Flaherty Special Situation Newsletter #33
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Ready to grow again! "We've reached an inflection point!" says CEO Charles Rice of InterMetro Communications, Inc. (IMTO).  After a three year internal turnaround, this cloud-based, next generation Voice over Internet Protocol (VoIP) network provider is poised to expand and profit in the booming $1.1 trillion domestic U.S. telecommunications industry.  Also featured: An ideal blend of growth plus safety for 2013, Federated Kaufmann Large Cap Fund is #1 among large cap funds ranked by The New York Times.  A hat trick for Bob!               February 13, 2013

Bob Flaherty Rides Again!

Welcome to our 33rd Flaherty Special Situation Newsletter. On page 21 in its Sunday, January 13, 2013 mutual fund section The New York Times ranked Federated Kaufmann Large Cap Fund #1 for 2012 among large cap mutual funds. Surprisingly there wasn't any further editorial mention of the fund. As a three- times former Forbes mutual fund editor I think that this is another   example of shrinking mutual fund coverage.

 I STILL THINK BEING #1 IS SPECIAL. IT SHOULD NOT BE IGNORED.  With its new   #1 ranking the timing to write up this largely unknown growth stock fund will never be better.

And I want another hat trick. Over my career I keep track of journalism awards, scalps and my unique coups like our   12 issue online expose "The Invisible Man Returns" plus all sorts of lesser things that really don't matter to anyone else.  Why? Because they do matter to me.

I got my first hat trick at Forbes. I wrote an opus about   the incredible blunders erecting the John Hancock Tower. It was a great hit with readers, but upset   the   builders of Boston's   version of the Tower of Babel.

Malcolm Forbes came into my office waving my story.  "Bob, we lost three advertisers with just this one story.  John Hancock, naturally, but also the glass company that supplied the windows and the underwriter who helped to finance the tower.  No one ever did that before."

"Yes," I proudly replied. "In hockey they call that a hat trick!"

Why would this issue's fund item complete a new hat trick? Back in l986 I did the first story on then tiny Kaufmann Fund featuring publicity shy co-founder Hans Utsch. The start-up was #1in performance but only had assets of about $16 million. Shortly after our piece appeared assets doubled.  Then Hans' partner Larry Auriana spoke at one of our conferences and assets doubled again. In Nov. l992 with fund assets up to $225 million I put both partners on our cover at Equities and again assets doubled, recently exceeding $5.3 billion.

In Dec. 2003 after the partners joined Federated Investors I wrote the first piece about their brand new Federated Kaufmann Small Cap Fund with only $200 million in assets and recently that fund's assets were $724 million.

 These portfolio managers have been successful in every niche they have covered because they are good at finding great companies. They seek growth companies led by very smart or brilliant leaders and buy them at reasonable prices. That is why their funds perform well.
Few investors realize Auriana and Utsch's winning team co-manages an overlooked third     Federated Kaufmann Large Cap. That is the one The New Times ranked   #1 in performance in large cap stocks for the year 2012.

That is a fine past performance. Looking forward   its   portfolio is perfect for this moment of individual confusion of where to invest. This relatively unknown fund is the solution for those not only looking for safety but also growth to offset the ever present depreciation of the dollar's purchasing power.

That is because the Federated Kaufmann Large Cap portfolio is filled with a nifty fifty of global blue chips with powerful positive cash flows. Their combined financial strength makes this fund one of the safest investments anywhere. Positive cash flow gives these blue chip managements the maximum choices to increase shareholder value. These enterprises can buy in their own shares, expand internally, make new strategic acquisitions or even start to pay dividends like  cash-rich Apple Computer.

This large cap fund portfolio is a combination of safety and growth everyone is seeking and few can find.  Another advantage is that Federated Kaufmann Large Cap Fund (KLCAX) is still relatively   small with assets of only about $372 million. That means it is still flexible enough   to generate some years of exceptional returns. Safety, growth, flexibility and its blue chip portfolio of large growth stocks makes it my ideal mutual fund for 2013.

