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

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

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|                           |                                                                                        | Page   |
|--------------------------------|---------------------------------------------------------------------------------------------|--------|
|                           |                                                                                        |   |
| PART I - FINANCIAL INFORMATION |                                                                                        |   |
|                           |                                                                                        |   |
| Item 1.                        | Financial Statements                                                                        |   | 3 |
|                           |                                                                                        |   |   |
| Item 2.                        | Management’s Discussion and Analysis of Financial Condition and Results of Operations |   | 10 |
|                           |                                                                                        |   |   |
| Item 3.                        | Quantitative and Qualitative Disclosures About Market Risk                                  |   | 19 |
|                           |                                                                                        |   |   |
| Item 4.                        | Controls and Procedures                                                                     |   | 19 |
|                           |                                                                                        |   |   |
| PART II - OTHER INFORMATION .  |                                                                                        |   |
|                           |                                                                                        |   |
| Item 1.                   | Legal Proceedings                                                                           |   | 20 |
|                           |                                                                                        |   |   |
| Item 1A.                       | Risk Factors                                                                                |   | 20 |
|                           |                                                                                        |   |   |
| Item 2.                        | Unregistered Sales of Equity Securitites and Use of Proceeds                                |   | 20 |
|                           |                                                                                        |   |   |
| Item 3.                        | Defaults Upon Senior Securities                                                             |   | 20 |
|                           |                                                                                        |   |   |
| Item 4.                        | (Removed and reserved)                                                                      |   | 20 |
|                           |                                                                                        |   |   |
| Item 5.                        | Other Information                                                                           |   | 20 |
|                           |                                                                                        |   |   |
| Item 6.                        | Exhibits                                                                                    |   | 20 |

----

|                                                                                                                                                                          |   | March 31,   |        |   | June 30,  |   |
|-------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|--------|-------------|-------------|--------|-----------|--------|
|                                                                                                                                                                          |   | 2011        |        |   | 2010      |   |
|                                                                                                                                                                          |   | (unaudited) |        |   | (audited) |   |
| ASSETS                                                                                                                                                                        |   |        |        |   |      |   |
| CURRENT ASSETS:                                                                                                                                                               |   |        |        |   |      |   |
| Cash and cash equivalents                                                                                                                                                     |   | $           | 1,400,011   |   |      | $      | 1,209,915 |   |
| Restricted cash                                                                                                                                                               |   |        | 6,432       |   |      |   | 6,432 |   |
| Accounts receivable, net of allowance for uncollectible accounts of $3,794 and $4,438 as of March 31, 2011 and June 30, 2010, respectively                                    |   |        | 50,660      |   |      |   | 113,936 |   |
| Inventory                                                                                                                                                                     |   |        | 313,219     |   |      |   | 274,954 |   |
| Prepaid expenses and other current assets                                                                                                                                     |   |        | 287,007     |   |      |   | 411,510 |   |
| Total current assets                                                                                                                                                          |   |        | 2,057,329   |   |      |   | 2,016,747 |   |
| Property and equipment—net                                                                                                                                              |   |        | 1,502,148   |   |      |   | 1,791,459 |   |
