KeyOn Communications Agrees to Merge with Internet America to Create a Stronger Provider of Broadband Services to Rural Communities

Business Wire, Nov 18, 2008

Creates a Company with a Total of 44,500 Customers and Double Present Revenues

Combination of Two Early Leaders in Wireless Broadband Communications

Establishes a Stronger Financial Platform for Potentially Faster Growth of Wireless Broadband Subscribers over Rural Areas in 11 States

HOUSTON & OMAHA, Neb. -- Internet America, Inc. (OTCBB:GEEK) and KeyOn Communications Holdings, Inc. (OTCBB:KEYO) entered into a definitive agreement to merge in a stock-for-stock transaction, with KeyOn shareholders maintaining 45% of the merged companies.

Both Internet America and KeyOn provide wireless broadband services to residential and business customers in underserved and rural communities. Internet America also offers dial-up, DSL and related Internet services to its customers, while KeyOn also offers video satellite services through a national partnership with DISH Network Corporation. The combined entity, called Internet America, will have approximately 44,500 subscribers including approximately 23,500 wireless broadband subscribers.

William (Billy) Ladin, chairman and chief executive officer of Internet America, commented, "We see significant opportunities in our industry and believe now is the time to create a larger wireless base of customers with more integrated and efficient systems all supported by a talented management team. Internet America has spent 2008 streamlining systems, focusing on the quality process, and putting the company in a financial position to capitalize on the challenging economic climate that exists today. The results of these efforts are beginning to be realized as evidenced in our first quarter results."

Ladin continued, "KeyOn is headed in a similar direction. This merger builds a stronger platform for incremental subscriber and revenue growth. With double the revenue base, we expect to create greater operating leverage, eliminate certain duplicative operating costs, and enhance profitability. We intend to be the aggressor while competitors, who have not taken similar steps, may reduce their focus on rural markets."

Jonathan Snyder, president and chief executive officer of KeyOn Communications, said, "We are fortunate to have found partners who share the same vision and strategy for creating shareholder value in this industry. We have both been successful in our efforts: expanding the reach and awareness of broadband services to communities that have little or no broadband availability and acquiring a combined total of about 13,000 subscribers since 2006. There are many potential acquisitions, and we expect to continue to be active in this area. In combination with organic subscriber growth, we plan to take our combined companies to yet another level. Because KeyOn is taking steps prior to the closing of the merger to deleverage its balance sheet through an equity raise and debt restructurings, the combined company should have more resiliency in these tough economic times. We believe our shareholders can be rewarded by our combined focus on profitability and careful execution of our business plan."

The combined September 30, 2008 financial metrics include total quarterly revenues of $3.9 million, and a healthy cash position of $3.4 million. Internet America was Adjusted EBITDA positive from July through October 2008 and KeyOn was Adjusted EBITDA neutral for the months of August through September 2008. The transaction also increases Internet America's wireless broadband revenues by approximately 180% which represents 75% of total revenue compared to 52% of Internet America standalone for the quarter ended September 30, 2008. As part of this transaction, KeyOn will restructure its $4,500,000 short-term obligation into long-term debt obligation with a 5-year maturity and a ten-year amortization, conditioned on the transaction closing.

Management expects the efficiencies derived from scale economies will enable the company to immediately reduce and maintain lower overall operating expenses. Operating margins are also expected to be positively impacted by the cross-selling of existing products and the introduction of new, related services across the expanded customer base. With greater operational scale and subscriber breadth, streamlined systems and processes, and improvements KeyOn has made to certain current liabilities, management believes the combined company will be EBITDA positive after a period of integration and should begin to generate positive cash flow.

Mr. Ladin will continue in his roles as CEO and Chairman. Mr. Snyder will be appointed Executive Vice Chairman and will have oversight over corporate development and communications. Other members of the executive team will include talented professionals from both Internet America and KeyOn. The Internet America Board of Directors will be expanded by two designees from KeyOn Communications. The headquarters of the company will remain in Houston, and KeyOn's current headquarters in Omaha will be converted into one of the company's operations and administrative facilities.