |            |  
|CASH -
 End of period                                                 |  | $    | 21,549     |      | $ | 519,223    |  
|                                                                      |  |      |            |      |   |            |  
|                                                                      |  |      |            |      |   |            |  
|SUPPLEMENTAL
 DISCLOSURES OF CASH FLOW INFORMATION:                   |  |      |            |      |   |            |  
|                                                                      |  |      |            |      |   |            |  
|Acquisition - SpeedNet:                                               |  |      |            |      |   |            |  
|Accounts receivable                                                   |  |      |           |      |   | 73,197     |  
|Prepaid assets                                                        |  |      |           |      |   | 109,913    |  
|Goodwill                                                              |  |      |           |      |   | 1,282,052  |  
|Subscriber Base                                                       |  |      |           |      |   | 916,301    |  
|Trademark                                                             |  |      |           |      |   | 16,667     |  
|Property and equipment                                                |  |      |           |      |   | 1,618,459  |  
|Inventory                                                             |  |      |           |      |   | 308,666    |  
|Accounts payable and accrued expenses                                 |  |      |           |      |   | (180,846   | )
|Deferred Revenue                                                      |  |      |           |      |   | (431,912   | )
|Capital lease obligations                                             |  |      |           |      |   | (254,242   | )
|                                                                      |  |      |            |      |   |            |  
|                                                                      |  | $    |           |      | $ | 3,458,255  |  
|                                                                      |  |      |            |      |   |            |  
|                                                                      |  |      |            |      |   |            |  
|                                                                      |  |      |            |      |   |            |  
|Stock issued to shareholders for notes payable                        |  | $    |           |      | $ | 1,065,999  |  
|                                                                      |  |      |            |      |   |            |  
|Stock issued to shareholders for notes payable interest               |  | $    |           |      | $ | 100,561    |  
|                                                                      |  |      |            |      |   |            |  
|Common stock exchange for accrued professional services               |  | $    | 12,000     |      | $ |           |  
|                                                                      |  |      |            |      |   |            |  
|Warrants for debt issuance costs                                      |  | $    |           |      | $ | 35,177     |  
|                                                                      |  |      |            |      |   |            |  
|Warrant interest expense                                              |  | $    |           |      | $ | 54,139     |  
|                                                                      |  |      |            |      |   |            |  
|Capital lease obligations for property and equipment                  |  | $    | 724,643    |      | $ | 370,308    |  
|                                                                      |  |      |            |      |   |            |  
|Deferred rent liability for tenant improvement                        |  |      |            |      | $ | 265,000    |  
|                                                                      |  |      |            |      |   |            |  
|                                                                      |  |      |            |      |   |            |  
|Cash
 payments for:                                                   |  |      |            |      |   |            |  
|Interest                                                              |  | $    | 425,596    |      | $ | 128,190    |  
|                                                                      |  |      |            |      |   |            |  
|                                                                      |  |      |            |      |   |            |  
|Tax                                                                   |  | $    |           |      | $ |           |  
|                                                                      |  |      |            |      |   |            |  

See notes to condensed
consolidated financial statements.

4

---



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. (KeyOn or the Company), 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 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,

|  | 
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|1

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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

Basis
of Presentation

The
condensed consolidated financial statements have been prepared in accordance
with accounting principles generally accepted in the United States of America
for interim financial statements and with Form 10-Q and Article 8 of Regulation
S-X of the Securities and Exchange Commission. Accordingly, they do not contain
all the information and footnotes required by accounting principles generally
accepted in the United States of America for annual financial statements. The
condensed consolidated financial statements include the accounts of the Company
and its wholly owned subsidiaries. All significant intercompany balances and
transactions have been eliminated in consolidation. In the opinion of the
Companys management, the accompanying condensed consolidated financial
statements contain all the adjustments necessary (consisting only of normal
recurring accruals) to make the financial position of the Company as of June
30, 2008 and the results of operations and cash flows for the three and six
months ended June 30, 2008 and 2007 not misleading. The unaudited condensed
consolidated financial statements for the three and six-month periods ended
June 30, 2008, and June 30, 2007 should be read in conjunction with the audited
financial statements for the years ended December 31, 2007 and 2006 as
contained in the Form 10K filed on March 31, 2008.

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.

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.

Inventories

With the
purchase of SpeedNet Services, Inc., the Company began to maintain a consistent
stock supply of

|  | 
|- | 
|2

---



customer premise equipment, installation supplies, and tower
replacement parts. The value of this inventory was $220,701 as of June 30,
2008. The Company also began to carry inventory in 2007 in support of its
launch as a reseller of satellite video service from DISH Network Corporation.
The value of this inventory was $15,037 as of June 30, 2008. 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

Acquisition
costs, which may include certain intangible assets, are capitalized as incurred
as part of the related investment. Once a potential acquisition is identified
as no longer attainable, such costs are charged to expense.

Intangible
assets, including goodwill, are accounted for under the provisions of Statement
of Financial Accounting Standards (SFAS) No. 142, Goodwill and Other
Intangible Assets (SFAS 142). Under SFAS 142, 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.

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 $388,294 at
June 30, 2008.

Reclassifications

Certain
reclassifications have been made to the 2007 financial statement amounts to
conform to the 2008 financial presentation.

Income
Taxes

The Company
has adopted SFAS No. 109, Accounting for Income Taxes (SFAS 109). Under
SFAS 109, deferred tax assets and liabilities are recognized for the expected
future tax consequences attributable to differences between the financial
statements carrying amounts of existing assets and liabilities and their
respective tax bases. Deferred tax assets and liabilities are measured using
enacted tax rates expected to apply to taxable income in the years in which
those temporary differences are expected to be recovered or settled. Under SFAS
109 the effect on deferred tax assets and liabilities of a change in tax rates
is recognized in income in the period that includes the enactment date. A
valuation is established, when necessary, to reduce deferred income tax assets
to the amount that is more likely than not to be realized. The Company recorded
a full valuation loss for the net loss incurred for the six months ended June
30, 2008.

As
single-member limited liability companies, KeyOn LLC, Pahrump, SIRIS, Grand
Junction, Idaho Falls, Pocatello, SpeedNet LLC and Spectrum Holdings are not
taxed as separate entities for federal income tax purposes. Rather, these
organizations taxable items of income, deduction, loss, and credit are
included with the federal income tax return of the Company. Accordingly, the
members separately account for their share of the organizations income,
deductions, losses and credits. Therefore, no separate provision for income tax
expense or benefit has been recognized in the accompanying consolidated
financial statements for these related entities, but was considered for KeyOn
as part of its SFAS 109 reporting requirement.

In July
2006, FASB issued Financial Accounting Standards Interpretation No. 48 (FIN
48), Accounting for Uncertainty in Income Taxes  an interpretation of FASB
Statement No. 109. FIN 48 prescribes a recognition threshold and measurement
attribute for the financial statement recognition and measurement of a tax
position taken or expected to be taken in a companys income tax return, and
also provides guidance on de-recognition, classification, interest and
penalties, accounting in interim periods, disclosure, and transition. FIN 48
utilizes a two-step approach for evaluating tax positions. Step one, Recognition, occurs when a company
concludes that a tax

|  | 
|- | 
|3

---



position is more likely than not to be sustained upon examination. Step
two, Measurement, is based on the
largest amount of benefit, which is more likely than not to be realized on
ultimate settlement. FIN 48 is effective for fiscal years beginning after
December 15, 2006, with the cumulative effect of the change in accounting
principle to be recorded as an adjustment to the beginning balance of retained
earnings; and, therefore, is effective for the Company in the first quarter of
fiscal 2008. For the six months ended June 30, 2008, there were no implications
on the Companys consolidated financial position, results of operations or cash
flows.

