10QSB

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

WASHINGTON, D.C. 20549

FORM 10-QSB

x QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(D) OF THE

SECURITIES EXCHANGE ACT OF 1934

FOR THE QUARTERLY PERIOD ENDED MARCH 31, 2007

OR

 o TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(D) OF THE

SECURITIES ACT OF 1934

FOR THE TRANSITION PERIOD FROM _________ TO _____

COMMISSION FILE NUMBER 000-25147

INTERNET AMERICA, INC.

(Exact name of registrant as specified in its charter)

TEXAS	86-0778979
(State or other jurisdiction of  incorporation or organization)	(I.R.S. Employer Identification Number)
10930 W. Sam Houston Pkwy., N., Suite 200	77064
(Address of principal executive offices)	(Zip Code)

(713) 968-2500

(Registrant's telephone number, including area code)

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 xNo o

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act).

Yes xNo o

As of May 09, 2007, registrant had 12,508,914 shares of Common Stock at $.01 par value, outstanding.

Transitional Small Business Disclosure Format (Check one): Yes o No x

PART I - FINANCIAL INFORMATION

ITEM 1 - FINANCIAL STATEMENTS

INTERNET AMERICA, INC. AND SUBSIDIARIES

CONDENSED CONSOLIDATED BALANCE SHEETS

		March 31, 2007			June 30, 2006
ASSETS		(unaudited)			(audited)
CURRENT ASSETS:
Cash and cash equivalents	$	671,159		$	937,401
Accounts receivable, net of allowance for uncollectible accounts of $13,576 and $6,996 as of March 31, 2007 and June 30, 2006 respectively		105,090			120,208
Inventory		242,269			280,888
Prepaid expenses and other current assets		466,014			299,379
Total current assets		1,484,532			1,637,876
PROPERTY AND EQUIPMENT — Net		886,056			1,082,590
OTHER ASSETS — Net		4,609,794			4,812,122
TOTAL	$	6,980,382		$	7,532,588
LIABILITIES AND SHAREHOLDERS' EQUITY
CURRENT LIABILITIES:
Trade accounts payable	$	262,921		$	419,766
Accrued liabilities		332,225			465,836
Deferred revenue		1,266,820			1,292,430
Current portion of long-term debt		98,546			98,208
Current portion of capital lease obligations		47,362			57,390
Total current liabilities		2,007,874			2,333,630
Long-term debt		94,765			169,044
Capital lease obligations		92,423			127,344
Other Long-term liabilities		–			47,320
Total liabilities		2,195,062			2,677,338
COMMITMENTS AND CONTINGENCIES
SHAREHOLDERS' EQUITY:
Common stock, $.01 par value; 40,000,000 shares authorized 12,508,914 and 12,508,914 issued and outstanding as of March 31, 2007 and June 30, 2006, respectively		125,089			125,089
Additional paid-in capital		57,092,390			57,061,952
Accumulated deficit		(52,432,159	)		(52,331,791	)
Total shareholders' equity		4,785,320			4,855,250
TOTAL	$	6,980,382		$	7,532,588

See accompanying notes to condensed consolidated financial statements.

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INTERNET AMERICA, INC. AND SUBSIDIARIES

CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS

(Unaudited)

		Three Months Ended March 31,						Nine Months Ended March 31,
		2007			2006			2007			2006
REVENUES:
Internet services	$	1,971,684		$	2,260,354		$	6,057,407		$	6,659,498
Other		–			293,382			66			1,013,756
Total		1,971,684			2,553,736			6,057,473			7,673,254
OPERATING COSTS AND EXPENSES:
Connectivity and operations		1,038,404			1,654,217			3,068,017			4,747,937
Sales and marketing		60,918			34,592			155,433			198,875
General and administrative		728,142			857,932			2,301,825			2,393,864
Bad debt expense		2,875			21,893			5,579			53,419
Depreciation and amortization		203,917			233,129			617,609			662,158
Total		2,034,256			2,801,763			6,148,463			8,056,253
LOSS FROM OPERATIONS		(62,572	)		(248,027	)		(90,990	)		(382,999	)
INTEREST EXPENSE, NET		302			1,715			9,377			29,497
NET LOSS	$	(62,874	)	$	(249,742	)	$	(100,367	)	$	(412,496	)
NET LOSS PER COMMON SHARE:
SHARE:
BASIC	$	(0.01	)	$	(0.02	)	$	(0.01	)	$	(0.03	)
DILUTED	$	(0.01	)	$	(0.02	)	$	(0.01	)	$	(0.03	)
WEIGHTED AVERAGE COMMON
SHARES OUTSTANDING:
BASIC		12,508,914			12,495,064			12,508,914			12,461,925
DILUTED		12,508,914			12,495,064			12,508,914			12,461,925

See accompanying notes to condensed consolidated financial statements.

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INTERNET AMERICA, INC. AND SUBSIDIARIES

CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS

(Unaudited)

		Nine Months Ended March 31,
		2007			2006
OPERATING ACTIVITIES:
Net loss	$	(100,367	)	$	(412,496	)
Adjustments to reconcile net loss to net cash
provided by (used in) operating activities:
Depreciation and amortization		617,609			66,158
Gain on disposal of property and equipment		(89	)		–
Provision for bad debt expense		5,579			53,419
Stock based compensation		30,438			–
Changes in operating assets and liabilities, net of acquisitions:
Accounts receivable		9,539			66,680
Inventory		100,945			(248,099	)
Prepaid expenses and other current assets		(166,636	)		(175,782	)
Other assets		–			(7,357	)
Accounts payable and accrued liabilities		(352,782	)		(264,524	)
Other liabilities		(47,320	)		–
Deferred revenue		(25,610	)		(108,675	)
Net cash provided by (used in) operating activities		71,306			(434,676	)
INVESTING ACTIVITIES:
Purchases of property and equipment		(219,258	)		(470,293	)
Proceeds from sale of property and equipment		600			–
Cash paid at closing for acquisitions		–			(248,371	)
Net cash used in investing activities		(218,658	)		(718,664	)
FINANCING ACTIVITIES:
Proceeds from issuance of common stock		–			9,981
Principal payments under long term debt		(73,941	)		(187,920	)
Principal payments under capital lease obligations		(44,949	)		(53,081	)
Net cash used in financing activities		(118,890	)		(231,020	)
NET DECREASE IN CASH AND CASH EQUIVALENTS		(266,242	)		(1,384,360	)
CASH AND CASH EQUIVALENTS, BEGINNING OF PERIOD		937,401			2,364,287
CASH AND CASH EQUIVALENTS, END OF PERIOD	$	671,519		$	979,927
SUPPLEMENTAL INFORMATION:
Cash paid for interest	$	17,744		$	27,408
NON-CASH INVESTING AND FINANCING ACTIVITIES:
Transfers between fixed assets and inventory	$	–		$	187,417
Assets acquired through accounts payable	$	62,326		$	93,536
Stock issued in connection with acquisitions	$	–		$	52,500
Debt assumed in connection with acquisitions	$	–		$	65,166
Debt issued in connection with acquisitions	$	–		$	136,362

See accompanying notes to condensed consolidated financial statements.