 I'm old fashioned. I know there are index funds to track the entire globe, ETFs for every niche and an explosion of   specialized funds.  I still think broad equity mutual funds with their professional management and diversification are one of the best investment and retirement vehicles for busy people who are absorbed in their own careers. Individual investors who aren't savvy about stocks or worried senior citizens who experience soaring costs of food, energy and shelter around them and fear outliving their savings can also use this fund.

Now I have my hat trick with three first or very early pieces on all three Federated Kaufmann funds. Few others around can also claim they did that. That's neat. I feel wonderful today and hope that you do too! 


NO RESTING ON OUR OARS:  How would my old Forbes editor the late great Jim Michaels respond to that? Jim would smile, but ask what are you going to do for us next? Jim treated journalists like galley slaves; no resting on your oars is permitted.

How about the first story on a real live low-priced, profitable, special situation turnaround no one else has covered yet? It's thrilling to bring you good news before most investors even know a company exists or understand what it is trying to do. Our scoop is ten-year-old InterMetro Communications, Inc. (IMTO) has cleaned up its balance sheet and is ready to grow again.  

The initial goal of a Flaherty Special Situation is a gain of 50% to 100%. On February 13th the stock of little-known InterMetro was about $0.09 and surprise - it's profitable.  Considering the tenacity of this management turnaround team through even the toughest of times, InterMetro's revenues, profits and share value should increase nicely. We believe investors can achieve our target of 100% gain and astute, patient investors have an excellent chance of achieving many times that 100% gain.  

InterMetro is at an inflection point. Now cloud-based IMTO's focus can shift to aggressive expansion and launching new products in the booming VoIP market -- a $300 billion segment of the $1.1 trillion U.S. domestic telecommunications industry. Best of all, this market is still just in its infancy. IMTO has the potential to increase its revenues many times over and join the giants. Read on and see if you agree.  

If you have not already done so, please join our financial family. Simply go to our website www.flahertyfinancialnews.com and opt in as a reader to receive your next FREE issues of Flaherty Special Situations and Flaherty Financial News Newsletters. You can opt out any time.



Ready to Grow Again!

InterMetro Communications, Inc.  (IMTO)



"We've reached an inflection point!" says InterMetro Communications, Inc.  CEO Charles Rice.   After a three year internal turnaround, this cloud-based, next generation Voice over Internet Protocol (VoIP) network provider is poised to expand and profit in the booming $1.1 trillion domestic U.S. telecommunications industry.


Recent Price (02/08/13): $0.09                                   
52-Week Range:             $0.03 - 0.19  

*Shares Outstanding:      80.4 million

*Float Outstanding:        17.1 million

Market Capitalization:    $7.3 million

*EPS (trailing 12 mo.):   $0.014         

*Revenues (ttm):             $19.6 million

Total Assets:                   $3.2 million 

*Total Liabilities:            $16 million 
Shareholder's Equity:       def.

Book Value per Share:     def
*Price/earnings ratio (ttm): 6.9
Avg. Daily Shr. Trd. Vol. (3m): 895 


*Based on IMTO's SEC financial reporting dated through 11/14/12


By Robert J. Flaherty and Arnaldo Arroyo


Buy Recommendation


This issue features the first, and currently the only, special situation report on the spectacular internally-executed turnaround at InterMetro Communications, Inc. (IMTO).  Public since December 2006, the company has developed a proprietary, next-generation, VoIP-based telecommunications infrastructure that serves Tier-1, famous name-brand carriers we all know.   Management recently completed its three-year internal turnaround by dramatically improving its balance sheet and restructuring liabilities.  Now InterMetro is poised for accelerated growth and higher profits.


InterMetro's focus is shifting to aggressive expansion of its existing offerings as well as launching new products in the booming Voice over Internet Protocol (VoIP) market.   InterMetro has the potential to increase its revenues many times over and join the giants.  Best of all, you readers are the first to know about it.   