| Goodwill—net                                                                                                                                                            |   |        | 2,413,127   |   |      |   | 2,413,127 |   |
| Subscriber acquisition costs—net                                                                                                                                        |   |        | 295,776     |   |      |   | 327,435 |   |
| Other assets                                                                                                                                                                  |   |        | 21,834      |   |      |   | 37,879 |   |
| TOTAL ASSETS                                                                                                                                                                  |   | $           | 6,290,214   |   |      | $      | 6,586,647 |   |
|                                                                                                                                                                          |   |        |        |   |      |   |   |   |
| LIABILITIES AND SHAREHOLDERS' EQUITY                                                                                                                                          |   |        |        |   |      |   |   |   |
| CURRENT LIABILITIES:                                                                                                                                                          |   |        |        |   |      |   |   |   |
| Trade accounts payable                                                                                                                                                        |   | $           | 143,267     |   |      | $      | 175,505 |   |
| Accrued liabilities                                                                                                                                                           |   |        | 344,303     |   |      |   | 409,911 |   |
| Deferred revenue                                                                                                                                                              |   |        | 784,297     |   |      |   | 855,675 |   |
| Current portion of long-term debt                                                                                                                                             |   |        | 457,665     |   |      |   | 425,971 |   |
| Current portion of capital lease obligations                                                                                                                                  |   |        | 9,717       |   |      |   | 28,315 |   |
| Total current liabilities                                                                                                                                                     |   |        | 1,739,249   |   |      |   | 1,895,377 |   |
| Long-term debt, net of current portion                                                                                                                                        |   |        | 651,814     |   |      |   | 884,052 |   |
| Long-term capital lease obligations, net of current portion                                                                                                                   |   |        | -           |   |      |   | 2,250 |   |
| Total liabilities                                                                                                                                                             |   |        | 2,391,063   |   |      |   | 2,781,679 |   |
|                                                                                                                                                                          |   |        |        |   |      |   |   |   |
| COMMITMENTS AND CONTINGENCIES                                                                                                                                                 |   |        | -           |   |      |   | - |   |
|                                                                                                                                                                          |   |        |        |   |      |   |   |   |
| SHAREHOLDERS' EQUITY:                                                                                                                                                         |   |        |        |   |      |   |   |   |
| Preferred stock $0.01 par value: 5,000,000 shares authorized, 2,718,428 and 2,889,076 issued and outstanding as of March 31, 2011 and June 30, 2010, respectively             |   |        | 27,185      |   |      |   | 28,891 |   |
| Common stock, $0.01 par value: 40,000,000 shares authorized, 16,729,562 and 16,558,914 issued and outstanding as of  March 31, 2011 and June 30, 2010, respectively |   |        | 167,296     |   |      |   | 165,590 |   |
| Additional paid-in capital                                                                                                                                                    |   |        | 63,007,503  |   |      |   | 62,989,094 |   |
| Accumulated deficit                                                                                                                                                           |   |        | (59,302,833 | )      |      |   | (59,377,806 | ) |
| Total Internet America, Inc. shareholders' equity                                                                                                                             |   |        | 3,899,151   |   |      |   | 3,805,769 |   |
| Noncontrolling interest in subsidiary                                                                                                                                         |   |        | -           |   |      |   | (801 | ) |
| Total shareholders' equity                                                                                                                                                    |   |        | 3,899,151   |   |      |   | 3,804,968 |   |
| TOTAL LIABILITIES AND SHAREHOLDERS' EQUITY                                                                                                                                    |   | $           | 6,290,214   |   |      | $      | 6,586,647 |   |