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INTERNET AMERICA, INC. AND SUBSIDIARIES

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

(Unaudited)

1.   Basis of Presentation

Certain information and footnote disclosures normally included in financial statements prepared in accordance with generally accepted accounting principles have been condensed or omitted pursuant to Article 10 of Regulation S-X of the Securities and Exchange Commission. The accompanying unaudited condensed consolidated financial statements reflect, in the opinion of management, all adjustments necessary to achieve a fair statement of the Company's consolidated financial position and consolidated results of operations for the interim periods presented. All such adjustments are of a normal and recurring nature. These condensed consolidated financial statements should be read in conjunction with the consolidated financial statements for the year ended June 30, 2006 included in the Company’s Annual Report on Form 10-KSB (File No 000-25147).

2.   Basic and Diluted Net Loss Per Common Share

There are no adjustments required to be made to net loss for the purpose of computing basic and diluted earnings per share (“EPS”) for the three and nine months ended March 31, 2007 and 2006. There were no options exercised to purchase shares of common stock during the nine months ended March 31, 2007 and 2006.

3.   Employee Stock Option Plans

On March 30, 2007, the Board of Directors adopted the 2007 Stock Option Plan (“2007 Plan”) under which options to purchase up to 2,000,000 shares may be granted as incentive and nonqualified stock options to employees, executives and directors. The 2007 Plan will be submitted to the Shareholders for approval at the next annual meeting of stockholders. In connection with the adoption of the 2007 Plan, the Board of Directors amended the 2004 Non-Employee Director Plan to reduce the number of shares available for issuance upon the exercise of options under that plan from 600,000 to 131,556 being the number of shares covered by outstanding options granted under that plan as of March 30, 2007. The Board of Directors also determined that the terms of the 1996 and 1997 Stock Option Plans of the Company, with combined reserved shares of 1,425,000, will not be renewed.

On March 30, 2007, the Board of Directors approved the granting of stock options under the 2007 Plan, in order to retain and incentivize employees, executives and directors. The granting of these stock options is subject to the approval of the Shareholders at the next annual meeting. All options will be granted at an exercise price of $0.50 per share, which is higher than the current market price of the Company’s stock. Options to purchase the following number of shares will be granted to the category of persons indicated: an aggregate of 168,444 shares to directors, 300,000 shares to executive officers and 335,000 shares to non-executive employees. The options will vest 25% at March 30, 2007 and 25% at each anniversary thereafter, except that options granted to employees or directors with less than 1 year of service vest 25% at each anniversary of March 31,2007.

On July 1, 2006, the Company adopted Statement of Financial Accounting Standard (“SFAS”) No. 123 (revised 2004), “Share-Based Payment,”(“SFAS 123(R)”) which requires the measurement and recognition of compensation expense for all share-based payment awards made to employees and directors including employee stock options based on estimated fair values. SFAS 123(R) supersedes the Company’s previous accounting under Accounting Principles Board Opinion No. 25, “Accounting for Stock Issued to Employees” (“APB 25”) for periods beginning in fiscal 2006. In March 2005, the Securities and Exchange Commission issued Staff Accounting Bulletin No. 107 (“SAB 107”) relating to SFAS 123(R). The Company has applied the provisions of SAB 107 in its adoption of SFAS 123(R).

The Company adopted SFAS 123(R) using the modified prospective transition method, which requires the application of the accounting standard as of July 1, 2006, the first day of the Company’s fiscal year ended June 30, 2007. The Company’s Consolidated Financial Statements for the prior periods have not been restated to reflect, and do not include, the impact of SFAS 123(R). The effect on net loss and loss per share of the Company before and after application of the fair value recognition provision of SFAS 123(R) to stock-based employee compensation for the nine months ended March 31, 2007 is as follows:

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3.   Employee Stock Option Plans (continued)

		Nine Months Ended March 31, 2007
		Net Loss Before Adoption of SFAS 123(R)			Effect of Stock-Based Compensation Expense			Net Income (Loss) As Reported
Loss before income tax	$	( 69,929	)	$	(30,438	)	$	(100,367	)
Provision for income tax		–			–			–
Net Loss	$	( 69,929	)	$	(30,438	)	$	(100,367	)
Earnings per share:
Basic	$	(0.00	)	$	(0.00	)	$	(0.01	)
Diluted	$	(0.00	)	$	(0.00	)	$	(0.01	)

The proforma effect on net loss and loss per share as if the Company had applied the fair value recognition provision of SFAS 123(R) would be as follows:

		Nine Months Ended March 31, 2006
Reported net loss	$	(412,496	)
Less: SFAS No. 123(R) compensation expense		(40,112	)
Pro forma net loss	$	(452,608	)
Reported basic loss per share	$	(0.03	)
Reported diluted loss per share	$	0.03	)
Less: SFAS No. 123(R) compensation expense	$	(0.00	)
Pro forma basic loss per share	$	(0.03	)
Pro forma diluted loss per share	$	(0.03	)

4.   Use of estimates

The preparation of consolidated financial statements in conformity with accounting principles generally accepted in the United States requires management to make estimates and assumptions that affect the reported amounts of assets and disclosure of contingent assets and liabilities at the date of the consolidated financial statements and the reported amounts of revenues and expenses during the reporting period. Actual results could differ significantly from these estimates.