"We have been the most private public company that I know of," says InterMetro Chairman, CEO, and President Charles Rice. "We haven't concentrated on talking about the stock and this is the first time we have even talked much about the company itself.  This year should change that." 

"In the past couple of years we have had solid profits and yet we have traded on some occasions for less than one times earnings," says Rice. "We do not believe our current stock market value is in any way reflective of the intrinsic value of the company today.  We believe our revenues can be many times larger than they are now, and can be very profitable revenues."   

This spring, management plans to go on the road to start spreading the news to stockbrokers, analysts and other investors.  InterMetro plans contact with the media, ongoing news releases and more detailed communications to shareholders with upcoming website functionality and updates. 

"We are at an inflection point in the business," says Rice. Management has succeeded in renegotiating and settling large amounts of indebtedness and other liabilities. Importantly in October 2012 InterMetro obtained a new $3 million line of credit from the Transportation Alliance Bank, Inc. (TAB Bank), an FDIC-insured institution.  TAB Bank's recent underwriting process speaks volumes to the success of the internal turnaround.   This new banking relationship can now serve as a cornerstone to enable InterMetro to finance its future growth and activities.  "We have great products serving some of the largest carriers, and more products in development," says Rice. "We intend to take these additional products to market as well as focus on continued growth of the current offerings of company."  

Also in October in addition to the new TAB senior credit facility, InterMetro accepted $295,000 in private funds from the sale of preferred stock and warrants priced at a premium over today's trading price. "This investment came from both new investors, as well as some of our existing, long term investors," says Rice.  "We believe the continued investment from those familiar with the company signals a solid vote of confidence in management's strategy." 

What strategy is that?   

Every day more and more devices like smart phones are being sold and more voice enabled applications are being developed. Many of these products have voice and data features which require next-generation communications networks such as InterMetro's to converge and compress voice and video into data and then transport that data.  Few appreciate how huge this data transport market will get as end-users continuously consume new ideas from the marketplace.


InterMetro has spent the past decade building just the kind of cloud-based proprietary network infrastructure needed to support the data transport these end-user products need.  Now, with the TAB Bank relationship to help finance its growth, InterMetro has the cutting edge technology and marketing savvy to build a sizable niche in the booming telecommunications VoIP space. The telecommunications industry is currently $1.1 trillion domestically, according to the Telecommunications Industry Association (TIA), with upwards of $300 billion of revenue just in voice/data services, according to the Federal Communications Commission's annual 499 filings (FCC).  Beyond that, the telecommunications industry represents a breathtaking $4.7 trillion globally according to the TIA.  Incredibly, with all the new products and applications exploding all over the globe the huge VoIP-based data transport market is still in its infancy.


"We're 'the powered by play'," explains Rice about InterMetro's network. "What we do is allow marketing and retail services companies to compete for the end-users. We're the inside of what is going on.  We are agnostic to the user devices. So whether it's going to be landlines, cell phones,  IP-phones or even computer-based applications that command the market, we can converge any and all those services at the user edge.  We can transport communications for individuals at home, small offices (SOHO), medium to large business enterprises, large Fortune 1000 companies, and even the largest of carriers and providers around the globe. We are able to transport, today, any voice communication needs." 


Rice believes that InterMetro's proprietary VoIP-infrastructure network, which can compress, convert, transport and support end-users, is the key. "We built an infrastructure which is very low cost, highly efficient and highly technical," says Rice.   "Any of those devices, be it an IP-phone, a cell phone or land line, can use our low-cost, highly-efficient data transport and infrastructure support.  Our infrastructure is built completely in the IP structure.  Instead of customers (even the largest of telecomm carriers) investing directly into their own IP network, they look at partnering with us and allowing InterMetro to thus become a key piece of their transport layer, leaving them to focus on marketing and end-user needs." 


Currently, InterMetro has a full plate expanding domestic business and that is the first priority. Besides organic growth, management sees acquisition opportunities down the road, some possibly with companies much larger than InterMetro itself.  Also, while currently operating only in the U.S., InterMetro has an eye toward expanding its operations in order to service the international market and gain a share of the booming global voice data traffic.