----

|                                                     |   | Three Months Ended |       |   | Nine Months Ended |   |
|----------------------------------------------------------|--------|--------------------|------------|--------|-------------------|--------|
|                                                     |   | March 31,          |       |   | March 31,         |   |
|                                                     |   | 2011               |       |   | 2010              |   |   | 2011 |   |   | 2010 |   |
| REVENUES:                                                |   |               |       |   |              |   |   |   |   |   |   |   |
| Internet services                                        |   | $                  | 1,728,463  |   |              | $      | 1,828,523 |   |   | $ | 5,229,343 |   |   | $ | 5,419,960 |   |
| Other                                                    |   |               | -          |   |              |   | 44,994 |   |   |   | - |   |   |   | 126,029 |   |
| TOTAL REVENUES                                           |   |               | 1,728,463  |   |              |   | 1,873,517 |   |   |   | 5,229,343 |   |   |   | 5,545,989 |   |
|                                                     |   |               |       |   |              |   |   |   |   |   |   |   |   |   |   |   |
| OPERATING  EXPENSES:                           |   |               |       |   |              |   |   |   |   |   |   |   |   |   |   |   |
| Connectivity and operations                              |   |               | 1,071,943  |   |              |   | 1,233,737 |   |   |   | 3,216,645 |   |   |   | 3,776,422 |   |
| Sales and marketing                                      |   |               | 50,156     |   |              |   | 73,452 |   |   |   | 151,522 |   |   |   | 221,198 |   |
| General and administrative                               |   |               | 344,039    |   |              |   | 510,191 |   |   |   | 957,528 |   |   |   | 1,738,195 |   |
| Provision for (recovery of) bad debt                     |   |               | (553       | )      |              |   | 2 |   |   |   | (644 | ) |   |   | (1,813 | ) |
| Depreciation and amortization                            |   |               | 264,234    |   |              |   | 251,130 |   |   |   | 767,031 |   |   |   | 755,230 |   |
| Loss on transfer of assets                               |   |               | -          |   |              |   | - |   |   |   | 26,004 |   |   |   | - |   |
| Gain from restructuring of debt                          |   |               | -          |   |              |   | (51,613 | ) |   |   | - |   |   |   | (51,613 | ) |
| TOTAL OPERATING EXPENSES                                 |   |               | 1,729,819  |   |              |   | 2,016,899 |   |   |   | 5,118,086 |   |   |   | 6,437,619 |   |
|                                                     |   |               |       |   |              |   |   |   |   |   |   |   |   |   |   |   |
| INCOME (LOSS) FROM OPERATIONS                            |   |               | (1,356     | )      |              |   | (143,382 | ) |   |   | 111,257 |   |   |   | (891,630 | ) |
| INTEREST INCOME                                          |   |               | (1,823     | )      |              |   | (2,120 | ) |   |   | (5,238 | ) |   |   | (8,741 | ) |
| INTEREST EXPENSE                                         |   |               | 11,550     |   |              |   | 17,552 |   |   |   | 41,522 |   |   |   | 63,088 |   |
|                                                     |   |               |       |   |              |   |   |   |   |   |   |   |   |   |   |   |
| NET INCOME (LOSS)                                        |   |               | (11,083    | )      |              |   | (158,814 | ) |   |   | 74,973 |   |   |   | (945,977 | ) |
| LESS: NET LOSS ATTRIBUTABLE TO NONCONTROLLING INTEREST   |   |               | -          |   |              |   | (94 | ) |   |   | - |   |   |   | (627 | ) |
| NET INCOME (LOSS) ATTRIBUTABLE TO INTERNET AMERICA, INC. |   | $                  | (11,083    | )      |              | $      | (158,720 | ) |   | $ | 74,973 |   |   | $ | (945,350 | ) |
|                                                     |   |               |       |   |              |   |   |   |   |   |   |   |   |   |   |   |
| NET INCOME (LOSS) PER COMMON SHARE:                      |   |               |       |   |              |   |   |   |   |   |   |   |   |   |   |   |
| BASIC AND DILUTED                                        |   | $                  | (0.00      | )      |              | $      | (0.01 | ) |   | $ | 0.00 |   |   | $ | (0.06 | ) |
|                                                     |   |               |       |   |              |   |   |   |   |   |   |   |   |   |   |   |
| WEIGHTED AVERAGE COMMON SHARES OUTSTANDING:              |   |               |       |   |              |   |   |   |   |   |   |   |   |   |   |   |
| BASIC                                                    |   |               | 16,729,562 |   |              |   | 16,558,914 |   |   |   | 16,668,527 |   |   |   | 16,558,290 |   |
| DILUTED                                                  |   |               | 16,729,562 |   |              |   | 16,558,914 |   |   |   | 19,386,955 |   |   |   | 16,558,290 |   |