Stock-Based
Compensation

Effective
January 1, 2006, the Company adopted Statement of Financial Accounting
Standards No. 123 (revised 2004), Share-Based Payment, (SFAS 123R), which
is a revision of SFAS No. 123, Accounting for Stock-Based Compensation (SFAS
No. 123). SFAS No. 123R supersedes APB No. 25, Accounting for Stock Issued to
Employees, and amends SFAS No. 95, Statement of Cash Flows. SFAS No. 123R
requires all share-based payments to employees, including grants of employee
stock options, to be recognized in the financial statements based upon their
fair values. The Company recorded total stock-based compensation and warrant
compensation of $1,438,446 and $2,560,832 for the three and six month periods
ended June 30, 2008, respectively, compared to $0 and $4,585 for the same
periods in 2007.

Consolidation Policy

The
accompanying consolidated balance sheets and consolidated statements of
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, KeyOn
SpeedNet LLC and KeyOn Spectrum Holdings, LLC all of which are under common
ownership. Intercompany balances and transactions have been eliminated in
consolidation.

The
accompanying consolidated financial statements are prepared assuming that the
Company will continue as a going concern and contemplates the realization of
assets and satisfaction of liabilities in the ordinary course of business.
Certain factors, including current liabilities exceeding current assets and the
presence of recurring losses and negative cash flow, among others, indicate the
Company may be unable to continue as a going concern for a reasonable period of
time. The Company has taken steps to mitigate this going concern opinion,
including executing a new commercial loan agreement on February 8, 2008
totaling $4.5 million (the Loan), the proceeds of which were used to
refinance the $3.0 million term loan and for working capital as to help sustain
its current capital needs. The Loan matured on August 8, 2008, and the Company
is in discussion with Sun West Bank to renew at the Companys option until
February 8, 2009. Beginning in 2007 and through the first quarter of 2008, the
Company had been staffed to accelerate growth through acquisitions and rapid
organic growth of its subscriber base. The Company has since moderated its
growth strategy by postponing further acquisitions. In addition, in order to
minimize cash outlays, the Company has slowed its organic growth while
instituting cost-cutting measures such as a reduction in marketing expenses and
company overhead. Finally, the Company is in the process of raising up to $1
million of secured-debt financing (see Subsequent Events) while these changes
are being implemented. As a result, the Company plans to begin to generate
operating income and positive cash from operations. These financial statements
have been prepared assuming the Company will continue as a going concern and,
accordingly, do not include any adjustments that might result from the outcome
of the uncertainties described above.

Recent Accounting Pronouncements

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

In
September 2006, the FASB issued Statement of Financial Accounting Standards
157, Fair Value Measurements (SFAS 157). SFAS 157 defines fair value,
establishes a framework for measuring fair value in generally accepted
accounting principles, and expands disclosures about fair value measurements.
SFAS 157 applies to other accounting pronouncements that require or permit fair
value measurements, the FASB having previously concluded in those accounting
pronouncements that fair value is the relevant measurement attribute.
Accordingly, this Statement does not require any new fair value measurements.
However, for some entities, the

|  | 
|- | 
|4

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application of SFAS 157 will change current practice. The provisions of
SFAS 157 are effective as of the beginning of the Companys 2009 fiscal year.
For the three and six month periods ended June 30, 2008, there was no impact on
the Companys consolidated financial position, results of operations or cash
flows due to SFAS 157.

In
September 2006, the Securities and Exchange Commission issued Staff Accounting
Bulletin No. 108, Considering the Effects of Prior Year Misstatements when
Quantifying Misstatements in the Current Year Financial Statements (SAB
108). SAB 108 addresses how the effects of prior-year uncorrected
misstatements should be considered when quantifying misstatements in
current-year financial statements. SAB 108 requires an entity to quantify
misstatements using a balance sheet and income-statement approach and to
evaluate whether either approach results in quantifying an error that is
material in light of relevant quantitative and qualitative factors. The
guidance is applicable for fiscal years ending after November 15, 2006. We
currently do not believe that SAB 108 has a material impact on our financial
statements.

In February
2007, the FASB issued SFAS 159,
The Fair Value Option for Financial Assets and Financial Liabilities, (SFAS
159) which expands opportunities to use fair value measurements in financial
reporting and permits entities to choose to measure many financial instruments
and certain other items at fair value. SFAS 159 is effective for fiscal years beginning
after November 15, 2007. For the three and six month periods ended June 30,
2008, there was no impact on the Companys consolidated financial position,
results of operations or cash flows due to SFAS 159.

In June
2001, the FASB issued FAS 141, Business Combinations, which was established to
(1) better reflect investments made in acquired companies, and (2) to provide
additional information regarding acquired intangible assets. FAS 141 mandates
that all assets acquired and liabilities assumed are valued at their fair
value. FAS 141 was revised in December 2007, and is effective for business
combinations for which the acquisition date is on or after the beginning of the
first annual reporting period beginning on or after December 15, 2008. This
revision represents a major departure from the historical cost accounting that
many companies use currently. The Company is currently evaluating FAS 141 to
determine its impact on its future consolidated financial position, results of
operations or cash flows.

Note 3  Equipment

Equipment
at June 30, 2008, consisted of the following:

|                                    |  |           |            |            |   |            |  
|----------------------------------- |  | --------- | ---------- | ---------- | - | ---------- | -
|                                    |  | 6/30/2008 |            | 12/31/2007 |  
|                                    |  |           |            |            |   |           
|Subscriber equipment                |  | $         | 5,920,363  |            | $ | 5,329,361  |  
|Fixed wireless tower site equipment |  |           | 2,529,783  |            |   | 2,353,683  |  
|Software and consulting costs       |  |           | 611,187    |            |   | 572,728    |  
|Computer and office equipment       |  |           | 418,030    |            |   | 417,077    |  
|Vehicles                            |  |           | 277,439    |            |   | 277,439    |  
|Leasehold improvements              |  |           | 312,100    |            |   | 312,100    |  
|                                    |  |           |            |            |   |            |  
|                                    |  |           | 10,068,902 |            |   | 9,262,388  |  
|Less: accumulated depreciation      |  |           | (5,889,461 | )          |   | (4,691,168 | )
|                                    |  |           |            |            |   |            |  
|                                    |  |           |            |            |   |            |  
|Fixed assets - net                  |  | $         | 4,179,441  |            | $ | 4,571,220  |  
|                                    |  |           |            |            |   |            |  

Depreciation
expense for the three months ended June 30, 2008 and 2007 was $588,423 and
$577,281 respectively. Depreciation expense for the six months ended June 30,
2008 and 2007 was $1,198,292 and $1,056,432, respectively.

Note 4  Intangible Assets

Intangible
assets at June 30, 2008, consisted of the following:

5

---



|                               |  |           |           |            |   |           |  
|------------------------------ |  | --------- | --------- | ---------- | - | --------- | -
|                               |  | 6/30/2008 |           | 12/31/2007 |  
|                               |  |           |           |            |   |           |  
|Goodwill                       |  | $         | 1,738,773 |            | $ | 1,738,773 |  
|Subscriber base                |  |           | 1,290,887 |            |   | 1,290,887 |  
|Trademark                      |  |           | 16,667    |            |   | 16,667    |  
|                               |  |           |           |            |   |           |  
|                               |  |           | 3,046,327 |            |   | 3,046,327 |  
|Less: accumulated amortization |  |           | (527,122  | )          |   | (326,100  | )
|                               |  |           |           |            |   |           |  
|                               |  |           |           |            |   |           |  
|Intangible assets - net        |  | $         | 2,519,205 |            | $ | 2,720,227 |  
|                               |  |           |           |            |   |           |  

Amortization
expense for the three months ended June 30, 2008 and 2007 was $100,511 and
$81,656, respectively. Amortization expense for the six months ended June 30,
2008 and 2007 was $201,022 and $137,859, respectively.