On February 13 the stock of little known InterMetro was $0.09. The initial expectation of Flaherty Special Situation is a gain of 50% to 100%. But taking into consideration their profitable core on trailing 12 months revenues of $19.6 million, the new $3 million TAB credit line financing, and the tenacity with which this management team is committed to operating this company through even the toughest of times, InterMetro's revenues, profits and share value should increase nicely over the years ahead.   For astute, patient investors, this company has an excellent chance of achieving many times that initial 100% gain as management successfully completes its shift to aggressive expansion over the next months and years.




InterMetro Communications, based in Simi Valley, CA, has built a national, private, proprietary VoIP network infrastructure. The network is used to deliver voice calling services to traditional long distance carriers, broadband phone companies, VoIP service providers, wireless providers, and other communications companies and end-users. This VoIP network utilizes proprietary software, configurations and processes, advanced IP switching equipment and fiber-optic lines to deliver carrier-quality VoIP services that can be substituted transparently for traditional long distance services. One of the major reasons InterMetro's VoIP technology is in such high demand is that it is generally more cost efficient than the circuit-based technologies predominantly used in existing long distance networks and is easier to integrate with enhanced IP communications services such as web-enabled phone call dialing, unified messaging and video conferencing services.


Furthermore, InterMetro's network configuration enables it to quickly, without modifying the existing network, add equipment that increases the Company's geographic coverage and calling capacity.  The network also supports and utilizes Signaling System 7 (SS-7), the established telecommunications industry standard for reliable call completion, to allow access to customers of the local telephone companies, as well as customers of wireless carriers.


Revenues currently come primarily from voice minutes on a metered basis; marketing is focused on increasing these minutes. This should occur by adding new customers and also new products so that the network is fully utilized.  Due to InterMetro's proprietary software and hardware, exponential expansion of the network is possible at a fraction of the heavy capital costs typically expected in the telecommunications industry at large.


"This is cloud communications at its best," says Rice. "We've created a cloud infrastructure that integrates all the different communications technologies in a secure environment, whether it is your office phone, your cell phone, or a traditional land line.  And through the internet (or private network connections to InterMetro's customers), our customers can offer services and communications through that cloud to end-users."


Unlike other companies requiring a substantial amount of capital investment to grow infrastructure, InterMetro is not a capital intensive business. According to the FCC, most telecommunications "facilities-based" network providers spend around $0.25 of every revenue dollar on investments back into their infrastructure.   InterMetro's proprietary network is intended to expand at a fraction of that amount.   "It is not at all capital intensive to expand our revenues, and that is unique in telecommunications, something we intend to exploit vigorously," says Rice.


The Opportunity


InterMetro Communications operates its VoIP infrastructure in the U.S. domestic telecommunications industry, which is presently estimated at $1.1 trillion, according to the TIA ($300 billion of that domestic industry, according to the FCC, in the segment directly addressed by InterMetro's current product offerings).  The global telecommunications industry is valued at a breathtaking $4.7 trillion.  What many fail to grasp is that these huge economic sectors are actually still in their infancy.  So InterMetro is in the right space at the right time.   This is especially true since every day more and more devices are being sold and more applications are being developed requiring voice and data, requirements that need a network like InterMetro's proprietary, low cost and highly efficient, highly technical, secure IP infrastructure to transport that voice data.


Though most consumers do not realize it, many new telecommunications companies, such as cable providers, internet services, even some wireless companies, do not generally own and operate their own telecommunications infrastructure.   Some of the largest existing telecommunications companies are built primarily on the old type of legacy infrastructure, with trillions of dollars invested.  Consequently, those companies seek affordable methods for accessing IP infrastructure without years of engineering and construction.   That's where InterMetro comes in.  The InterMetro network infrastructure is built completely in the VoIP structure. It generates revenue on a metered basis. To boosts its revenue stream, InterMetro partners with its customers to become their transport layer, so InterMetro's customers can instead focus on generating their own revenues and going after their own end-users.