----

|                                                                                                                           |   | Nine Months Ended |      |
|--------------------------------------------------------------------------------------------------------------------------------|--------|-------------------|-----------|
|                                                                                                                           |   | March 31,         |      |
|                                                                                                                           |   | 2011              |      |   | 2010 |   |
| OPERATING ACTIVITIES:                                                                                                          |   |              |      |   |   |   |
| Net income (loss)                                                                                                              |   | $                 | 74,973    |   |   | $ | (945,977 | ) |
| Adjustments to reconcile net income (loss) to net cash provided by (used in) operating activities:                             |   |              |      |   |   |   |   |   |
| Depreciation and amortization                                                                                                  |   |              | 767,031   |   |   |   | 755,230 |   |
| Loss on transfer of assets                                                                                                     |   |              | 26,004    |   |   |   | - |   |
| Loss on disposal of fixed assets                                                                                               |   |              | (1,548    | ) |   |   | 23,390 |   |
| Recovery of bad debt                                                                                                           |   |              | (644      | ) |   |   | (1,813 | ) |
| Non-cash stock compensation expense                                                                                            |   |              | 18,409    |   |   |   | 54,663 |   |
| Gain from restructuring of debt                                                                                                |   |              | -         |   |   |   | (51,613 | ) |
| Changes in operating assets and liabilities:                                                                                   |   |              |      |   |   |   |   |   |
| Accounts receivable                                                                                                            |   |              | 29,787    |   |   |   | 45,683 |   |
| Inventory                                                                                                                      |   |              | (38,265   | ) |   |   | (19,321 | ) |
| Prepaid expenses and other current assets                                                                                      |   |              | 125,560   |   |   |   | 95,253 |   |
| Other assets                                                                                                                   |   |              | 16,045    |   |   |   | 11,816 |   |
| Accounts payable and accrued liabilities                                                                                       |   |              | (88,916   | ) |   |   | (213,870 | ) |
| Deferred revenue                                                                                                               |   |              | (71,378   | ) |   |   | (142,567 | ) |
| Net cash provided by (used in) operating activities                                                                            |   |              | 857,058   |   |   |   | (389,126 | ) |
| INVESTING ACTIVITIES:                                                                                                          |   |              |      |   |   |   |   |   |
| Purchases of property and equipment                                                                                            |   |              | (217,198  | ) |   |   | (257,460 | ) |
| Proceeds from sale of property and equipment                                                                                   |   |              | 3,900     |   |   |   | 6,880 |   |
| Cash paid for subscriber acquisition                                                                                           |   |              | (108,212  | ) |   |   | - |   |
| Net cash used in investing activities                                                                                          |   |              | (321,510  | ) |   |   | (250,580 | ) |
| FINANCING ACTIVITIES:                                                                                                          |   |              |      |   |   |   |   |   |
| Principal payments of long-term debt                                                                                           |   |              | (324,604  | ) |   |   | (485,481 | ) |
| Principal payments of capital leases                                                                                           |   |              | (20,848   | ) |   |   | (16,713 | ) |
| Net cash used in financing activities                                                                                          |   |              | (345,452  | ) |   |   | (502,194 | ) |
| NET INCREASE (DECREASE) IN CASH AND CASH EQUIVALENTS                                                                           |   |              | 190,096   |   |   |   | (1,141,900 | ) |
| CASH AND CASH EQUIVALENTS, BEGINNING OF PERIOD                                                                                 |   |              | 1,209,915 |   |   |   | 2,421,264 |   |
| CASH AND CASH EQUIVALENTS, END OF PERIOD                                                                                       |   | $                 | 1,400,011 |   |   | $ | 1,279,364 |   |
| SUPPLEMENTAL INFORMATION:                                                                                                      |   |              |      |   |   |   |   |   |
| Cash paid for interest                                                                                                         |   | $                 | 40,709    |   |   | $ | 66,039 |   |
| NON-CASH INVESTING AND FINANCING ACTIVITIES:                                                                                   |   |              |      |   |   |   |   |   |
| Cancellation of common stock shares for long term debt in connection  with acquisition                               |   | $                 | -         |   |   | $ | 745,943 |   |
| Debt issued in connection with canceled common stock, net                                                                      |   | $                 | -         |   |   | $ | 685,773 |   |
| Non cash adjustment to intangible assets related to imputed interest on long term debt issued for cancellation of common stock |   | $                 | -         |   |   | $ | 60,170 |   |
| Debt issued for subscriber acquisition, net of discount                                                                        |   | $                 | 111,860   |   |   | $ | - |   |
| Debt issued for purchase of software and maintenance                                                                           |   | $                 | 12,200    |   |   | $ | - |   |

----

| 1. | Basis of Presentation |
|----|-----------------------|

| 2. | Principals of Consolidation |
|----|-----------------------------|

| 3. | Basic and Diluted Net Income (Loss) Per Share |
|----|-----------------------------------------------|

| 4. | Use of Estimates |
|----|------------------|

----

| 5. | Goodwill and Subscriber Acquisition Costs |
|----|-------------------------------------------|