Estimated
amortization expense for the remainder of 2008 and future fiscal years is as
follows:

|           |  |   |         | 
|---------- |  | - | ------- | 
|2008       |  | $ | 201,022 | 
|2009       |  |   | 402,044 | 
|2010       |  |   | 109,493 | 
|2011       |  |   | 21,189  | 
|2012       |  |   | 21,189  | 
|2013       |  |   | 8,829   | 
|Thereafter |  |   |        | 
|           |  |   |         | 
|           |  | $ | 763,766 | 
|           |  |   |         | 

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). The Company used $3.0 million of the proceeds to
refinance its existing debt loan of $3.0 million with Sun West Bank. The
remaining $1.5 million was available to be drawn upon as needed. The loan
balance was $4,500,000 as of June 30, 2008. Although the interest payments were
not current as of June 30, 2008, the Company subsequently made such payments.
The Loan matured on August 8, 2008, and the Company is in discussions with Sun
West Bank to renew the Loan at the Companys option for an additional six months until
February 8, 2009. The initial interest rate is 7.75% and will vary with the Sun
West Banks index rate plus 2.5 percentage points over the index. 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 June 30, 2008 was 8.25%. The interest on the line of credit
is paid monthly. The line of credit is guaranteed by a shareholder and officer of
the Company. The Company had the following long term debt at June 30, 2008 and
December 31, 2007:

6

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|                                                                                                                                                                         |  |           |          |            |   |          |  
|------------------------------------------------------------------------------------------------------------------------------------------------------------------------ |  | --------- | -------- | ---------- | - | -------- | -
|                                                                                                                                                                         |  | 6/30/2008 |          | 12/31/2007 |  
|                                                                                                                                                                         |  |           |          |            |   |          |  
|One non-interest bearing note payable to an entity for professional
 services.                                                                                           |  | $         | 121,737  |            | $ | 121,737  |  
|                                                                                                                                                                         |  |           |          |            |   |          |  
|One 7.8% note payable to American National Bank maturing April 2011
 for the purchase of vans.                                                                           |  |           | 60,588   |            |   | 69,959   |  
|                                                                                                                                                                         |  |           |          |            |   |          |  
|Two separate 9.1% notes payable to GMAC maturing August 2010 for the
 purchase of two trucks.                                                                            |  |           | 22,016   |            |   | 26,514   |  
|                                                                                                                                                                         |  |           |          |            |   |          |  
|Two 5.0% notes payable due to two separate entities maturing from
 October 3rd to October 9, 2008, with interest payable at maturity.                                    |  |           | 40,000   |            |   |         |  
|                                                                                                                                                                         |  |           |          |            |   |          |  
|Two unsecured, non-interest bearing notes payable to two separate
 entities maturing from June 2009 to November 2009 resulting from the
 conversion of accounts payable. |  |           | 73,636   |            |   |         |  
|                                                                                                                                                                         |  |           |          |            |   |          |  
|Total long term debt                                                                                                                                                     |  |           | 317,977  |            |   | 218,210  |  
|Less current maturities                                                                                                                                                  |  |           | (261,364 | )          |   | (149,685 | )
|                                                                                                                                                                         |  |           |          |            |   |          |  
|                                                                                                                                                                         |  |           |          |            |   |          |  
|Total long term debt less
 current maturities                                                                                                                            |  | $         | 56,613   |            | $ | 68,525   |  
|                                                                                                                                                                         |  |           |          |            |   |          |  

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 June 30, 2008:

|     |  |   |         | 
|---- |  | - | ------- | 
|2008 |  | $ | 167,099 | 
|2009 |  |   | 73,458  | 
|2010 |  |   | 29,578  | 
|2011 |  |   | 7,842   | 
|     |  |   |         | 
|     |  | $ | 277,977 | 
|     |  |   |         | 

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 2011. Pursuant to those capital lease
financing arrangements, the Company has drawn down an additional $333,478 in
the three months ended June 30, 2008 and an additional $724,643 in the six
months ended June 30, 2008.

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 an additional 10 years. 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
$3,314,891 as of June 30, 2008.

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 June 30, 2008:

7

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|                                     |  |   |           |  
|------------------------------------ |  | - | --------- | -
|2008                                 |  | $ | 630,257   |  
|2009                                 |  |   | 974,696   |  
|2010                                 |  |   | 334,323   |  
|2011                                 |  |   | 26,496    |  
|2012                                 |  |   |          |  
|                                     |  |   |           |  
|Total
 minimum lease payments        |  |   | 1,965,772 |  
|Less amounts
 representing interest  |  |   | (361,315  | )
|                                     |  |   |           |  
|                                     |  |   | 1,604,457 |  
|                                     |  |   |           |  
|Less current
 portion                |  |   | (889,908  | )
|                                     |  |   |           |  
|                                    
|Long term
 capital lease obligations |  | $ | 714,549   |  
|                                     |  |   |           |  

Future
minimum lease payments under the operating leases with initial or remaining
terms of one year or more consist of the following at June 30, 2008:

|           |  |   |           | 
|---------- |  | - | --------- | 
|2008       |  | $ | 429,573   | 
|2009       |  |   | 654,694   | 
|2010       |  |   | 456,634   | 
|2011       |  |   | 322,658   | 
|2012       |  |   | 212,054   | 
|2013       |  |   | 57,878    | 
|Thereafter |  |   | 19,919    | 
|           |  |   |           | 
|           |  |   |           | 
|Total      |  | $ | 2,153,410 | 
|           |  |   |           | 

The total
rental expense included in operating expenses for operating leases included
above is $333,336 and $241,653 for the three months ended June 30, 2008 and
2007, respectively. For the six months ended June 30, 2008 and 2007, the total
rental expense included in operating expenses for operating leases was $632,065
and $491,693, respectively.

Note 7 - Related
Party Transactions

Related
parties that entered into transactions with the Company include officers and
stockholders. Transactions with related parties as of June 30, 2008 are the
following:

|                                     |  |           |           |            |   |           | 
|------------------------------------ |  | --------- | --------- | ---------- | - | --------- | 
|                                     |  | 6/30/2008 |           | 12/31/2007 |  
|                                     |  |           |           |            |  
|Term loan
 payable (see also Note 5) |  | $         | 4,500,000 |            | $ | 3,000,000 | 
|                                     |  |           |           |            |   |           | 

8

---



Note 8 - Business
Combinations

On
January 31, 2007, through a wholly owned subsidiary, KeyOn SpeedNet LLC
(SpeedNet LLC) purchased the assets of SpeedNet Services, Inc. (SpeedNet),
including subscriber contracts, accounts, and fixed assets, and assumed certain
operating liabilities for $3,458,255 in cash, with certain adjustments to the
purchase price for working capital, deferred revenue and the assumption of certain
capital lease obligations. Also, On October 22, 2007, the Company
acquired substantially all of the assets and assumed certain liabilities of
MicroLnk, LLC, a Nebraska limited liability company, (MicroLnk), pursuant to
an Asset Purchase Agreement. As consideration for these acquired assets, the
Company paid MicroLnk $659,981 in cash.

