KeyOn Reports Record Results For Second Fiscal Quarter of 2011

KeyOn Communications Holdings, Inc. (OTCBB: KEYO) ("KeyOn” or the "Company”), one of the largest providers of wireless broadband, satellite video and voice over Internet protocol (VoIP) services in the United States, reported its financial results for the second quarter ended June 30, 2011. Additionally, as of June 1, 2011, KeyOn provides VoIP services directly utilizing its own network infrastructure acquired with the assets purchased from entities doing business as CommX.

Management Comments
Jonathan Snyder, President and CEO of KeyOn Communications, commented, "With these results, KeyOn is proving that its strategy of generating economies scale through acquisitions continues to be effective. As an example, our primary operating expense categories are all down as a percentage of revenues from the previous year’s quarter, except for depreciation and installation expense which have increased due to acquisitions and a 54% increase in organic new customer sales. We realized solid growth over the prior year’s quarter and our EBITDA loss continues to be reduced due to our growing scale – in fact, our EBITDA loss for the month of June was less than $75,000. Management believes that it could immediately achieve positive EBITDA at the expense of growth, but, as evidenced by our second quarter results, our strategy proves we can generate both strong revenue growth and operating margins.”

Snyder continued, "Our second quarter results include a full quarter of contribution from the acquisitions we completed in the first quarter, specifically the wireless assets of Wells Rural Electric Company (WREC) and ERF’s Central and North Central Texas areas. In June, we acquired the voice-over-IP (VoIP) assets of entities doing business as CommX which, in addition to sales through existing and new wholesale partners located throughout the U.S., provides us with the ability to sell VoIP services to our 20,000+ subscribers using our own Broadsoft-based (NASDAQ: BSFT) softswitch. On a pro forma basis including the CommX acquisition, second quarter revenues would have grown 94% over the prior year and 42% on a sequential basis. And, for the six months ended June 30, 2011, pro forma for all acquisitions, revenues would have been $6.8 million, or a $13.6 million annual run rate. As important, Adjusted EBITDA loss for the second quarter continues to narrow over the prior year’s quarter and sequentially, improving 40% and 24%, respectively.”

2011 Second Quarter Consolidated Results
During the three month period ended June 30, 2011, we recognized revenues of $2,839,315, as compared to revenues of $1,728,849 during the three month period ended June 30, 2010, representing an increase of approximately 64%. Our increased revenue was a result of the subscriber growth from the completion of six acquisitions during the last two quarters of the year ended December 31, 2010 and the six month period ended June 30, 2011, as well as the positive effects of the increase in organic marketing efforts during that second half of 2010 and through 2011.

Operating expenses, which consist of payroll, bonuses, taxes and stock based compensation, depreciation and amortization, other general and administrative costs, network operating costs, marketing and advertising, installation expense, and professional fees totaled $4,124,102 for the three month period ended June 30, 2011, as compared to $3,503,577 for the three month period ended June 30, 2010, representing an increase of approximately $620,000, or 17%. The increase was due primarily to the additional depreciation and amortization expense of approximately $438,000, or 71%, of the total increase.

By removing non-cash stock compensation expense, our operating loss margin improved by 18% percent from a total normalized operating loss of $1,261,792, or an operating loss margin of 44% for the three month period ended June 30, 2011 as compared to a loss of $1,071,244, or an operating loss margin of 62% for the three month period ended June 30, 2010.

We had a net loss of $1,284,693 for the three month period ended June 30, 2011, as compared to a net income of $675,741 for the three month period ended June 30, 2010, representing a decrease of $1,959,434. The primary reasons for the decrease were non-cash effects of the derivative accounting of the long term convertible note of $2,680,051 and non-cash stock compensation expense for personnel and professional fees of $703,484. If the effect of the conversion of the Note and the non-cash compensation expenses are removed our net loss would be $1,263,441 for the three months ended June 30, 2011, as compared to a net loss of 1,300,826 for the three months ended June 30, 2010, an improvement of 3%.