| 6. | Long-Term Debt |
|----|----------------|

|                                                                                                                                                                                                                                                           |   | March 31, |      |   | June 30, |   |
|----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|--------|-----------|-----------|--------|----------|--------|
|                                                                                                                                                                                                                                                           |   | 2011      |      |   | 2010     |   |
| Note payable due July 19, 2010, payable in quarterly payments of $7,751 with interest imputed at 9% (net of unamortized discount of $0 and $234)                                                                                                          |   | $         | -         |   |     | $      | 7,517 |   |
| Note payable due January 23, 2011, payable in bi-annual installments of $13,917 with interest imputed at 8% (net of unamortized discount of $0 and $601)                                                                                                  |   |      | -         |   |     |   | 12,886 |   |
| Note payable due August 08, 2010, payable in monthly installments of $1,033 beginning October 08, 2008 with interest imputed at 5% (net of unamortized discount of $0 and $13)                                                                                 |   |      | -         |   |     |   | 2,054 |   |
| Note payable due June 20, 2012, payable in monthly installments of $2,088 with interest imputed at 9% (net of unamortized discount of $1,802 and $4,407)                                                                                                       |   |      | 29,516    |   |     |   | 45,701 |   |
| Note payable due July 20, 2010, payable in monthly installments of $1,818 with interest imputed at 6.5% (net of unamortized discount of $0 and $10)                                                                                                            |   |      | -         |   |     |   | 1,808 |   |
| Note payable due July 20, 2010, payable in monthly installments of $1,409 with interest imputed at 6.5% (net of unamortized discount of $0 and $8)                                                                                                             |   |      | -         |   |     |   | 1,401 |   |
| Note payable due  February 15, 2015, payable in monthly payments of $4,346 with fixed interest of 4.5%                                                                                                                                               |   |      | 186,963   |   |     |   | 219,162 |   |
| Note payable due  February 15, 2015, payable in monthly payments of $11,189 with interest imputed at 3.25% (net of unamortized discount of $32,721 and $45,931)                                                                                      |   |      | 493,169   |   |     |   | 580,661 |   |
| Loan and Security Agreement with United States Department of Agriculture Rural Utilities Service due June 8, 2012, payable in variable monthly installments, with interest based on the cost of borrowing of the Department of Treasury for 7 year obligations |   |      | 276,070   |   |     |   | 438,833 |   |
| Note payable due February 10, 2014, payable in monthly installments of $417 with interest of 8.5%                                                                                                                                                              |   |      | 11,901    |   |     |   | - |   |
| Note payable due May 3, 2013, payable in monthly installments of $5,085 with interest imputed at 8.5% (net of unamortized discount of $10,172 and $0)                                                                                                          |   |      | 111,860   |   |     |   | - |   |
|                                                                                                                                                                                                                                                           |   |      | 1,109,479 |   |     |   | 1,310,023 |   |
| Less current portion                                                                                                                                                                                                                                           |   |      | (457,665  | )      |     |   | (425,971 | ) |
| Total long-term debt, less current portion                                                                                                                                                                                                                     |   | $         | 651,814   |   |     | $      | 884,052 |   |

----

| 7.     Noncontrolling Interest and Transfer of Assets |
|--------------------------------------------------------------------------------|

| 8.     Shareholders’ Equity |
|------------------------------------------------------------|

| 9. | Income Taxes |
|----|--------------|

| 10. | Related Parties |
|-----|-----------------|

----

|                 |   | Nine Months Ended |   |
|----------------------|--------|-------------------|--------|
|                 |   | March 31,         |   |
|                 |   | 2011              |   |   | 2010 |   |
| Troy LeMaile Stovall |   | $                 | 11,750 |   |   | $ | 12,250 |   |
| Justin McClure       |   |              | 12,125 |   |   |   | 12,250 |   |
| John Palmer          |   |              | 10,125 |   |   |   | 11,750 |   |
| Steven Mihaylo       |   |              | 11,625 |   |   |   | 11,750 |   |
| Cynthia Ocker        |   |              | 5,090  |   |   |   | 110,576 |   |
|                 |   | $                 | 50,715 |   |   | $ | 158,576 |   |

|                 |   | Three Months Ended |   |
|----------------------|--------|--------------------|--------|
|                 |   | March 31,          |   |
|                 |   | 2011               |   |   | 2010 |   |
| Troy LeMaile Stovall |   | $                  | 3,500  |   |   | $ | 4,500 |   |
| Justin McClure       |   |               | 3,875  |   |   |   | 4,500 |   |
| John Palmer          |   |               | 3,375  |   |   |   | 4,000 |   |
| Steven Mihaylo       |   |               | 3,875  |   |   |   | 3,500 |   |
| Cynthia Ocker        |   |               | -      |   |   |   | 42,081 |   |
|                 |   | $                  | 14,625 |   |   | $ | 58,581 |   |

| 11. | Recent Accounting Pronouncements |
|-----|----------------------------------|