History and the Turnaround


Founded in 2003, InterMetro Communications finished building its first network components and began generating revenue as a private company in 2004. The company used its own cash flow to finance its operations and acquisitions.  In March 2005, the company acquired a switchless reseller of wholesale long-distance services which  enabled InterMetro to increase its customer base, add minutes to its network, access new sales channels, and demonstrate its M & A integration capabilities. 

With revenues exceeding management's own projections, InterMetro and its investment bankers developed a model for rapid growth that was to be based on an influx of public funds and a strategic M & A plan.   In anticipation of raising the public capital, InterMetro built-out its nationwide network at great time and expense, and positioned itself with a negative cash flow situation as part of the larger plan.    Unexpected by the company or its bankers, the equity markets stalled in 2006.  Rather than scrub the plan and the largely completed national network infrastructure build, InterMetro and its advisors developed a new plan. It was to   accept a 'reduced' public capital infusion of $10 million in 2006 and to use that as a bridge until 2008 when a new capital raise could occur. InterMetro expected that this next time the capital raise would be in the form of debt. 

All went well in 2007, but then the debt capitalization was scheduled for August of 2008. This was the month of the Lehman Bros. banking collapse and the beginning of the recession that slammed shut the window for funding for so many emerging markets companies like InterMetro.  Basically, the company had hit both the equity and then the debt markets at the worst of all possible moments for each situation.  This left management starting 2009 without the capital they had anticipated.  In the early years of the "Great Recession" many companies in these sorts of circumstances did not survive. 

Faced with the frozen capital markets of 2009, and with network liabilities piling up, CEO Rice announced that InterMetro was to stop seeking capital. As he put it, the company would get "Back to the Basics".  They pulled back expansion operations, refocused on organic growth, its core business, stopped pursuing all M & A activities, and maintained a strong fiscal discipline with a sustainable growth rate.  Simultaneously, they internally executed a financial workout and restructuring program with their creditors. 

After making strategic changes in management, the newly configured veteran executive team executed one of its largest growth periods in the company's history with profits at times in excess of $1million in a single quarter.  "Tough times required tough decisions," said Rice.  "With the right team in place we recognized opportunities that arose from the recession and capitalized on them."  Essentially, InterMetro internally performed a full turnaround of the company through strong will and commitment.


InterMetro has done a fantastic job at restructuring its finances.  The Company has lowered its balance sheet current liabilities by approximately $12 million during the turnaround, down from over $24 million.  What's even more encouraging is that InterMetro accomplished a significant reduction of its liabilities using its own cash flow. 

"Now that we have our balance sheet in order, and a new $3 million TAB Bank credit facility in place, we can focus our attention on growth and utilize our cash to help expand our business and our existing customers, which includes some of the largest telco's," says Rice. "We needed to clean our balance sheet up first so that once it came to the time to bring in outside capital we could plan to do so at a value which would be more reflective of the job that we are doing here." 

Management deserves great credit for a stellar performance.  


If you look at the financials as a snapshot you may miss the spectacular progress management has made in dramatically improving these financials, as described in the previous section above.  All from internally generated cash from operations combined with effective collaboration and negotiations with its creditors, the working capital deficit has come down over $11 million (almost 50%) in the internal turnaround years.  InterMetro has also become a client of TAB Bank with an initial credit line of $3 million. This wiped out an older, smaller credit line, with costly terms, that had been taken out in a difficult period. Now remaining payments with the existing creditors are all on schedules which can be reasonably maintained and liabilities should continue to be reduced from operational cash flow.  

The relationship with TAB Bank should provide the access to capital needed to execute the current growth strategy until the stock price rises to a level where using equity for future financing makes sense.  

For the three months ended September 30, 2012 InterMetro's net revenues increased $584,000, or 11.8%, to $5.5 million, up from $4.9 million for the comparable three months in 2011.  Revenues for the trailing 12 months were $19.6 million.    