Adjusted EBITDA for the second quarter ended June 30, 2011, was negative $403,975 compared to a negative $673,775 in the second quarter of 2010, an improvement of 40%.

Outlook
Jonathan Snyder continued, "We are extremely excited about the prospects of integrating our VoIP services into our broadband offering as believe we can generate meaningful revenue and EBITDA growth. We are also very active in our acquisitions efforts and expect to continue to increase our subscriber base and value-added services through the remainder of 2011, including the receipt of stimulus funds for our Nevada award. Finally, KeyOn is poised to generate positive Adjusted EBITDA which we expect to report in the 3^rd quarter of this year.”

About KeyOn Communications Holdings, Inc.
KeyOn Communications Holdings Inc. (OTC BB: KEYO) is one of the largest providers of wireless broadband, satellite and voice over Internet protocol (VoIP) services in the United States, primarily targeting underserved markets with populations generally less than 50,000. KeyOn offers broadband services with VoIP and satellite video services to both residential and business subscribers across 11 Western and Midwestern states. KeyOn also offers hosted VoIP services to small to mid-sized businesses as well as to our residential customers through wholesale partners and retail direct. Through a combination of organic growth and acquisitions, KeyOn has expanded its network footprint to reach approximately 62,000 square miles and cover over 2,700,000 people, as well as small-to-medium businesses. With its successful track record of acquiring companies through its Rural UniFi initiative and growth of its overall subscriber base, KeyOn is one of the leading wireless broadband companies in the United States in terms of subscribers. Management intends to drive subscriber growth through additional acquisitions as well as organic growth across the company’s expanding footprint by offering bundled services including broadband, video, VoIP and related valuable services. The company has and intends to continue to opportunistically build mobile and/or nomadic WiMAX networks in and around its market footprint. More information on KeyOn can be found at http://www.keyon.com. Companies interested in participating in Rural UniFi can visit www.keyon.com/ruralunifi.html.

Non-GAAP Measures
This press release includes disclosure regarding "Adjusted EBITDA” which is a measurement used by KeyOn Communications to monitor business performance and is not recognized under GAAP (generally accepted accounting principles). Accordingly, investors are cautioned in using or relying upon these measures as alternatives to recognized GAAP measures.

"Adjusted EBITDA” is defined as earnings or loss from operations adjusted for depreciation, amortization, goodwill impairment, non-cash stock-based compensation, broadband stimulus application expenses and other non-recurring expenses, including the duplication of accounting personnel, temporary employees, and travel and moving expenses in connection with the relocation of our accounting department. Adjusted EBITDA should not be construed as an alternative to operating loss as defined by GAAP.

The Non-GAAP measure, Adjusted EBITDA, including non-recurring expenses, has been reconciled to Net Income/(Loss) as follows:

Safe Harbor Statement
This press release contains forward-looking statements, including, without limitation, anything relating or referring to future financial results and plans for future business development activities, and are thus prospective. Forward-looking statements may include, without limitation, the company’s expectations regarding: future financial and operating performance and financial condition; plans, objectives and strategies; product development; industry conditions; the strength of its balance sheet; and liquidity and financing needs. Readers are cautioned not to put undue reliance on such forward-looking statements, which are not a guarantee of performance and are subject to a number of uncertainties and other factors, many of which are outside of the company’s control, which could cause actual results to differ materially from such statements, including, without limitation, its ability to successfully complete accretive acquisitions and grow its business organically, maintain the health of the Company’s networks to minimize losses to the Company’s subscriber base, the Company’s reliance on multi-user unlicensed spectrum to service subscribers, competition from larger and better financed providers, the Company’s reliance on third party sales representatives and new and more burdensome telecommunications’ regulations. For a more detailed description of the factors that could cause such a difference, please refer to the company’s filings with the Securities and Exchange Commission, including the information under the headings "Risk Factors” and "Forward-Looking Statements” in our Form 10-K filed on March 30, 2011. Consequently, future events and actual results could differ materially from those set forth in, contemplated by, or underlying the forward-looking statements contained herein. The company undertakes no obligation to update or supplement such forward-looking statements.