5.   Other Assets

The carrying value of other assets at March 31, 2007 and June 30, 2006 is as follows:

		March 31, 2007			June 30, 2006
Goodwill	$	26,047,266		$	26,047,266
Accumulated amortization-goodwill		(21,734,139	)		(21,734,139	)
Total goodwill, net		4,313,127			4,313,127
Subscriber acquisition costs		1,244,102			1,244,102
Accumulated amortization-subscriber acquisition costs		(977,009	)		(774,681	)
Total subscriber acquisition costs, net		267,093			469,421
Deposits		29,574			29,574
Total other assets, net	$	4,609,794		$	4,812,122

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The amortization period for subscriber acquisition costs is 36 months. Amortization expense for the three and nine months ended March 31, 2007, was approximately $67,000 and $202,000, respectively. As of March 31, 2007, amortization expense for the fiscal years ending June 30, 2007, 2008 and 2009 is expected to be approximately $270,000, $157,000 and $43,000, respectively.

6.   Income Taxes

During the three and nine months ended March 31, 2007 and the three and nine months ended March 31, 2006, the Company generated a net loss. No provision for income taxes was recorded for the three and nine months ended March 31, 2006 and March 31, 2007, as the Company continues to generate losses. As of March 31, 2007, the Company continues to maintain a full valuation allowance for its net deferred tax assets of approximately $12.3 million. Given its limited history of generating net income, the Company has concluded that it is not more likely than not that the net deferred tax assets will be realized.

7.   Long-Term Debt

Long-term debt consists of:

		March 31, 2007			June 30, 2006
Note payable due November 15, 2007, payable in monthly installments of $1,825, bearing interest at prime plus 3%	$	15,626		$	31,200
Note payable due September 22, 2007, payable in annual installments of $41,667 with interest imputed at 8% (net of unamortized discount of $3,087)		38,580			74,303
Note payable due May 30, 2007, payable in monthly installments of approximately $987, bearing interest at prime plus 2%		4,809			13,201
Note payable due July 19, 2009, payable in quarterly payments of $7,751 with interest imputed at 9% (net of unamortized discount of $29,409)		92,174			94,612
Note payable due January 23, 2011, payable in bi-annual installments of $13,917 with interest imputed at 8% (net of unamortized discount of $8,131)		34,895			32,980
Credit card line of credit advance, payable on demand, bearing interest at prime plus 6.5%		7,227			20,956
		193,311			267,252
Less current portion		(98,546	)		(98,208	)
Total long-term debt	$	94,765		$	169,044

The Company’s long-term debt is unsecured except for approximately $20,000 and $44,000 as of March 31, 2007 and June 30, 2006, respectively, which is secured by certain inventory and equipment. The prime rate at March 31, 2007 and June 30, 2006 was 7.75% and 6.25%, respectively.

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8.   Capital Lease Obligations

The Company leases certain phone equipment, wireless equipment and switches under leases with bargain purchase options. The following is a schedule by fiscal years of the future minimum lease payments under these capital leases together with the present value of the net minimum lease payments as of March 31, 2007:

2007		15,977
2008		54,368
2009		54,368
2010		31,713
Total minimum lease payments		156,426
Less amounts representing interest		(16,641	)
Present value of minimum capitalized payments		139,785
Less current portion		(47,362	)
Long-term capitalized lease obligations	$	92,423

9.   Related Parties

The following table shows amounts paid to three non-employee directors for serving on the Company’s board of directors during the nine months ended March 31, 2007 and 2006:

		Nine Months Ended March 31,
		2007		2006
Troy LeMaile Stovall	$	12,250	$	11,500
Justin McClure		12,000		11,500
John Palmer		11,250		10,250
Total director fees	$	35,500	$	33,250

10.   New Accounting Pronouncements

In February 2007, the FASB issued SFAS 159, "The Fair Value Option for Financial Assets and Financial Liabilities," ("SFAS 159") which permits the choice to measure certain financial assets and liabilities at their fair value at specified election dates. SFAS 159 is effective as of the beginning of an entity's first fiscal year that begins after November 15, 2007. The new standard is effective for the Company for the year ended June 30, 2008, unless early adoption is elected. The Company does not expect the new standard to have a material impact on its financial position or results of operation.

During the three and nine months ended March 31, 2007, no new other accounting pronouncements have been issued or adopted, except as disclosed in the Form 10-KSB for the year ended June 30, 2006. None of these pronouncements are expected to have a material impact on the Company’s consolidated financial statements.

11.   Letter of Intent to Acquire Teleshare Communications Services, Inc.

On February 27, 2007, the Company entered into a non-binding letter of intent with the shareholders of Teleshare Communications Services, Inc. to acquire 100% ownership in their wireless Internet service business. The Company is proceeding with due diligence to negotiate and excute a definitive stock purchase agreement.

12.   Letter of Intent to Acquire Assets of NoDial.net, Inc.

On March 30, 2007, the Company entered into a definitive agreement to acquire substantially all of the assets and assume certain liabilities of NoDial.net, Inc., a wireless Internet service provider near Victoria, Texas, for cash and long-term notes. The agreement is subject to due diligence and the negotiation and execution of a definitive asset purchase agreement.

13.   Subsequent Events

On April 20, 2007, the Company entered into a definitive agreement to acquire substantially all of the assets and assume certain liabilities of Shadownet, Inc., a wireless Internet service provider in Victoria, Texas, for cash and long-term notes. The agreement is subject to due diligence and the negotiation and execution of a definitive asset purchase agreement.

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ITEM 2.

MANAGEMENT'S DISCUSSION AND ANALYSIS OF

FINANCIAL CONDITION AND RESULTS OF OPERATIONS

Certain statements contained in this Form 10-QSB constitute "forward-looking statements" within the meaning of Section 27A of the Securities Act of 1933 and Section 21E of the Securities Exchange Act of 1934. These statements, identified by words such as "anticipate," "believe," "estimate," "should," "expect" and similar expressions include our expectations and objectives regarding our future financial position, operating results and business strategy. These statements reflect the current views of management with respect to future events and are subject to risks, uncertainties and other factors that may cause our actual results, performance or achievements, or industry results, to be materially different from those described in the forward-looking statements. We do not intend to update the forward-looking information to reflect actual results or changes in the factors affecting such forward-looking information. Our Annual Report on Form 10-K for the fiscal year ended June 30, 2006 and other publicly filed reports discuss some additional important factors that could cause our actual results to differ materially from those in any forward-looking statements. See “Safe Harbor” statement below.