The Management Team


IMTO's management team is comprised of individuals who have more than 75 years of combined telecom industry experience with prior work experience at leading telecommunications companies.  A majority of the team has previously worked together to build a leading IP communications company. High praise comes from a secured lender Rob Deutschman, Managing Director of Cappello Capital Corp. "I am tremendously impressed with this management team's ability to navigate the challenges of our recent economic environment while still maintaining focus on generating continuous net profits and growth. Beyond that, in even the most challenging of times the team has still managed to devote resources toward R & D and introduce several new products and services, which further bolsters my enthusiasm for making an additional investment at this moment."  


Charles Rice, 48, serves as Chief Executive Officer, President and Chairman of the Board for InterMetro Communications, Inc.  Rice is also the founder of InterMetro Delaware and serves as its Chairman, Chief Executive Officer and President since its inception in July 2003.  Under Rice's leadership, InterMetro was ranked 46th in Entrepreneur Magazine's June 2006 Hot 100 Fastest Growing Businesses in America.  Rice holds several patents and patents pending in the telecommunications and technology fields.  From 1999 to 2003, Rice was Chairman, Chief Executive Officer and President of CNM Network, Inc., or CNM, a national VoIP carrier.  For the years under Rice's leadership, the company received the Deloitte Technology Fast 50 and also received the Frost and Sullivan's Best New Product Award.  Rice joined CNM in 1997 and became a member of its board of directors in 1998.  From 1998 to 1999, Rice served as CNM's Vice President and Chief Operating Officer.  Prior to CNM, Rice spent over 15 years in executive positions.  Rice attended California State University of Northridge.


Eric Fuchs, 45, serves as Chief Sales Officer for InterMetro and previously served as Vice President of Sales.  Fuchs has been with the company since its inception in July of 2003.  From 2000 to 2003, Fuchs was Vice President of Sales of CNM Network, Inc.  Prior to joining CNM, Fuchs was the Silicon Valley Sales Director at ICG Communications.  Previous senior sales positions included Sales Director for National Accounts for Ocular Sciences/American Hydron (OSI), a contact lens manufacturer, where he assisted in the successful acquisition of the assets from Allergan Pharmaceutical's contact lens division.  During his tenure at OSI, sales revenue grew from $8 million to $150 million per year.   Fuchs holds a B.A. in Organizational Communications with Business Marketing emphasis from Arizona State University. 


David Olert, 59, serves as Chief Financial Officer of InterMetro and previously was the company's Corporate Controller.  Before joining InterMetro Delaware in 2007, Olert was Controller of Optical Communication Products, Inc., a manufacturer of telecom fiber optic components and prior to that served as Corporate Controller of SMTEK, Inc., a contract manufacturer. Prior to SMTEK, Olert spent 12 years working for various publicly traded companies as CFO or Corporate Controller and worked four years in public accounting.  Olert is a Certified Public Accountant and holds a B.A. degree from Barry University. 


Christopher Fogel, 39, serves as the Chief Technology Officer of InterMetro and previously served as Vice President of Network and Provisioning.  Fogel has been with the company since its inception in July 2003.  Prior to joining InterMetro, Fogel was Director of Provisioning for CNM Network from 1998 to 2003.  As Director, he was responsible for deploying CNM's 54 node national IP network.  From 1996 to 1998, Fogel was with Netcom Communications, Inc.  Fogel attended the University of North Dakota.


 Jon deOng, 38, serves as Chief Information Officer and Director of InterMetro.  deOng has been with the company since its launch in July of 2003.  Before that he served as the Chief Technology Officer and as a Director for CNM Network from 1999 to 2003.  From 1998 to 1999, deOng served as Vice President of Technology for CNM.  Prior to CNM, he was responsible for managing the development and deployment of Netcom On-line Communication Services, Inc.'s business center. It was the core infrastructure systems of Netcom's web hosting service which was later acquired by ICG Communications, Inc.   deOng attended the University of Texas. 


