Italk Inc (OTCMKTS:TALK) Subsidiary Will Seek Relief Under Chapter 11 Bankruptcy

tags: TALK

At the start of the year investors were genuinely excited about the prospects of Italk Inc (OTCMKTS:TALK) acquiring United Mobile Solutions Corp. After all, UMS had finished 2014 with reported revenues of over $17 million. On January 29 the deal was closed and TALK had to pay a lot – the company issued 106,250 of its preferred stock, which if converted could be turned into over 10.6 BILLION common shares, in exchange for the 100 thousand shares that UMS had outstanding.

All it took was just a couple of months for the deal to turn sour, though. The red flags around UMS began cropping up one after the other – first the board of directors of TALK decided that the financial statements of UMS should no longer be relied upon due to the fact that several legal actions against UMS had not been disclosed. Apparently four legal actions had been commenced against UMS in November and December 2015, another one in March 2016, and two more in April and May. Then investors learned that the revenues of UMS for 2015 had suffered a dramatic decrease of over 41% on a year-over-year basis.

Yesterday, however, came the final blow – TALK announced that United Mobile Solutions had filed a voluntary petition for relief under Chapter 11 of the U.S. Bankruptcy Code. The indirect wholly owned subsidiary of TALK will try to restructure its financials in an attempt to “significantly reduce debt and other liabilities, provide maximum recoveries for creditors and cause no interruption of its carrier master dealer operations”.

The news had a devastating effect on the stock. In a state of panic selling investors dumped over 216 million shares on the market. TALK‘s share price plummeted for the bottom of the chart and by the time of the closing bell the stock had wiped more than 44% of its value, sitting at $0.0005.

On its own TALK fails to inspire much confidence. The company is delinquent with its filings and its OTCMarkets profile page is branded with the OTC Pink Limited Information sign. The last financial report covers the quarter ended November 30, 2015, and contains the following numbers:

• $4,626 cash and total current assets!!!
• $2.67 million total current liabilities
• $100 thousand sales
• $141 thousand net loss

The company also has a significant amount of outstanding convertible notes that can be turned into common shares at deep discounts to the market price. Before any new shares can see the light of day, though, TALK will have to increase their authorized shares because as of May 13, 2016, they had maxed out their currently authorized amount of 1.875 BILLION shares.

It should be obvious that TALK is an extremely dangerous choice that should be approached with caution. Before you put any money on the line you should take the necessary time to do your own due diligence. 

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