Overview

Internet America, Inc. (the “Company”) is an Internet service provider (“ISP”) serving approximately 34,000 subscribers in Texas as of March 31, 2007. A subscriber represents an active, billed service. One customer account may represent multiple subscribers depending on the number of active and billed services for that customer. The Company derives substantially all revenues from services, primarily Internet access services, and related fees, and such revenues represented 100% of our revenue for the quarter ended March 31, 2007.  For the year ended June 30, 2006, Internet access services accounted for 89.5% of total revenue, with the remaining percentage attributable primarily to wireless reseller revenues. The Company discontinued wireless reseller sales in the quarter ending March 31, 2006 due to low gross profit margins. For the nine months ended March 31, 2006, Internet access services accounted for 85.9% of total revenue, with the remaining percentage attributable primarily to wireless equipment reseller revenues.

The Company continues to experience an attrition of dial-up service customers. The loss of these customers is primarily attributable to their moving to broadband connectivity with other service providers. The largest competitors in broadband access are the cable companies and regional Bell operating companies.  We operate in a highly competitive market for each of our service offerings.  The competitive environment impacts the churn rates we experience as well as the number of new customers we are able to add.

The Company continues to focus on providing wireless Internet connectivity to customers in under-served markets of Texas through acquisitions, internal growth, and a gradual transition into more cost effective wireless technologies. During the fiscal year ended June 30, 2006, we expanded in the suburban and rural markets near San Antonio and Houston, Texas, through acquisitions and deployment of new infrastructure. We also added new infrastructure in north central Texas, our other major wireless market, enabling additional growth within all of the markets we presently serve. The Company is pursuing additional growth within the geographic areas we cover through new acquisition opportunities in non-metropolitan markets where competition is less intense and the demand for Internet connectivity may be under-served. By April of 2007, we entered into letters of intent to acquire three wireless ISPs headquartered in Crosby and Victoria, Texas. The first of these, Teleshare Communication Services, Inc. (“Teleshare”), is based east of Houston in Crosby and provides service to areas east, north, and west of Houston, some of which are adjacent to our existing coverage but not overlapping. This acquisition will expand our service to areas that are geographically adjacent to our current coverage areas but in which we have not yet actively marketed our services. The other two acquisitions, NoDial.net, Inc. and Shadownet, Inc., in the Victoria area will again expand our service adjacent to areas that we presently serve and also expand our coverage area. Upon completion of the Teleshare acquisition, we anticipate adding four Teleshare executives to the Internet America management team including Mark Ocker, the owner and President of Teleshare, as a senior executive within Internet America.

While we have not entered into any additional agreements to acquire other ISPs, we are in various stages of discussions with several and may proceed to definitive documentation prior to our fiscal year end on June 30, 2007. At the present time, all of our discussions are with ISPs within the same general geographic areas of Texas generally bounded by and surrounding Dallas/Ft. Worth on the north; Corpus Christi on the south, Houston and Galveston Bay area to the east; and San Antonio/Austin/Hill Country to the west.

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In addition to the rural market, Internet America anticipates participating in the development and deployment of wireless broadband in the metropolitan markets of Texas by selling its products over wireless systems which are being developed and constructed by cooperation between city and local governments and corporations.  This approach will alleviate much of the capital requirement in major metropolitan markets while allowing Internet America to focus on its forte in consumer marketing.

As the Company’s business and direction becomes more focused on the consolidation and development of the rural markets, sales and marketing to the major metropolitan areas, and a gradual transition to higher performance and lower cost wireless technologies, management believes there is an excellent opportunity for revenue growth in the next several years. Internet America’s prior experience in marketing to metropolitan markets will be reutilized in introducing wireless Internet to other growth areas.

Having recognized the transitions taking place in the communications industry that affect internet connectivity, Internet America has spent the last several years re-inventing itself along these lines while maintaining the systems developed for selling, billing, and supporting hundreds of thousands of dial up internet customers and applying them to the support of a similar number of wireless customers.  These same systems and controls remain in place with a proven track record and are being used daily.

The Company’s customer count for wireless Internet services has increased to approximately 4,200 subscribers as of March 31, 2007 from 3,900 subscribers at December 31, 2006. Upon the completion of the three acquisitions that were announced in April, 2007, wireless subscriber count would be between 6,000 and 6,500. Management believes that we are poised for additional growth as we have targeted areas where competition is less intense and demand for Internet connectivity may be under-served. Growth of customer count for wireless Internet services should continue to come from organic growth and acquisitions. Additional acquisitions will allow the Company to more rapidly expand in areas that are pre-determined to be underserved and consistent with our development plans. The internal growth and the additional acquisitions will help to replace declining revenues due to attrition of dial-up customers, and management believes this will allow the Company to begin to regain revenue and profits. More rapid growth through acquisitions will provide economies of scale cost savings to the acquired operations, and management believes this will allow for a more rapid return to profits and greater value to our subscriber based business.

Company management believes the initiatives identified above are instrumental to the achievement of our goals, but they may be subject to competitive, regulatory and other events and that sufficient capital may not be available and other circumstances that are beyond our control. We can provide no assurance that we will be successful in achieving any or all of the initiatives, that the achievement or existence of such initiatives will result in profit improvements, or that other factors will not arise that would adversely affect future profits.

Statement of Operations

Internet services revenue is derived from dial-up Internet access, including analog and ISDN access, DSL access, dedicated connectivity, wireless access, bulk dial-up access, web hosting services, and value-added services, such as multiple e-mail boxes, personalized e-mail addresses and Fax-2-Email services. In addition to miscellaneous revenue, other revenue includes wireless equipment reseller revenues, which was discontinued in March 2006.

Prior to fiscal 2005 the Company operated primarily out of its corporate headquarters in Dallas, Texas. In fiscal 2005, in addition to the corporate office, the Company began operating out of local offices including computer centers in Corsicana, Hillsboro, and Stafford, Texas. In March 2006, the corporate headquarters were moved to Houston, Texas. Operating expenses for the Company includes operating expenses for both the corporate office and the local computer centers.

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A brief description of each element of our operating expenses follows:

Connectivity and operations expenses consist primarily of setup costs for new subscribers, telecommunication costs, merchant processing fees and wages of network operations and customer support personnel. Connectivity costs include (i) fees paid to telephone companies for subscribers' dial-up connections to our network; (ii) fees paid to backbone providers for connections from our network to the Internet; and (iii) equipment and tower lease costs for our new wireless networks.

Sales and marketing expenses consist primarily of creative and production costs, costs of media placement, management salaries and call center wages. Advertising costs are expensed as incurred.