Joshua Touber, 49, has served as a Director of InterMetro since January 2007 and has also served as a Director of InterMetro Delaware since March 2004.  He is currently President of TouberMedia, LLC, a media consulting firm.  From 1998 to 2003, Touber was the Chief Operating Officer of Ascent Media Creative Services Group, a subsidiary of Liberty Media Group.  In 1995 he founded Virtuosity, a telecommunication services provider that developed the "virtual assistant" product category under the "Wildfire" brand name and has served as its president since its inception.   Touber holds a B.A. degree in Computer Science from Dartmouth College. 


Douglas Benson has served as an Independent Director of InterMetro Communications since January 2007 and has also served as a Director of InterMetro Delaware since May 2006.  He is currently the Chief Executive Officer of the Edwin S. Johnston Company, a real estate investment and development company, a position he has held for the past 20 years.  Benson was a founder and majority shareholder of Heritage Bank, a commercial bank in Michigan. He served on the board of directors of Andrews University for over 10 years.  Benson holds a B.A. degree from Andrews University and a Doctor of Medicine from Loma Linda University. 


Robert Grden has served InterMetro Communications since January 2007 as an Independent Director, and the Chairman of the Audit Committee.   Mr. Grden has also served as a Director of InterMetro Delaware since August 2004.  He is currently the Executive Director for the Wayne County Employee's Retirement System, where he oversees the defined benefit and defined contribution retirement plans.  He has worked for Wayne County since 1991 and held the position of Deputy County Treasurer/Investments. Prior to that, he was a management consultant with Ernst & Young LLP serving clients in a variety of industries.  Mr. Grden holds a B.A. degree from Lawrence Tech and a Master of Science in Finance from Walsh College.




As competition continues to heat up among a growing number of companies for end-users of voice services that have traditionally been serviced by the large incumbent carriers, InterMetro is able to provide something that most of its competitors cannot: a proprietary, low-cost, national network IP infrastructure.  Some of its competitors include wireless carriers, competitive local exchange carriers, interexchange carriers and more recently broadband VoIP providers, including cable companies and DSL companies offering broadband VoIP services over their own IP networks.  However, despite the number of competing companies, many of them do not operate complete national network infrastructures. In fact, companies that previously purchased national voice and data services exclusively from the few original large carriers are now increasingly purchasing services from IMTO.   


As an emerging growth company in a rapidly changing field, IMTO faces the same risks as most technology companies, that new technology could alter their model.  As with most emerging market companies, serious financial missteps could set plans back.  However, these are risks emerging growth companies face and the company has demonstrated a tremendous ability to manage its way through the toughest of times.  InterMetro files reports outlining full risk factors with the Securities and Exchange Commission which are available at www.sec.gov and which should be reviewed before making any investment decision. 

So far the VoIP industry has enjoyed growing in an environment that is largely free from regulation.  However, the FCC and many state regulatory agencies are examining how they could regulate this rapidly growing economic sector.  Regulatory initiatives that are currently being considered include proposed reforms for universal communication service, the inter-carrier compensation system, FCC rulemaking regarding emergency calling services related to broadband IP devices and the assertion of state regulatory authority over VoIP businesses. If these initiatives are eventually ratified, they could impact InterMetro's business by, including but not limited to, increased operating expenses, legal fees, taxes and regulatory fees applicable to its services. 

While the top ten customers of InterMetro accounted for 77% of its revenues as of Sept 30, 2012, these concentrated relationships with some of the biggest name-brand carriers could also be considered an advantage. Certainly the loss of one would hurt. On the other hand, additional acceptance of some of the company's new products by these largest of carrier customers could dramatically increase current sales.



InterMetro Communications, Inc. 