The
financial results for the three month period ended June 30, 2007 for KeyOn
Communications Holdings, Inc. do not include operations for the MicroLnk fourth
quarter 2007 acquisition. These financial results reflected on a pro forma
basis (unaudited) by adding in the April, May and June, 2007 of MicroLnk
financial results are reported as follows:

KEYON COMMUNICATIONS HOLDINGS INC. AND RELATED
ENTITIES

PRO FORMA CONDENSED CONSOLIDATED STATEMENT OF
OPERATIONS
FOR THE THREE MONTHS ENDED JUNE 30, 2007 (UNAUDITED)

|                                  |  |                    |            |          |   |             |     |                |        |  |   |            |  
|--------------------------------- |  | ------------------ | ---------- | -------- | - | ----------- | --- | -------------- | ------ |  | - | ---------- | -
|                                  |  | Keyon as
 Reported |            | MicroLnk |   | Adjustments |     | 2007 pro forma |       
|                                  |  |                    |            |          |   |             |     |                |        |  |   |            |  
|TOTAL REVENUES                    |  | $                  | 1,857,179  |          | $ | 155,203     | b   | $              | 51,608 |  | $ | 2,063,990  |  
|                                  |  |                    |            |          |   |             |     |                |        |  |   |            |  
|                                 
|OPERATING COSTS AND
 EXPENSES:    |  |                    |            |          |   |             |     |                |        |  |   |            |  
|Depreciation and amortization     |  |                    | 658,937    |          |   | 25,927      |     |                |       |  |   | 684,864    |  
|                                  |  |                    |            |          |   |             |     |                |        |  |   |            |  
|TOTAL OPERATING COSTS AND EXPENSE |  |                    | 2,854,689  |          |   | 235,098     | a,b |                | 18,427 |  |   | 3,108,214  |  
|                                  |  |                    |            |          |   |             |     |                |        |  |   |            |  
|                                 
|LOSS FROM OPERATIONS              |  |                    | (997,510   | )        |   | (79,895     | )   |                | 33,182 |  |   | (1,044,224 | )
|                                 
|TOTAL OTHER INCOME (EXPENSE):     |  |                    | (133,061   | )        |   | (185        | )   |                |       |  |   | (133,246   | )
|                                  |  |                    |            |          |   |             |     |                |        |  |   |            |  
|                                 
|NET LOSS                          |  | $                  | (1,130,571 | )        | $ | (80,081     | )   | $              | 33,182 |  | $ | (1,177,470 | )
|                                  |  |                    |            |          |   |             |     |                |        |  |   |            |  

|   |                                                                                                                                                                           
|-- | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|a. | $33,000,
 Elimination of retention bonuses (plus payroll taxes) paid to top employees
 to stay during sale of business plus elimination of duplicative headcount
 salaries
|   |                                                                                                                                                                           
|b. | $52,000,
 Service credits and promotional credits added back to revenue and reflected
 as marketing and network expenses                                                  
|   |                                                                                                                                                                           

The
financial results for the six month period ended June 30, 2007 for KeyOn
Communications Holdings, Inc. include five months of operations from SpeedNet
LLC, and no operations for the MicroLnk fourth quarter 2007 acquisition. These
financial results reflected on a pro forma basis (unaudited) by adding in the
January 2007 SpeedNet Services, Inc. and January through June 2007 of MicroLnk
financial results are reported as follows:

9

---



KEYON COMMUNICATIONS HOLDINGS INC. AND RELATED
ENTITIES

PRO FORMA CONDENSED CONSOLIDATED STATEMENT OF
OPERATIONS
FOR THE SIX MONTHS ENDED JUNE 30, 2007 (UNAUDITED)

|                                  |  |                    |            |                               |   |          |   |             |          |                |   |          |   |   |            |  
|--------------------------------- |  | ------------------ | ---------- | ----------------------------- | - | -------- | - | ----------- | -------- | -------------- | - | -------- | - | - | ---------- | -
|                                  |  | Keyon as
 Reported |            | Jan 2007
 SpeedNet 
 Services |   | MicroLnk |   | Adjustments |          | 2007 pro forma |  
|REVENUES:                         |  |                    |            |                               |   |          |   |             |          |                |   |          |   |   |            |  
|                                  |  |                    |            |                               |   |          |   |             |          |                |   |          |   |   |            |  
|TOTAL REVENUES                    |  | $                  | 3,353,554  |                               | $ | 482,435  |   | $           | 339,618  | e              | $ | 113,737  |   | $ | 4,289,344  |  
|                                  |  |                    |            |                               |   |          |   |             |          |                |   |          |   |   |            |  
|                                 
|OPERATING COSTS AND EXPENSES:     |  |                    |            |                               |   |          |   |             |          |                |   |          |   |   |            |  
|Depreciation and amortization     |  |                    | 1,194,291  |                               |   | 170,567  |   |             | 51,656   | b              |   | (50,228  | ) |   | 1,366,285  |  
|                                  |  |                    |            |                               |   |          |   |             |          |                |   |          |   |   |            |  
|                                 
|TOTAL OPERATING COSTS AND EXPENSE |  |                    | 5,048,462  |                               |   | 710,670  |   |             | 452,638  | a,b,c,e        |   | (233,751 | ) |   | 5,978,018  |  
|                                  |  |                    |            |                               |   |          |   |             |          |                |   |          |   |   |            |  
|                                 
|LOSS FROM OPERATIONS              |  |                    | (1,694,908 | )                             |   | (228,235 | ) |             | (113,019 | )              |   | 347,488  |   |   | (1,688,674 | )
|                                 
|TOTAL OTHER INCOME (EXPENSE):     |  |                    | (292,899   | )                             |   | (18,869  | ) |             | (439     | ) d            |   | 14,651   |   |   | (297,556   | )
|                                  |  |                    |            |                               |   |          |   |             |          |                |   |          |   |   |            |  
|NET LOSS                          |  | $                  | (1,987,807 | )                             | $ | (247,104 | ) | $           | (113,458 | )              | $ | 362,139  |   | $ | (1,986,230 | )
|                                  |  |                    |            |                               |   |          |   |             |          |                |   |          |   |   |            |  

|   |                                                                                                                                                                            
|-- | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|a. | $265,000,
 Elimination of retention bonuses (plus payroll taxes) paid to top employees
 to stay during sale of business plus elimination of duplicative headcount
 salaries
|   |                                                                                                                                                                            
|b. | $50,000,
 Depreciation adjustment for January for new fair market valuation of assets                                                                                      
|   |                                                                                                                                                                            
|c. | $32,000,
 Adjustment for one quarter rent due to relocation into a smaller facility in
 Q2 2007                                                                            
|   |                                                                                                                                                                            
|d. | $15,000,
 Adjustment of interest charged on SpeedNet Services other debt that is not a
 liability under KeyOn SpeedNet                                                     
|   |                                                                                                                                                                            
|e. | $114,000,
 Service credits and promotional credits added back to revenue and reflected
 as marketing and network expenses                                                  

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

On December
31, 2006, we adopted Statement of Financial Accounting Standards (SFAS) No. 123
(revised 2004), Share-Based Payment, requiring us to recognize expenses
related to the fair value of its employee stock option awards. We recognize the
cost of all share-based awards on a straight line vesting basis over the
vesting period of the award.