----

----

----

|   |   |
|--------|--------|

|                                                     |   | Three Months Ended March 31, |       |
|----------------------------------------------------------|--------|------------------------------|------------|
|                                                     |   | 2011                         |       |   | % ofRevenues |   |   | 2010 |   |   | % ofRevenues |   |
| STATEMENT OF OPERATIONS DATA:                            |   |                         |       |   |   |   |   |   |   |   |   |   |
| REVENUES:                                                |   |                         |       |   |   |   |   |   |   |   |   |   |
| Internet services                                        |   | $                            | 1,728      |   |   |   | 100.0 | % |   | $ | 1,829 |   |   |   | 97.6 | % |
| Other                                                    |   |                         | -          |   |   |   | 0.0 | % |   |   | 45 |   |   |   | 2.4 | % |
| TOTAL REVENUES                                           |   |                         | 1,728      |   |   |   | 100.0 | % |   |   | 1,874 |   |   |   | 100.0 | % |
| OPERATING EXPENSES:                                      |   |                         |       |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Connectivity and operations                              |   |                         | 1,072      |   |   |   | 62.0 | % |   |   | 1,234 |   |   |   | 65.9 | % |
| Sales and marketing                                      |   |                         | 50         |   |   |   | 2.9 | % |   |   | 74 |   |   |   | 3.9 | % |
| General and administrative                               |   |                         | 344        |   |   |   | 19.9 | % |   |   | 510 |   |   |   | 27.2 | % |
| Recovery of bad debt expense                             |   |                         | (1         | ) |   |   | (0.1 | )% |   |   | - |   |   |   | 0.0 | % |
| Depreciation and amortization                            |   |                         | 264        |   |   |   | 15.3 | % |   |   | 251 |   |   |   | 13.4 | % |
| Gain from restructuring of debt                          |   |                         | -          |   |   |   | 0.0 | % |   |   | (52 | ) |   |   | (2.8 | )% |
| TOTAL OPERATING EXPENSES                                 |   |                         | 1,729      |   |   |   | 100.0 | % |   |   | 2,017 |   |   |   | 107.6 | % |
| OPERATING INCOME (LOSS)                                  |   |                         | (1         | ) |   |   | 0.0 | % |   |   | (143 | ) |   |   | (7.6 | )% |
| INTEREST INCOME                                          |   |                         | (2         | ) |   |   | (0.1 | )% |   |   | (2 | ) |   |   | 0.0 | % |
| INTEREST EXPENSE                                         |   |                         | 12         |   |   |   | 0.7 | % |   |   | 18 |   |   |   | (1.0 | )% |
| NET INCOME (LOSS)                                        |   |                         | (11        | ) |   |   | (0.6 | ) % |   | $ | (159 | ) |   |   | (8.5 | )% |
| LESS: NET LOSS ATTRIBUTABLE TO NONCONTROLLING INTEREST   |   |                         | -          |   |   |   | 0.0 | % |   |   | - |   |   |   | 0.0 | % |
| NET INCOME (LOSS) ATTRIBUTABLE TO INTERNET AMERICA, INC. |   | $                            | (11        | ) |   |   | (0.6 | )% |   | $ | (159 | ) |   |   | (8.5 | )% |
| NET INCOME (LOSS) PER COMMON SHARE:                      |   |                         |       |   |   |   |   |   |   |   |   |   |   |   |   |   |
| BASIC AND DILUTED                                        |   | $                            | (0.00      | ) |   |   |   |   |   | $ | (0.01 | ) |   |   |   |   |
| WEIGHTED AVERAGE COMMON SHARES OUTSTANDING:              |   |                         |       |   |   |   |   |   |   |   |   |   |   |   |   |   |
| BASIC                                                    |   |                         | 16,729,562 |   |   |   |   |   |   |   | 16,558,914 |   |   |   |   |   |
| DILUTED                                                  |   |                         | 16,729,562 |   |   |   |   |   |   |   | 16,558,914 |   |   |   |   |   |
| OTHER DATA:                                              |   |                         |       |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Subscribers at end of period (1)                         |   |                         | 25,000     |   |   |   |   |   |   |   | 26,200 |   |   |   |   |   |
| Adjusted EBITDA(2)                                       |   | $                            | 277        |   |   |   |   |   |   | $ | 121 |   |   |   |   |   |
| Adjusted EBITDA margin(3)                                |   |                         | 16.0       | % |   |   |   |   |   |   | 6.5 | % |   |   |   |   |
| Reconciliation of net income (loss) to Adjusted EBITDA:  |   |                         |       |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Net Income (Loss)                                        |   | $                            | (11        | ) |   |   |   |   |   | $ | (159 | ) |   |   |   |   |
| Add:                                                     |   |                         |       |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Depreciation and amortization                            |   |                         | 264        |   |   |   |   |   |   |   | 251 |   |   |   |   |   |
| Stock compensation                                       |   |                         | 14         |   |   |   |   |   |   |   | 13 |   |   |   |   |   |
| Interest expense                                         |   |                         | 12         |   |   |   |   |   |   |   | 18 |   |   |   |   |   |
| Loss from transfer of assets                             |   |                         | -          |   |   |   |   |   |   |   | - |   |   |   |   |   |
| Less: Interest income                                    |   |                         | (2         | ) |   |   |   |   |   |   | (2 | ) |   |   |   |   |
| Adjusted EBITDA (2)                                      |   | $                            | 277        |   |   |   |   |   |   | $ | 121 |   |   |   |   |   |