2685 Park Center Drive, Building A,

Simi Valley, CA 93065


Investor Relations

Phone: (805) 433-8000

Email: ir@intermetro.net 



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Disclaimer and Safe Harbor Statements


Disclaimer: This Flaherty Special Situation Newsletter contains forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995. Such statements are subject to certain risks and uncertainties, and actual circumstances, events or results may differ materially from those projected. We caution readers not to place undue reliance on any forward-looking statements and to supplement this newsletter with specific company SEC filings and their own research. Before purchasing any shares or making an investment, readers should review the company's SEC filings, including the most recent 10-K and 10-Q, available at www.sec.gov.  Please be aware that there is risk in every company stock that you buy. Coverage or other mention of a stock or fund in this newsletter is neither an offer nor solicitation to buy or sell any securities mentioned. We are not investment dealers or investor advisers registered with the SEC or State Security Authorities. We do not guarantee all the information in this newsletter is correct or will be updated. Remember some errors are inevitable. Reproduction without written permission is forbidden.  Flaherty Financial News Inc. received four thousand dollars from InterMetro Communications, Inc.   This was an editorial writing and online distribution fee for InterMetro Communications to be featured in this Flaherty Special Situation Newsletter. Our own policy forbids editorial from buying or selling a featured stock until this issue is out at least ten business days after its issue date, which in this case would be March 1, 2013.  No fee was paid for coverage by Federated Kaufmann Large Cap Fund. We covered this fund simply because it is relatively unknown and outlining its potential is a scoop. In cases where a report or profile is subsidized, readers should consider such subsidized articles as paid advertorials and understand that sponsored material will not be as objective as non-sponsored editorial. As Flaherty Financial News editor I always reserve "Final Copy Responsibility" on what to include and what to leave out of every issue. The buck stops here. We have tried to be objective, but may have failed. We are not security analysts or stockbrokers engaged in buying or selling, but financial journalists with all the many failings of that profession. You readers must decide the merits of each investment yourself and whether to invest. -Bob Flaherty, Editor

Flaherty Financial News Inc. (FFN) and its newsletters Flaherty Financial News and Flaherty Special Situations are not registered as broker dealers or investment advisers with the U.S. Securities and Exchange Commission or any state securities authority. Our newsletters and their information and content providers make no representations or warranties of any kind in connection with the subject matter, performance or suitability of the information contained in the publications for any purpose and are not liable for the timeliness, accuracy or completeness of the information. The information is provided for general information purposes and is not a substitute for obtaining professional advice from a qualified person or entity familiar with your personal circumstances. Please seek the help and advice of professionals as appropriate regarding the evaluations of any specific security, report, opinion, advice or other content. FFN is not responsible for trades placed by recipients. All opinions expressed, information and data provided are subject to change without notice. FFN, its officers and its employees may have positions in and may from time to time make purchases or sales of the securities discussed or mentioned by FFN. (However, we will avoid front running and the buying or selling of any security about to be discussed until ten business days after our particular report is released to the public.) FFN shall have no liability for any newsletter that is lost, intercepted or not received in a timely manner, or not received at all, for any reason.-RJF

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Is Your Company Looking To Raise Capital? Public And  With A Growth Plan And Projected  Earnings? Give Us A Call Or Send FFN A Message. We Are Currently In Contact With Many Lenders With Capital Looking For Investment Ideas Who Would Love To Help. Lenders  also seek people looking to sell their business or subsidiary or intellectual property, rights and permissions. Companies seeking to finance expansion by selling royalty rights should also touch base.   

Contact: Brian Flaherty at 914-539-0688 or email dfbrian@yahoo.com 
Dear Friends: Our sputtering American economy appears to be recovering as our people struggle to adapt to rapid global changes. While much of the nation has been snowy or stormy, remember spring really is just around the corner. Meanwhile, it was fun to bring you in this issue a new company before anyone else and our #1 mutual fund choice for 2013. Scoops are what make journalism such a rewarding profession. You never stop learning. And the recession teaches us all the value of work. So whatever job or work you have do it well.
Bob and Brian

Robert and Brian  Flaherty
Flaherty Financial News Inc.