General and administrative expenses consist primarily of administrative salaries, professional services, rent and other general office and business expenses.

Bad debt expense (recoveries) consists primarily of customer accounts that have been deemed uncollectible and will potentially be written off in future periods, net of recoveries. Historically, the expense has been based on the aging of customer accounts, whereby all accounts that are 90 days or older have been provided for as a bad debt expense.

Depreciation expense is computed using the straight-line method over the estimated useful lives of the assets or the capital lease term, as appropriate. Data communications equipment, computers, data servers and office equipment are depreciated over three years. We depreciate furniture, fixtures and leasehold improvements over five years. Amortization expense consists of the amortization of subscriber acquisition costs.

Our business is not subject to any significant seasonal influences.

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Results of Operations

Three Months Ended March 31, 2007 Compared to Three Months Ended March 31, 2006

The following table sets forth certain unaudited financial data for the three months ended March 31, 2007 and 2006. Operating results for any period are not indicative of results for any future period. Dollar amounts are shown in thousands (except per share data and subscriber counts).

		Three Months Ended March 31, 2007					Three Months Ended March 31, 2006
				% of					% of
		(000's)		Revenues			(000's)		Revenues
STATEMENT OF OPERATIONS DATA:
REVENUES:
Internet services	$	1,972		100.0	%	$	2,260		88.5	%
Other		-		-	%		294		11.5	%
Total		1,972		100.0	%		2,554		100.0	%
OPERATING COSTS AND EXPENSES:
Connectivity and operations		1,039		52.7	%		1,654		64.8	%
Sales and marketing		61		3.1	%		35		1.4	%
General and administrative		728		36.9	%		858		33.6	%
Bad debt expense		3		0.2	%		22		0.9	%
Depreciation and amortization		204		10.3	%		233		9.1	%
Total		2,035		103.2	%		2,802		109.8	%
OPERATING LOSS		(63	)	(3.2	)%		(248	)	(9.7	)%
INTEREST EXPENSE, NET		-		-	%		2		0.1	%
NET LOSS	$	(63	)	(3.2	)%	$	(250	)	(9.8	)%
NET LOSS PER COMMON SHARE:
BASIC AND DILUTED	$	(0.01	)			$	(0.02	)
WEIGHTED AVERAGE COMMON
SHARES OUTSTANDING:
BASIC AND DILUTED		12,509					12,495
OTHER DATA:
Subscribers at end of period (1)		34,000					46,000
EBITDA(2)	$	141				$	(15	)
EBITDA margin(3)		7.0	%				(1.0	)%
Reconciliation of net loss to EBITDA:
Net loss	$	(63	)			$	(250	)
Add:
Depreciation and amortization		204					233
Interest expense (income), net		-					2
EBITDA(2)	$	141				$	(15	)

(1) A subscriber represents an active, billed service. One customer account may represent multiple subscribers depending on the number of active and billed services for that customer.

(2) EBITDA (earnings before interest, taxes, depreciation and amortization) is not a measurement of financial performance under generally accepted accounting principles (GAAP) and should not be considered an alternative to net income as a measure of performance. Management has consistently used EBITDA on a historical basis as a measurement of the Company’s current operating cash income.

(3) EBITDA margin represents EBITDA as a percentage of total revenue.

12

Total revenue. Total revenue decreased by $582,000, or 22.8%, to $1,972,000 for the three months ended March 31, 2007, from $2,554,000 for the three months ended March 31, 2006. The Company’s subscriber count decreased by 12,000, or 26.1%, to 34,000 as of March 31, 2007 compared to 46,000 as of March 31, 2006. The decrease in subscriber counts is attributed to the loss of dial-up customers moving to other providers’ broadband services. The decrease in revenue is primarily attributable to the loss of dial-up customers partially offset by an increase in wireless subscribers. Wireless equipment reseller revenue for the three months ended March 31, 2006 was $281,000. The wireless equipment reseller sales were discontinued in the quarter ended March 31, 2006 due to low profit margins and increased bad debts, and there were no revenues related to these sales for the three months ended March 31, 2007.

Connectivity and operations. Connectivity and operations expense decreased by $615,000, or 37.2%, to $1,039,000 for the three months ended March 31, 2007 from $1,654,000 for the three months ended March 31, 2006. Wages decreased by approximately $252,000 due to the reduction in force (“RIF”) during January 2006, offset by severance costs of approximately $50,000 incurred in connection with a RIF. Approximately $220,000 of the decrease is related to the discontinuance of the wireless equipment reseller business prior to fiscal 2007, which resulted in $0 cost of goods sold for the quarter ended March 31, 2007 compared to $220,000 for the quarter ended March 31, 2006. An additional decrease of approximately $274,000 relates primarily to the consolidation of internet and telephone connections and circuits to more closely align with demand, as well as the renegotiation of contracts with several of our major telecom vendors. An increase of $81,000 in wireless installation costs, tower rents and wireless CPE (customer premises equipment) for the three months ended March 31, 2007, was due to expansion of our wireless Internet service provider business and related amortization of deferred installation and set up fees. As a percentage of total revenue, connectivity and operations expense decreased to 52.7% for the three months ended March 31, 2007, from 64.8% for the three months ended March 31, 2006, due to lower margins on the wireless equipment reseller revenue in 2006 offset by the decrease in revenues.

Sales and marketing. Sales and marketing expense increased by $26,000, or 74.3%, to $61,000 for the three months ended March 31, 2007, compared to $35,000 for the three months ended March 31, 2006. The increase relates primarily to increases in wages and payments to sales call center staffing of approximately $34,000, offset by a decrease in billboard and mass marketing costs during the three months ended March 31, 2007.

General and administrative. General and administrative expense decreased by $130,000, or 15.2%, to $728,000 for the three months ended March 31, 2007, from $858,000 for the three months ended March 31, 2006. The decrease is primarily a result of decreased operating costs of regional offices which were former headquarters for acquired entities. General and administrative expense for the three months ended March 31, 2006 also includes severance costs, as a result of the RIF, of approximately $21,000. Also, the Company incurred additional travel expenses for Houston personnel to Dallas during the transition of the corporate office from Dallas during the three months ended March 31, 2006.

Provision for bad debt expense. Provision for bad debt expense decreased by $19,000, or 86.4%, for the three months ended March 31, 2007, from $22,000 for the three months ended March 31, 2006. The additional expense in 2006 related to the reserve for doubtful wireless equipment reseller receivables, which has since been discontinued.