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). 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 were listed on the OTC Bulletin Board
under the symbol KYCS. On October 26, 2007, KeyOn Holdings effected a 1-for-2
reverse stock split of the Companys common stock, par value $0.001 per share
and the Companys ticker symbol was changed to KEYO (Reverse Split) All
common share, option and warrant amounts have been adjusted to reflect the
Reverse Split.

Concurrent
with the Merger, KeyOn Holdings raised $2,088,500 (net of $118,500 in offering
costs) with the sale of 551,750 shares of common stock in an equity offering.
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.

The Company
is authorized to issue up to 95,000,000 shares of common stock with a par value
of $.001 for each share. As of December 31, 2007, 8,249,106 shares were issued
and outstanding. During the three and six month periods ended June 30, 2008, 0
and 2,036 shares of common stock were issued, respectively. As of June 30,
2008, 8,251,142 shares were issued and outstanding.

The Company
entered into an agreement with a current employee on January 10, 2008, for the
issuance of 100,000 shares of restricted common stock. The agreement calls for
the shares to be issued over a two year period beginning July 10, 2008. The
Company is recording compensation expense monthly over the life of the
agreement.

10

---



For the three
and six month periods ended June 30, 2008, compensation expense totaled $37,500
and $75,000, respectively.

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.
As of June 30, 2008, no shares of preferred stock were issued and outstanding.

Warrants

The
Company has 1,723,675 common stock warrants outstanding and exercisable as of
June 30, 2008 with a warrant strike price ranging from $3.31 to $8.00 and an
average price of $5.27 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, 2007, a total of 473,675 warrants to purchase shares of our common
stock were outstanding and exercisable. A total of 0 and 1,250,000 warrants
were issued during the three and six months ended June 30, 2008, respectively.
The Company recorded compensation expense for the warrants granted in 2008 of
$1,095,850 and $1,702,083 for the three and six months ended June 30, 2008,
respectively. No warrants were forfeited or exercised during the three and six
months ended June 30, 2008. The amount expensed to interest expense for the
amortization of the debt issuance costs during the three and six months ended
June 30, 2008, was $2,510 and $7,379, respectively.

Stock Option
Plans

On
April 25, 2006, KeyOns Board of Directors and stockholders adopted the 2006
Stock Incentive Plan (the 2006 Plan). Under the 2006 Plan, KeyOn was
authorized to issue incentive stock options intended to qualify under Section
422 of the Code, non-qualified stock options and restricted stock. The 2006
Plan was administered by KeyOns Board of Directors. Prior to the time of the
Merger, there were 20,278 KeyOn stock options outstanding under the 2006 Plan.
Immediately following the closing of the Merger, these options were exchanged
for options to purchase 612,831 shares of our common stock under our 2007 Incentive
Stock and Awards Plan (the 2007 Plan) with a weighted average exercise price
of approximately $2.48 per share. Following this exchange, KeyOn terminated the
2006 Plan.

On
August 9, 2007, our Board of Directors and stockholders adopted the 2007 Stock
Incentive 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 KeyOns
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 Compensation Committee at the direction of the Board of
Directors.

As
of December 31, 2007, 612,867 options were outstanding. During the three and
six months ended June 30, 2008, the Company granted options to purchase a total
of 68,040 and 286,664 shares of common stock, respectively, pursuant to the
2007 Plan. For the three months  ended June 30, 2008, 7,556 options were forfeited.
During the first three months of 2008, no options were forfeited. No options
were exercised in the three and six month period ending June 30, 2008. As of
June 30, 2008, 891,975 options were outstanding.

Compensation
expense recorded on stock options for the three and six months ended June 30,
2008, totaled $305,096 and $783,749, respectively. The range of strike price
per outstanding option is $1.10 to $8.16 and the weighted average strike price
is $2.86 per share.

Note
10  Subsequent Events

In July and
August 2008, the Company received $425,000 from investors in the form of a
secured loan. The Independent Members of the Companys Board of Directors
preliminarily approved terms under which the investment

11

---



would be made. However, the terms of the loan and the loan agreements
have not yet been finalized. As certain investors who participated are members
of management and the Board of Directors, this transaction qualifies as a
Related Party Transaction. The Company anticipates raising up to $1 million
under the same terms and conditions when finalized.

The Company
is currently in discussions to extend the maturity of its Loan with Sun West
Bank, at its option for an additional six months until February 8, 2009.

12

---



|        |                                                                                       
|------- | --------------------------------------------------------------------------------------
|Item 2. | Managements Discussion and Analysis of Financial Condition and
 Results of Operations

Recent Events

Prior
to August 9, 2007, we were a public shell company, as defined by the Securities
and Exchange Commission, without material assets or activities. On August 9,
2007, we completed a reverse merger, pursuant to which a wholly-owned
subsidiary of ours merged with and into a private company, KeyOn Communications
Inc., with such private company being the surviving company. In connection with
this reverse merger, we discontinued our former business and succeeded to the
business of KeyOn Communications Inc. as our sole line of business. For
financial reporting purposes, KeyOn Communications Inc., and not us, is
considered the accounting acquiror. Accordingly, the historical financial
statements presented and the discussion of financial condition and results of
operations herein are those of KeyOn Communications Inc. and do not include our
historical financial results.

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 satellite video and VoIP services to both
residential and business subscribers. In October 2007, we acquired
substantially all of the assets of MicroLnk, LLC, (MicroLnk) a provider of
wireless broadband services to rural communities in Nebraska, headquartered in
Lincoln. We currently operate the MicroLnk assets under the SpeedNet brand.
In January 2007, we acquired substantially all of the assets of SpeedNet
Services, Inc., (SpeedNet) a leading provider of fixed wireless broadband
services to non-metropolitan communities and rural areas in the central United
States. Including the operations of SpeedNet, 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. Our results for
the quarter ended June 30, 2007 do not include any operational results for
MicroLnk as compared to the three months of financial results for the quarter
ended June 30, 2008. Our results for the year to date ended June 30, 2007
include only five months of operations of SpeedNet and no operations for
MicroLnk as compared to the financial results for the year to date ended June
30, 2008.

Characteristics of
Our Revenues and Operating Costs and Expenses

We
offer our services under annual or two-year 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. In 2008, we began offering services as a DISH retailer and
receive revenues for DISH installations and DISH equipment sales. These
revenues are recognized upon installation.

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 and DISH inventory costs. Payroll expenses
consist of personnel costs, including salaries, benefits, employer taxes and
bonuses 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. DISH inventory costs consist of the cost of the equipment
purchased from DISH network in support of our DISH offering.

17

---



Results of Operations

Three-Month Period Ended June 30, 2008 as
Compared to the Three-Month Period Ended June 30, 2007

Revenues. During the
three-month period ended June 30, 2008, we recognized revenues of $1,986,288,
as compared to revenues of $1,857,179 during the three-month period ended June
30, 2007, representing an increase of approximately 7.0%. This increase was the
result of the additional revenue from our fourth quarter 2007 acquisition of
MicroLnk and organic subscriber growth. The revenues in the second quarter of
2008 include three months of revenue from MicroLnk as compared to the second
quarter of 2007 which contains no revenues from MicroLnk. As the Companys GAAP
financials display revenues and marketing and advertising both net of
promotions and/or service credits, adjusting for these items, revenues for the
quarter ended June 30, 2008 were $2.1 million.