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|                                                           |   | Nine Months Ended March 31, |       |
|----------------------------------------------------------------|--------|-----------------------------|------------|
|                                                           |   | 2011                        |       |   | % of Revenues |   |   | 2010 |   |   | % of Revenues |   |
| STATEMENT OF OPERATIONS DATA:                                  |   |                        |       |   |   |   |   |   |   |   |   |   |
| REVENUES:                                                      |   |                        |       |   |   |   |   |   |   |   |   |   |
| Internet services                                              |   | $                           | 5,229      |   |   |   | 100.0 | % |   | $ | 5,420 |   |   |   | 97.7 | % |
| Other                                                          |   |                        | -          |   |   |   | 0.0 | % |   |   | 126 |   |   |   | 2.3 | % |
| TOTAL REVENUES                                                 |   |                        | 5,229      |   |   |   | 100.0 | % |   |   | 5,546 |   |   |   | 100.0 | % |
| OPERATING COSTS AND EXPENSES:                                  |   |                        |       |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Connectivity and operations                                    |   |                        | 3,217      |   |   |   | 61.5 | % |   |   | 3,777 |   |   |   | 68.1 | % |
| Sales and marketing                                            |   |                        | 151        |   |   |   | 2.9 | % |   |   | 221 |   |   |   | 4.0 | % |
| General and administrative                                     |   |                        | 958        |   |   |   | 18.3 | % |   |   | 1,739 |   |   |   | 31.3 | % |
| Recovery of bad debt expense                                   |   |                        | (1         | ) |   |   | 0.0 | % |   |   | (2 | ) |   |   | (0.0 | )% |
| Depreciation and amortization                                  |   |                        | 767        |   |   |   | 14.7 | % |   |   | 755 |   |   |   | 13.6 | % |
| Loss from transfer of assets                                   |   |                        | 26         |   |   |   | 0.5 | % |   |   | - |   |   |   |   |   |
| Gain from restructuring of debt                                |   |                        | -          |   |   |   | 0.0 | % |   |   | (52 | ) |   |   | (0.9 | )% |
| TOTAL OPERATING EXPENSES                                       |   |                        | 5,118      |   |   |   | 97.9 | % |   |   | 6,438 |   |   |   | 116.1 | % |
| OPERATING INCOME (LOSS)                                        |   |                        | 111        |   |   |   | 2.1 | % |   |   | (892 | ) |   |   | (16.1 | )% |
| INTEREST INCOME                                                |   |                        | (5         | ) |   |   | (0.1 | )% |   |   | (9 | ) |   |   | (0.2 | )% |
| INTEREST EXPENSE                                               |   |                        | 41         |   |   |   | 0.8 | % |   |   | 63 |   |   |   | (1.1 | )% |
| NET INCOME (LOSS)                                              |   | $                           | 75         |   |   |   | 1.4 | % |   | $ | (946 | ) |   |   | (17.0 | )% |
| LESS: NET LOSS ATTRIBUTABLE TO NONCONTROLLING INTEREST         |   | $                           | -          |   |   |   | 0.0 | % |   | $ | (1 | ) |   |   | (0.0 | )% |
| NET INCOME (LOSS) ATTRIBUTABLE TO INTERNET AMERICA, INC.       |   | $                           | 75         |   |   |   | 1.4 | % |   | $ | (945 | ) |   |   | (17.0 | )% |
| NET INCOME (LOSS) PER COMMON SHARE:                            |   |                        |       |   |   |   |   |   |   |   |   |   |   |   |   |   |
| BASIC AND DILUTED                                              |   | $                           | 0.00       |   |   |   |   |   |   | $ | (0.06 | ) |   |   |   |   |
| WEIGHTED AVERAGE COMMON SHARES OUTSTANDING:                    |   |                        |       |   |   |   |   |   |   |   |   |   |   |   |   |   |