Depreciation and amortization. Depreciation and amortization decreased by $29,000, or 12.4%, to $204,000 for the three months ended March 31, 2007, from $233,000 for the three months ended March 31, 2006. Increases related to additions in fixed assets through both acquisitions and new product development including the deployment of new wireless technology, were offset by discontinued depreciation of fully depreciated assets still in use related to the office space and network infrastructure.

Interest expense (income), net.For the three months ended March 31, 2007, the Company recorded approximately $6,000 in interest expense and approximately $6,000 in interest income. For the three months ended March 31, 2006, the Company recorded approximately $14,000 in interest expense and approximately $12,000 in interest income. The interest expense recorded relates to interest charges on newly issued and assumed debt related to acquisitions. Interest income represents interest earned on the Company’s money market accounts.

13

Nine Months Ended March 31, 2007 Compared to Nine Months Ended March 31, 2006

The following table sets forth certain unaudited financial data for the nine months ended March 31, 2007 and 2006. Operating results for any period are not indicative of results for any future period. Dollar amounts are shown in thousands (except per share data and subscriber counts).

		Nine Months Ended March 31, 2007					Nine Months Ended March 31, 2006
		(000's)		% of Revenues			(000's)		% of Revenues
STATEMENT OF OPERATIONS DATA: REVENUES:
Internet services	$	6,057		100.0	%	$	6,659		86.8	%
Other		–		–	%		1,014		13.2	%
Total		6,057		100.0	%		7,673		100.0	%
OPERATING COSTS AND EXPENSES:
Connectivity and operations		3,068		50.7	%		4,748		61.9	%
Sales and marketing		155		2.6	%		199		2.6	%
General and administrative		2,302		38.0	%		2,394		31.2	%
Bad debt (recoveries) expense		6		0.1	%		53		0.7	%
Depreciation and amortization		617		10.2	%		662		8.6	%
Total		6,148		101.6	%		8,056		105.0	%
OPERATING LOSS		(91	)	(1.6	)%		(383	)	(5.0	)%
INTEREST EXPENSE, NET		9		0.1	%		29		0.4	%
NET LOSS	$	(100	)	(1.7)%		$	(412	)	(5.4)%
NET LOSS PER COMMON SHARE:
BASIC	$	(0.01	)			$	(0.03	)
DILUTED	$	(0.01	)			$	(0.03	)
WEIGHTED AVERAGE COMMON
SHARES OUTSTANDING:
BASIC		12,509					12,462
DILUTED		12,509					12,462
CASH FLOW DATA:
Cash flow provided by (used in) operations	$	71				$	(435	)
Cash flow used in investing activities	$	(218	)			$	(719	)
Cash flow used in financing activities	$	(119	)			$	(231	)
OTHER DATA:
Subscribers at end of period (1)		34,000					46,000
EBITDA(2)	$	526				$	279
Reconciliation of net loss to EBITDA:
Net Loss	$	(100	)			$	(412	)
Add:
Depreciation and amortization		617					662
Interest expense (income), net		9					29
EBITDA(2)	$	526				$	279

(1) A subscriber represents an active, billed service. One customer account may represent multiple subscribers depending on the number of active and billed services for that customer.

(2) EBITDA (earnings before interest, taxes, depreciation and amortization) is not a measurement of financial performance under generally accepted accounting principles (GAAP) and should not be considered an alternative to net income as a measure of performance. Management has consistently used EBITDA on a historical basis as a measurement of the Company’s current operating cash income.

14

Total revenue. Total revenue decreased by $1.6 million, or 21.1%, to $6.1 million for the nine months ended March 31, 2007, from $7.7 million for the nine months ended March 31, 2006. The Company’s subscriber count decreased by 12,000, or 26.1%, to 34,000 as of March 31, 2007 compared to 46,000 as of March 31, 2006. The decrease in subscriber counts is attributed to the loss of dial-up customers moving to other providers’ broadband services. The decrease in revenue is primarily attributable to the loss of dial-up customers partially offset by an increase in wireless subscribers. Wireless equipment reseller revenue for the nine months ended March 31, 2006 was $938,000, or 58.0%, of the decrease of $1.6 million in total revenue. The wireless equipment reseller sales were discontinued in the quarter ended March 31, 2006 due to low profit margins and increased bad debts, and there were no revenues related to these sales for the three months ended March 31, 2007.

Connectivity and operations. Connectivity and operations expense decreased by $1,680,000, or 35.4%, to $3,068,000 for the nine months ended March 31, 2007 from $4,748,000 for the nine months ended March 31, 2006. The decrease in expense relates primarily to wireless reseller cost of sales of $818,000 for the nine months ended March 31, 2006 which were discontinued for the nine months ended March 31, 2007. Additional decreases were in wage expense and connectivity costs offset by increases in installation costs and wireless CPE costs of sales. Wage expense decreased by approximately $510,000 in the nine months ended March 31, 2007, compared to the same period of 2006 primarily, as a result of the staff reductions carried out by the Company in January 2006. Wage expense includes severance costs of approximately $50,000 for the nine months ended March 31, 2006. Connectivity costs decreased by approximately $471,000 in the nine months ended March 31, 2007, compared to the same period of 2006, primarily as a result of the consolidation of internet and telephone connections and circuits to more closely align with demand.

Decreases in wages and connectivity from 2007 to 2006 were offset primarily by an increase of $146,000 in cost of sales related to the ramp up of wireless installations and related increases in tower rents, installation costs and wireless CPE costs of sales for the nine months ended March 31, 2007.

To a lesser extent, decreases in wages and connectivity were affected by a decrease of $22,000 in merchant processing fees due to the related decrease in revenue. Additionally, during the nine months ended March 31, 2006, the Company incurred additional sales tax expense of approximately $45,000 related to a sales tax audit.

Sales and marketing. Sales and marketing expense decreased by $44,000, or 22.1%, to $155,000 for the nine months ended March 31, 2007, compared to $199,000 for the nine months ended March 31, 2006. The Company has increased staffing in its wireless sales call center, causing an increase of approximately $80,000 for the nine months ended March 31, 2007. This is offset by termination of the wireless equipment reseller staff upon discontinuing sales in 2006, resulting in a decrease of $98,000. Additional decreases were related to reduction in advertising costs incurred in the nine months ended March 31, 2007 compared to the nine months ended March 31, 2006.