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, professional fees and stock based
compensation totaled $4,531,754 for the three-month period ended June 30, 2008,
as compared to $2,854,689 for the three-month period ended June 30, 2007,
representing an increase of approximately 58.7%. A majority of this increase,
85.8%, was due to the incurrence of $1,438,446 for non-cash expenses of
stock-based and warrant compensation expense. Another contributing factor,
accounting for 14.2% of the increase in the operating loss, is the cost
increase associated with running expanded operations with the larger customer
base of our fourth quarter acquisition of MicroLnk and our organic growth.
Without the non-cash stock compensation expenses, normalized operating expenses
would have been $3,093,308 for the three-month period ended June 30, 2008 as compared
to $2,854,689 for the three-month period ended June 30, 2007, representing an
increase of only 8.4%. Our actual operating loss margin increased by 75
percentage points from a total operating loss $2,545,466 of the three-month
period ended June 30, 2008 as compared to a loss of $997,510 for the
three-month period ended June 30, 2007. By removing non-cash expenses of
$1,438,446, our normalized operating loss margin increased by less than 2
percentage points from a total normalized operating loss $1,107,020 for the
three-month period ended June 30, 2008 as compared to a loss of $997,510 for
the three-month period ended June 30, 2007. Notably, the Company was not a
public company in the second quarter of 2007 and therefore did not incur costs
related thereto. In addition, we have since hired additional personnel,
including senior executives in furtherance of our acquisition strategy, public
status and the overall growth of the business.

Payroll,
Bonuses and Taxes. Payroll bonuses and taxes totaled
$1,037,908 for the three-month period ended June 30, 2008, as compared to
$853,976 for the three-month period ended June 30, 2007, representing an
increase of approximately 21.5%. This increase was primarily due to the
incremental variable staff additions, such as customer service representatives
and installers that are needed to service the expanded customer base, as well
as our acquisition of MicroLnk in October 2007. Additionally, we have since
hired additional personnel, including senior executives in furtherance of our
acquisition strategy, public status and the associated growth of the business.

Depreciation
and Amortization. Depreciation and amortization expenses
totaled $688,934 for the three-month period ended June 30, 2008, as compared to
$658,937 for the three-month period ended June 30, 2007, representing an
increase of approximately 4.6%. This increase was primarily due to the
additional network footprint and customer premise equipment acquired in
connection with the fourth quarter 2007 acquisition of MicroLnk and our organic
subscriber growth.

Other
General and Administrative Expenses. Other general
and administrative expenses totaled $310,697 for the three-month period ended
June 30, 2008, as compared to $316,236 for the three-month period ended June
30, 2007, representing a decrease of approximately 1.8%. This decrease is due
to our efforts to reduce and control overall operating costs.

Network
Operating Costs. Network operating costs, which consist of
tower rent, Internet transport costs and Internet termination expense, totaled
$726,876 for the three-month period ended June 30, 2008, as compared to
$634,328 for the three-month period ended June 30, 2007, representing an
increase of approximately 14.6%. The additional network footprint and increased
customer base associated with our fourth quarter acquisition of MicroLnk
accounts for 22.7% of the change. The balance of the increase, or 77.3%, is
related to higher than expected tower repair costs and service credits given to
our expanded customer base due to severe weather in our Midwestern markets.

18

---



Marketing
and Advertising Expenses. Marketing and advertising expenses totaled
$136,746 for the three-month period ended June 30, 2008, as compared to
$169,894 for the three-month period ended June 30, 2007, representing a
decrease of approximately 19.5%. This decrease relates to our concentration on
certain target markets during the three months ended June 30, 2008 as compared
to a more broad-based marketing plan used during the three months ended June
30, 2007. Our marketing costs were 6.9% of revenue for the three-month period
ended June 30, 2008 and 9.1% for the three-month ended June 30, 2007. This 2
percentage point difference in marketing expenses as a percentage of revenue
was due to our focused marketing efforts which resulted in a relative cost
reduction for this category.

Installation
Expense. Installation
expense, which consists primarily of expenses associated with installation
supplies, third party installation costs and transportation expenses relating
to the installations, totaled $121,535 for the three-month period ended June
30, 2008, as compared to $134,217 for the three-month period ended June 30,
2007, representing a decrease of approximately 9.4%. Installation volumes
decreased by 8.7% for the three-month period ended June 30, 2008 as compared to
the three-month period ended June 30, 2007. Installation supply expense and
automobile repairs declined during the three-month period ended June 30, 2008
as compared to the three-month period ended June 30, 2007, but was offset by
the 30% increase in fuel costs over prior period.

Professional
Fees. Professional
fees, which consist of legal, accounting, and other related expenses, totaled
$56,304 for the three-month period ended June 30, 2008, as compared to $87,101
for the three-month period ended June 30, 2007, representing a decrease of
approximately 35.4%. Accounting fees account for all of the decrease in
professional fee costs as we incurred additional accounting expenses in the
three months ended June 30, 2007 in support of the company becoming a publicly traded
company as of August 9, 2007. Accounting fees account for all of the decrease
in professional fee costs as we incurred additional accounting expenses in the
three months ended June 30, 2007 in support of the company becoming a publicly
traded on August 9, 2007.

Stock-Based
and Warrant Compensation. Stock-based and warrant compensation of
$1,438,446 was expensed for the three-month period ended June 30, 2008, as
compared to no expense for the three-month period ended June 30, 2007. The
expense for warrants granted as compensation for the guaranty on our term note
with Sun West Bank was $1,095,850 during the three-month period ended June 30,
2008. Stock-based compensation for stock options issued under our option plan
totaled $305,096 for the three-month period ended June 30, 2008. Stock-based
compensation for restricted stock was $37,500 for the three-month period ended
June 30, 2008.

Cost
of DISH Inventory. Cost of DISH inventory of $14,308 was expensed for
the three-month period ended June 30, 2008, as compared to no cost for the
three-month period ended June 30, 2007. The expense for DISH inventory is
recognized immediately after installation.

Other
Income and Expense. We incurred other income and
expense of $186,688 for the three-month period ended June 30, 2008, as compared
to $133,061 for the three-month period ended June 30, 2007, representing an
increase of 40.3%. The primary reason for the increase, 37.9%, resulted from an
increase in lease financing in support of our continued organic growth of our
customer base. We earned interest income during the three-month period ended
June 30, 2007 as compared to negligible interest income earned during the
three-month period ended June 30, 2008. This difference is the reason for 31.0%
of the increase. The remaining reason for the increase, or 31.1%, is due to the
increased interest expense incurred in connection with our term loan.

Net
Loss. We
had a net loss of $2,732,154 for the three-month period ended June 30, 2008, as
compared to a net loss of $1,130,571 for the three-month period ended June 30,
2007, representing an increase of approximately 142%. The major contributing
factor of the increased net loss is the incurrence of $1,438,446 for non-cash
stock-based and warrant compensation expense, which accounts for 89.8% of the
increase. The increased costs associated with running the expanded operation of
MicroLnk contributed to 5.6% of the increase. Finally, additional personnel,
including senior executives in furtherance of our acquisition strategy, public
company status and the associated growth of the business accounts for 4.6% of
the increase. Normalized net loss without the non-cash expenses would have been
$1,293,708 for the three-month period ended June 30, 2008 as compared to
$1,130,571 for the three-month period ended June 30, 2007, representing an
increase of 14.4%. This is as a result of the elimination of duplicative costs
and improvements in efficiencies due to economies of scale with our fourth
quarter 2007 acquisition of MicroLnk. Our net loss margin increased by 77
percentage points from a net loss

19

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$2,732,154 for
the three-month period ended June 30, 2008 as compared to a net loss of
$1,130,571 for the three-month period ended June 30, 2007. However, after
removing the non-cash expenses of $1,438,446, our normalized net loss margin
increased by 4 percentage points from a total normalized net loss $1,293,708
for the three-month period ended June 30, 2008 as compared to a net loss of
$1,130,571 for the three-month period ended June 30, 2007.