| BASIC                                                          |   |                        | 16,668,527 |   |   |   |   |   |   |   | 16,558,290 |   |   |   |   |   |
| DILUTED                                                        |   |                        | 19,386,955 |   |   |   |   |   |   |   | 16,558,290 |   |   |   |   |   |
| OTHER DATA:                                                    |   |                        |       |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Subscribers at end of period (1)                               |   |                        | 25,000     |   |   |   |   |   |   |   | 26,200 |   |   |   |   |   |
| Adjusted EBITDA(loss)(2)                                       |   | $                           | 922        |   |   |   |   |   |   | $ | (82 | ) |   |   |   |   |
| Adjusted EBITDA margin(3)                                      |   |                        | 17.6       | % |   |   |   |   |   |   | (1.5 | )% |   |   |   |   |
| CASH FLOW DATA:                                                |   |                        |       |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Cash flow provided by (used in) operations                     |   | $                           | 857        |   |   |   |   |   |   | $ | (389 | ) |   |   |   |   |
| Cash flow used in investing activities                         |   |                        | (322       | ) |   |   |   |   |   |   | (251 | ) |   |   |   |   |
| Cash flow used in financing activities                         |   |                        | (345       | ) |   |   |   |   |   |   | (502 | ) |   |   |   |   |
| Reconciliation of net income (loss) to Adjusted EBITDA (loss): |   |                        |       |   |   |   |   |   |   |   |   |   |   |
| Net Income (loss)                                              |   | $                           | 75         |   |   |   |   |   |   | $ | (946 | ) |   |   |   |   |
| Add:                                                           |   |                        |       |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Depreciation and amortization                                  |   |                        | 767        |   |   |   |   |   |   |   | 755 |   |   |   |   |   |
| Stock compensation                                             |   |                        | 18         |   |   |   |   |   |   |   | 55 |   |   |   |   |   |
| Interest expense                                               |   |                        | 41         |   |   |   |   |   |   |   | 63 |   |   |   |   |   |
| Loss from transfer of assets                                   |   |                        | 26         |   |   |   |   |   |   |   | - |   |   |   |   |   |
| Less: Interest income                                          |   |                        | (5         | ) |   |   |   |   |   |   | (9 | ) |   |   |   |   |
| Adjusted EBITDA (loss)(2)                                      |   | $                           | 922        |   |   |   |   |   |   | $ | (82 | ) |   |   |   |   |

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| 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 William E. Ladin, Jr. |
| 32.1    |   | Section 1350 Certification of William E. Ladin, Jr.             |

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| INTERNET AMERICA, INC.                              |
|-----------------------------------------------------|
| (Registrant)                                        |
|                                                |
| Date:  05/13/11                                |
| By:                                                 | /s/ William E. Ladin, Jr. |   |
| William E. Ladin, Jr.                               |
| Chairman and Chief Executive Officer                |
|                                                |
| Date:  05/13/11                                |
| By:                                                 | /s/ William E. Ladin, Jr. |   |
| William E. Ladin, Jr.                               |
| Acting Chief Financial and Chief Accounting Officer |

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