General and administrative. General and administrative expense decreased slightly by $92,000, or 3.8%, to $2.3 million for the nine months ended March 31, 2007, from $2.4 million for the nine months ended March 31, 2006. The decrease is primarily a result of expenses incurred during the nine months ended March 31, 2006 in connection with the additional travel for Houston personnel to Dallas during the transition of the corporate office from Dallas, as well as moving expense for relocating the corporate office. General and administrative expense for the nine months ended March 31, 2006 also includes severance costs, as a result of the RIF, of approximately $21,000.

Provision for bad debt expense. Provision for bad debt expense decreased by $47,000 for the nine months ended March 31, 2007, compared to $6,000 for the nine months ended March 31, 2006, mainly related to wireless equipment reseller receivables in 2006. As of March 31, 2007, the Company continues to be fully reserved for all customer accounts that are at least 90 days old.

Depreciation and amortization. Depreciation and amortization decreased by $45,000, or 6.8%, to $617,000 for the nine months ended March 31, 2007, from $662,000 for the nine months ended March 31, 2006. Increases related to additions in fixed assets through both acquisitions and new product development, including the deployment of new wireless technology, were offset by discontinued depreciation of fully depreciated assets still in use related to the office space and network infrastructure.

Interest expense (income), net. For the nine months ended March 31, 2007, the Company recorded approximately $28,000 in interest expense and approximately $19,000 in interest income. For the nine months ended March 31, 2006, the Company recorded approximately $63,000 in interest expense and approximately $34,000 in interest income. The interest expense recorded in these periods relates to interest charges on newly issued and assumed debt related to acquisitions. Interest income represents interest earned on the Company’s money market accounts.

15

Liquidity and Capital Resources

We have financed our operations to date primarily through (i) cash flows from operations, (ii) public and private sales of equity securities and (iii) loans from shareholders and third parties.

Cash provided by operating activities is net income adjusted for certain non-cash items and changes in assets and liabilities. For the nine months ended March 31, 2007, cash provided by operations was $71,000 compared to cash used in operations of $435,000 for the nine months ended March 31, 2006. For the nine months ended March 31, 2007, net loss plus non-cash items totaled $553,000 in income which was used primarily to decrease accounts payable and accrued liabilities to offset the decrease in deferred revenue. These decreases were offset by increases in inventory. For the nine months ended March 31, 2006, net loss plus non-cash items totaled $293,000, which was used primarily for purchases of inventory and increases in prepaids and to decrease accounts payable and deferred revenue. Inventory, which primarily includes modems and wireless access radios, increased in the nine months ended March 31, 2006 due to the expansion of the wireless business. The decrease in deferred revenue from year to year is a result of the decrease in our subscriber count. The decrease in accounts payable and accrued liabilities is a result of the Company paying vendors on a timelier basis and the resolution of billing disputes with telecommunication vendors.

Cash used in investing activities totaled $219,000 for the nine months ended March 31, 2007 and consisted of fixed asset purchases related to the deployment of new wireless infrastructure. Cash used in investing activities totaled $719,000 for the nine months ended March 31, 2006 and consisted of cash paid for acquisitions and fixed asset purchases related to the deployment of new wireless infrastructure.

Cash used in financing activities totaled $119,000 and $231,000 for the nine months ended March 31, 2007 and 2006, respectively, and consisted primarily of principal payments on debt and capital leases.

We estimate that cash on hand of $671,000 at March 31, 2007, along with anticipated cash flow from operations, will be sufficient to meet our working capital needs for the next twelve months with regard to continuing operations in existing markets. Additional financing will be required to fund acquisitions or expansion into new markets. Continued decreases in revenues and subscriber count may ultimately adversely affect the liquidity of the Company.

If additional capital financing arrangements, including public or private sales of debt or equity securities, or additional borrowings from commercial banks, are insufficient or unavailable, or if we experience shortfalls in anticipated revenues or increases in anticipated expenses, we will modify our operations and growth strategies to match available funding.

“Safe Harbor” Statement

The following "Safe Harbor" Statement is made pursuant to the Private Securities Litigation Reform Act of 1995. Certain of the statements contained in the body of this Report are forward-looking statements (rather than historical facts) that are subject to risks and uncertainties that could cause actual results to differ materially from those described in the forward-looking statements. With respect to such forward-looking statements, we seek the protections afforded by the Private Securities Litigation Reform Act of 1995. These risks include, without limitation, that (1) we will not be able to increase our rural customer base at a rate that exceeds the loss of metropolitan area customers; (2) we will not improve EBITDA, profitability or product margins; (3) we will not be able to identify and negotiate acquisitions of wireless Internet customers and infrastructure on attractive terms; (4) we may not be able to integrate acquisitions of wireless Internet customers and infrastructure into existing operations to achieve operating efficiencies; (5) needed financing will not be available to us if and as needed; (6) we will not continue to achieve operating efficiencies in existing operations; (7) we will not be competitive with existing or new competitors; (8) we will not keep up with industry pricing or technological developments impacting the Internet; (9) we will be adversely affected by dependence on network infrastructure, telecommunications providers and other vendors, by regulatory changes and by general economic and business conditions; (10) service interruptions or impediments could harm our business; (11) we may not be able to protect our proprietary technologies or successfully defend infringement claims and may be required to enter into licensing arrangements on unfavorable terms; (12) we may be accused of infringing upon the intellectual property rights of third parties, which is costly to defend and could limit our ability to use certain technologies in the future; (13) government regulations could force us to change our business practices; (14) we may be unable to continually develop effective business systems, processes and personnel to support our business; (15) we may be unable to hire and retain qualified personnel, including our key executive officers; (16) provisions in our certificate of incorporation, bylaws and shareholder rights plan could limit our share price and delay a change of management; (17) our stock price has been volatile historically and may continue to be volatile; and (18) some other unforeseen difficulties may occur. This list is intended to identify certain of the principal factors that could cause actual results to differ materially from those described in the forward-looking statements included elsewhere herein. These factors are not intended to represent a complete list of all risks and uncertainties inherent in our business, and should be read in conjunction with the more detailed cautionary statements included in our other publicly filed reports and documents.