Six-Month Period Ended June 30, 2008 as
Compared to the Six-Month Period Ended June 30, 2007

Revenues. During the
six-month period ended June 30, 2008, we recognized revenues of $4,032,319, as
compared to revenues of $3,353,554 during the six-month period ended June 30,
2007, representing an increase of approximately 20.2%. This increase was the
result of the additional revenue from our 2007 acquisitions and organic
subscriber growth. The revenues in the first six months of 2008 include six
months of revenue from MicroLnk and six months of revenue from SpeedNet as
compared to the first six months ended June 30, 2007 which includes no revenue
from MicroLnk and only five months of revenue from SpeedNet. As the Companys
GAAP financials display revenues and marketing and advertising both net of
promotions and/or service credits, adjusting for these items, revenues for the
six months ended June 30, 2008 were $4.2 million.

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, professional fees and stock
based compensation totaled $8,973,651 for the six-month period ended June 30,
2008, as compared to $5,048,462 for the six-month period ended June 30, 2007,
representing an increase of approximately 77.8%. A majority of this increase,
65.1%, was due to the incurrence of $2,556,247 in non-cash stock-based and
warrant compensation expense for the six months ended June 30, 2008 as compared
to the six months ended June 30, 2007. Another contributing factor, accounting
for 30.2% of the increase in the operating loss, is the cost increases
associated with the larger customer base, including the acquisitions of
SpeedNet and MicroLnk, and the resulting increased costs associated with
running the expanded operations. Increased professional fees to support public
company requirements account for 3.5% of the increase. Additional marketing
initiatives for the continued organic expansion of the customer base and the
initiation of activities as a DISH retailer and related DISH inventory costs
account for 1.2% of the increase. Without the non-cash stock compensation
expense, normalized operating expenses would have been $6,412,819 for the
six-month period ended June 30, 2008, as compared to $5,043,877 for the
six-month period ended June 30, 2007, representing an increase of only 27.1%.
Our actual operating loss margin increased by 72 percentage points from a total
operating loss $4,941,332 of the six-month period ended June 30, 2008 as
compared to a loss of $1,694,908 for the six-month period ended June 30, 2007.
By removing non-cash stock compensation expense, our normalized operating loss
margin increased by less than 9 percentage points from a total normalized
operating loss $2,380,500 for the six-month period ended June 30, 2008 as
compared to a loss of $1,690,323 for the six-month period ended June 30, 2007.
Notably, the Company was not a public company in the six months of 2007 and
therefore did not incur costs related thereto. In addition, KeyOn has since
hired additional personnel, including senior executives in furtherance of its
acquisition strategy, public status and the associated growth of the business.

Payroll,
Bonuses and Taxes. Payroll bonuses and taxes totaled
$2,045,596 for the six-month period ended June 30, 2008, as compared to
$1,489,854 for the six-month period ended June 30, 2007, representing an
increase of approximately 37.3%. This increase was primarily due to the
incremental variable staff additions, such as customer service representatives
and installers that are needed to service the expanded customer base as a
result of our acquisitions of SpeedNet and MicroLnk in 2007. Additionally, we
have since hired additional personnel, including senior executives in
furtherance of our acquisition strategy, public status and the associated
growth of the business.

Depreciation
and Amortization. Depreciation and amortization expenses
totaled $1,399,314 for the six-month period ended June 30, 2008, as compared to
$1,194,291 for the six-month period ended June 30, 2007, representing an
increase of approximately 17.2%. This increase was primarily due to the
additional network footprint and customer premise equipment acquired in
connection with the acquisitions SpeedNet Services, Inc. and MicroLnk in 2007.

Other
General and Administrative Expenses. Other general
and administrative expenses totaled $676,880 for the six-month period ended
June 30, 2008, as compared to $855,058 for the six-month period ended June 30,
2007, representing a decrease of approximately 20.8%. The absence of expenses
incurred in connection with our

20

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acquisitions account for 20.2% of the decrease in the six-month period
ended June 30, 2008, as compared to the six-month period ended June 30, 2007.
The absence of expenses incurred on insurance premiums account for 18.0% of the
decrease in the six-month period ended June 30, 2008, as compared to the
six-month period ended June 30, 2007. The balance of the decrease, or 61.8%, is
due to our efforts to reduce and control overall operating costs.

Network
Operating Costs. Network operating costs, which
consist of tower rent, Internet transport costs and Internet termination
expense, totaled $1,470,274 for the six-month period ended June 30, 2008, as
compared to $988,832 for the six-month period ended June 30, 2007, representing
an increase of approximately 48.7%. The additional network footprint and
increased customer bases associated with our acquisitions of SpeedNet and
MicroLnk and our organic growth account for the majority of the increase. The
balance of the increase is related to higher than expected tower repair costs
and service credits due to severe weather in our Midwestern markets.

Marketing
and Advertising Expenses. Marketing and advertising
expenses totaled $301,080 for the six-month period ended June 30, 2008, as
compared to $230,635 for the six-month period ended June 30, 2007, representing
an increase of approximately 30.5%. This increase was primarily due to our
emphasis on organic growth across all of our markets as we have the ability to
market to a greater number of potential customers served by the additional
network footprint associated with the acquisitions of SpeedNet and MicroLnk
completed in 2007. Our marketing costs were 7.5% of revenue for the six-month
period ended June 30, 2008 and 6.9% for the six-month ended June 30, 2007,
representing a 1 percentage point increase.

Installation Expense. Installation expense, which
consists primarily of expenses associated with installation supplies, third
party installation costs and transportation expenses relating to the
installations, totaled $243,421 for the six-month period ended June 30, 2008,
as compared to $174,557 for the six-month period ended June 30, 2007,
representing an increase of approximately 39.5%. Installation volumes increased
by 21.6% for the six-month period ended June 30, 2008 as compared to the
six-month period ended June 30, 2007. Fuel costs during the six month period
ended June 30, 2008 as compared to June 30, 2007 have increased approximately
30% which accounts for 15% of the cost increase. The SpeedNet and MicroLnk
acquisitions account for 39.4% while organic growth accounted for 60.6% of the
installation volume increase for the six-month period ended June 30, 2008, as
compared to the six-month period ended June 30, 2007.

Professional
Fees. Professional fees, which consist of legal,
accounting, and other related expenses, totaled $245,141 for the six-month
period ended June 30, 2008, as compared to $110,650 for the six-month period
ended June 30, 2007, representing an increase of approximately 121.5%.
Specifically, legal fees account for 52.4%, accounting fees account for 31.7%,
and advisory and other professional fees account for 15.9% of the increase in
professional fee costs for the six-month period ended June 30, 2008, as compared
to the six-month period ended June 30, 2007. These additional expenses have
been incurred in support of the company now being a publicly traded company as
of August 9, 2007.

Stock-Based
and Warrant Compensation. Stock-based and warrant
compensation of $2,560,832 was expensed for the six-month period ended June 30,
2008, as compared to $4,585 for the six-month period ended June 30, 2007. The
expense for warrants granted as compensation for the guaranty on our term note
with Sun West Bank was $1,702,083 during the six-month period ended June 30,
2008. Stock-based compensation for stock options issued under our option plan
totaled $783,749 for the six-month period ended June 30, 2008, as compared to
stock option expense for the six-month period ended June 30, 2007 totaling
$4,585. Stock-based compensation for restricted stock was $75,000 for the
six-month period ended June 30, 2008.

Cost
of DISH Inventory. Cost of DISH inventory of $31,113
was expensed for the six-month period ended June 30, 2008, as compared to no
cost for the six-month period ended June 30, 2007. The expense for DISH
inventory is recognized immediately after installation. We began installations
as a DISH retailer in January 2008.

Other
Income and Expense. We incurred other income and
expense of $362,455 for the six-month period ended June 30, 2008, as compared
to $292,899 for the six-month period ended June 30, 2007, representing an
increase of 23.7%. We earned interest income during the six-month period ended June
30, 2007 as compared to negligible interest income earned during the six-month
period ended June 30, 2008. This difference is the reason for 41.1% of the
increase. The remaining reason for the increase, or 58.9%, is due to the
increased interest expense

21

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incurred in connection with lease financing in support of our continued
organic growth of our customer base and increased interest incurred on our term
loan.

Net
Loss. We had a net loss of $5,303,787 for the
six-month period ended June 30, 2008, as compared to a net loss of $1,987,807
for the six-month period ended June 30, 2007, representing an increase of
approximately 166.8%. The major contributing factor of the increased net loss
is the incurrence of $2,560,832 for non-cash expense stock-based and warrant
compensation expense for the six months ended June 2008, as compared to $4,585
incurred for the six months ended June 2007. This difference accounts for 77.1%
of the increase. The increased costs associated with running the expanded operations
of SpeedNet and MicroLnk contributed to 18.8% of the increase. Finally, 4.1% of
increase is the incremental professional fees incurred in support of our public
company status. Normalized net loss without the non-cash stock compensation
expense would have been $2,742,955 for the six-month period ended June 30, 2008
as compared to $1,983,222 for the six-month period ended June 30, 2007,
representing an increase of only 38.3%. Our net loss margin increased by 72
percentage points from a net loss $5,303,787 for the six-month period ended
June 30, 2008 as compared to a net loss of $1,987,807 for the six-month period
ended June 30, 2007. However, after removing the non-cash stock compensation
expense of $2,560,832 for the six months ended June 2008 and $4,585 for the six
months ended June 2007, our normalized net loss margin increased by 9
percentage points from a total normalized net loss $2,742,955 for the six-month
period ended June 30, 2008 as compared to a net loss of $1,983,222 for the
six-month period ended June 30, 2007.

Liquidity and Capital Resources

General

As of June
30, 2008 and June 30, 2007, we had cash of $21,549 and $519,223, respectively.

Net
Cash Used by Operating Activities. Net cash used in
operating activities totaled $1,201,615 for the six-month period ended June 30,
2008, as compared to net cash used from operating activities of $231,209 for
the six-month period ended June 30, 2007. The change in cash used in operating
activities is primarily attributed to the increases in professional fees in
support of our public company requirements, network operating costs relating to
the SpeedNet and MicroLnk territories. In addition we incurred, the incremental
variable staff additions, such as customer service representatives and
installers, which are needed to service the expanded customer base as a result
of our acquisitions of SpeedNet and MicroLnk in 2007, and we hired additional
personnel, including senior executives in furtherance of our acquisition
strategy, public status and the associated growth of the business, marketing
costs and an increase in accounts receivable.

Net Cash Used in Investing
Activities. Net
cash used in investing activities totaled $81,870 for the six-month period
ended June 30, 2008, as compared to $3,585,065 for the six-month period ended
June 30, 2007. In the six-month period ended June 30, 2007, we completed the
asset purchase of SpeedNet Services, Inc.

Net
Cash Provided By Financing Activities. Net cash
provided by financing activities totaled $988,035 for the six-month period
ended June 30, 2008, as compared to $4,330,807 for the six-month period ended
June 30, 2007. During the six-month period ended June 30, 2008, the company
entered into a commercial loan agreement for $4,500,000 of which $3,000,000 was
used to pay the prior term loan that was entered into during the six-month
period ending June 30, 2007. The company drew down $1,500,000 of the remaining
amount on the loan balance for use in operations. $530,388 was used during the
first six months of 2008 to pay down the balance on the operations financing
leases. Proceeds from the sale of stock for the six-month period ended June 30,
2007 totaled $1,608,050.

Working
Capital. As of June 30, 2008, we had negative working
capital of $8,467,385. This amount includes $4,500,000 of term debt, $889,908
for capital leases, and $388,294 for deferred revenue. We are currently in
discussions to extend the maturation of the Loan for an additional six months,
at our option, until February 8, 2009. Additionally, the Company is in the
process of obtaining additional secured loans from existing shareholders and
certain related parties as indicated in the Notes to the Financial Statements.
The Companys continued ability to execute pursuant to its business plan could
be significantly impacted in the event that the Company is unable to raise the
additional capital or to extend the maturity of its Loan with Sun West Bank.

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|         |                         
|-------- | ------------------------
|Item 4T. | 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. We were unable to conclude that our disclosure
controls and procedures are effective, as of the end of the period covered by
this report (June 30, 2008), in ensuring that material information that we are
required to disclose in reports that we file or submit 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. We believe that we will have effective internal
controls to meet this requirement prior to the filing of our annual report for
the year ended December 31, 2008.

Changes in Internal Control Over Financial
Reporting

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

PART 11  OTHER INFORMATION

|        |          
|------- | ---------
|Item 6. | Exhibits.

|             |  |                                                              
|------------ |  | -------------------------------------------------------------
|Exhibit
 No. |  | Description                                                  
|             |  |                                                              
|             |  |                                                              
|31.1*        |  | Section 302
 Certification by the Principal Executive Officer
|             |  |                                                              
|31.2*        |  | Section 302
 Certification by the Principal Financial Officer
|             |  |                                                              
|32.1*        |  | Section 906
 Certification by the Principal Executive Officer
|             |  |                                                              
|32.2*        |  | Section 906
 Certification by the Principal Financial Officer



---

* Filed herewith


23

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SIGNATURES

Pursuant
to the requirements of the Securities Exchange Act of 1934, the registrant has
duly caused this report to be signed on its behalf by the undersigned thereunto
duly authorized.

|                       |                                      |                                       
|---------------------- | ------------------------------------ | --------------------------------------
|                       | KEYON
 COMMUNICATIONS HOLDINGS, INC.
|                       |                                      |                                       
|Date: August
 14, 2008 | By:                                  | /s/ Jonathan Snyder                   
|                       |                                      |                                       
|                       |                                      | Jonathan
 Snyder                      
|                       |                                      | President
 and Chief Executive Officer
|                       |                                      | (Principal
 Executive Officer)        
|                       |                                      |                                       
|Date: August
 14, 2008 | By:                                  | /s/ Annette Eggert                    
|                       |                                      |                                       
|                       |                                      | Annette
 Eggert                       
|                       |                                      | Chief
 Financial Officer              
|                       |                                      | (Principal
 Financial Officer)        

24

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EXHIBIT INDEX

|             |  |                                                              
|------------ |  | -------------------------------------------------------------
|Exhibit
 No. |  | Description                                                  
|             |  |                                                              
|31.1*        |  | Section 302
 Certification by the Principal Executive Officer
|             |  |                                                              
|31.2*        |  | Section 302
 Certification by the Principal Financial Officer
|             |  |                                                              
|32.1*        |  | Section 906
 Certification by the Principal Executive Officer
|             |  |                                                              
|32.2*        |  | Section 906
 Certification by the Principal Financial Officer

|                 
|-----------------
|                 
|* Filed
 herewith

---