16

ITEM 3. CONTROLS AND PROCEDURES

An evaluation was carried out under the supervision and with the participation of our management, including our Chief Executive Officer and Chief Financial and Accounting Officer, of the effectiveness of the design and operation of our disclosure controls and procedures (as defined in Rule 13a-15(e) under the Securities Exchange Act of 1934) in effect as of March 31, 2007. Based upon that evaluation, the Chief Executive Officer and Chief Financial and Accounting Officer concluded that, as of March 31, 2007, the design and operation of these disclosure controls and procedures were effective in timely alerting them to the material information relating to the Company required to be included in its periodic filings with the Securities and Exchange Commission. There were no changes in our internal control over financial reporting during the nine months ended March 31, 2007 that materially affected, or are reasonably likely to materially affect, our internal control over financial reporting.

17

PART II - OTHER INFORMATION

ITEM 1. LEGAL PROCEEDINGS

We are involved from time to time in routine disputes and legal proceedings occurring in the ordinary course of business. Management believes these matters, individually and in the aggregate, are immaterial to our financial condition, results of operations and cash flows.

ITEM 6. EXHIBITS

Exhibit	Description
31.1	Rule 13a-14(a)/15d-14(a) Certification of William E. Ladin, Jr.
31.2	Rule 13a-14(a)/15d-14(a) Certification of Jennifer S. LeBlanc
32.1	Section 1350 Certification of William E. Ladin, Jr.
32.2	Section 1350 Certification of Jennifer S. LeBlanc

18

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.

	INTERNET AMERICA, INC.
	(Registrant)
Date: May 11, 2007	By: /s/ William E. Ladin, Jr.
	William E. Ladin
	President and Chief Executive Officer
Date: May 11, 2007	By: /s/ Jennifer S. LeBlanc
	Jennifer S. LeBlanc
	Chief Financial Officer and Chief Accounting Officer
	(Principal Accounting Officer)

19

INDEX TO EXHIBITS

Exhibit No.	Description
31.1	Rule 13a-14(a)/15d-14(a) Certification of William E. Ladin, Jr.
31.2	Rule 13a-14(a)/15d-14(a) Certification of Jennifer S. LeBlanc
32.1	Section 1350 Certification of William E. Ladin, Jr.
32.2	Section 1350 Certification of Jennifer S. LeBlanc

20

EX-31.1

Exhibit 31.1 - Rule 13a-14(a)/15d-14(a) Certification of William E. Ladin, Jr.

I, William E. Ladin, Jr., Chief Executive Officer of Internet America, Inc., certify that:

1. I have reviewed this quarterly report on Form 10-QSB of Internet America, Inc.;

2. Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;

3. Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report.

4. The registrant’s other certifying officers and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) for the registrant and have:

(a) designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared;

(b) evaluated the effectiveness of the registrant’s disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and

(c) disclosed in this report any change in the registrant’s internal control over financial reporting that occurred during the registrant’s most recent fiscal quarter (the registrant’s fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant’s internal control over financial reporting.

5. The registrant’s other certifying officer(s) and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant’s auditors and the audit committee of the registrant’s board of directors (or persons performing the equivalent functions):

(a) all significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant’s ability to record, process, summarize and report financial information; and

(b) any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s internal control over financial reporting;

Date: May 11, 2007	/s/ William E. Ladin, Jr.
	William E. (Billy) Ladin, Jr.
	Chief Executive Officer

21

EX-31.2

Exhibit 31.2 - Rule 13a-14(a)/15d-14(a) Certification of Jennifer S. LeBlanc

I, Jennifer S. LeBlanc, Chief Accounting Officer and Chief Financial Officer of Internet America, Inc., certify that:

1. I have reviewed this quarterly report on Form 10-QSB of Internet America, Inc.;

2. Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;

3. Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report.

4. The registrant’s other certifying officers and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) for the registrant and have:

(a) designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared;

(b) evaluated the effectiveness of the registrant’s disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and

(c) disclosed in this report any change in the registrant’s internal control over financial reporting that occurred during the registrant’s most recent fiscal quarter (the registrant’s fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant’s internal control over financial reporting.

5. The registrant’s other certifying officer(s) and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant’s auditors and the audit committee of the registrant’s board of directors (or persons performing the equivalent functions):

(a) all significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant’s ability to record, process, summarize and report financial information; and

(b) any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s internal control over financial reporting;

Date: May 11, 2007	/s/ Jennifer S. LeBlanc
	Jennifer S. LeBlanc
	Chief Accounting Officer

22

EX-32.1

Exhibit 32.1 -Certification of Principal Executive Officer

CERTIFICATION IN ACCORDANCE WITH

18 U.S.C. SECTION 1350

AS ADOPTED BY

SECTION 906 OF THE SARBANES-OXLEY ACT OF 2002

In connection with the Quarterly Report on Form 10-QSB of Internet America, Inc. (the “Company”) for the period ending March 31, 2007 as filed with the Securities and Exchange commission on the date hereof (the “Report”), I, William E. Ladin, Jr., Chief Executive Officer of the Company, certify in accordance with 18 U.S.C. Section 1350, as adopted by Section 906 of the Sarbanes-Oxley Act of 2002, to my knowledge that:

(1) the Report fully complies with the requirements of Section 13(a) or 15(d) of the Securities Exchange Act of 1934; and

(2) the information contained in the Report fairly presents, in all material respects, the financial condition and results of operations of the Company.

/s/ William E. Ladin, Jr.  

William E. (Billy) Ladin, Jr.

Chief Executive Officer  

Date: May 11, 2007 

23

EX-32.2

Exhibit 32.2 -Certification of Principal Financial Officer

CERTIFICATION IN ACCORDANCE WITH

18 U.S.C. SECTION 1350

AS ADOPTED BY

SECTION 906 OF THE SARBANES-OXLEY ACT OF 2002

In connection with the Quarterly Report on Form 10-QSB of Internet America, Inc. (the “Company”) for the period ending March 31, 2007 as filed with the Securities and Exchange commission on the date hereof (the “Report”), I, Jennifer S. LeBlanc, Chief Financial Officer and Chief Accounting Officer of the Company, certify in accordance with 18 U.S.C. Section 1350, as adopted by Section 906 of the Sarbanes-Oxley Act of 2002, to my knowledge that:

(1) the Report fully complies with the requirements of Section 13(a) or 15(d) of the Securities Exchange Act of 1934; and

(2) the information contained in the Report fairly presents, in all material respects, the financial condition and results of operations of the Company.

/s/ Jennifer S. LeBlanc  

Jennifer S. LeBlanc 

Chief Financial Officer and Chief Accounting Officer  

Date: May 11, 2007 

24