Italk Inc (OTCMKTS:TALK) Could Be A Discount Entry Opportunity

Italk Inc. (TALK), the advanced communications & mobile broadband services company, seems to be finally waking up after a long time of share price inactivity. The company filed for bankruptcy in July 2016, and the market seemed to forget the company. Something good should be happening right now, and in this article, we will assess that. Additionally, the fact that the company became quite popular on the iHub forum reinforces the idea that regular readers would appreciate an article about the company. Have a look at the recent price action, and note the volume.SourceBusinessTALK was created on July 10, 2006. The business entity is the result of some business combinations. We want to note them all here, as they are usually appreciated by the market:

• The merger with Sopac Cellular Solutions, Inc., on December 18, 2012.
• Purchase and Sale Agreement with United Mobile Solutions Corp on September 24, 2015.

We found out that TALK started providing value and services to "T-Mobile dealers, mobile virtual network operations’ dealers, wireless product and service resellers, exclusive carrier agents, distributors and wholesalers in the U.S." thanks to the acquisition of United Mobile Solutions Corp. Furthermore, the company became partner of T-Mobile, to which the company provides "training and development, new dealer recruitment, retail store development and commissions processing for its sub agents to its customers".In addition to this deal with T-Mobile, the company mentioned many other agreements with other companies operating in the same sector. You can find a lot of information about them here, and on the company website. In addition, the company posted many achievements in the social media:SourceRecent DevelopmentsThe telecommunications industry saw a wave of restructuring and consolidation in previous years. For those who didn't follow the recent market news from the sector, this is a good read:

"Competition within the telecommunications industry is fueling mergers and acquisitions, albeit at a slower pace than in years past. There were 269 telecom mergers in 2015, down 11.5 percent from the 304 mergers that took place in 2014 and off 20 percent from the 339 in 2013. Since the start of 2010, the industry has seen more than 2,400 M&A transactions. The number of telecom players is dwindling, but industry consolidation is still robust between mobile and fixed line/cable operators, resulting in bigger players occupying more dominant positions." Source

Competition means that either you merge with another competitor or you will have to restructure. In the case of TALK, management believed that remaining independent was more valuable and decided to restructure. The company filed for bankruptcy in July 21, 2016. The President of TALK, David Lee, and the CEO, David Levy, explained in the following words:

"Our retail units across the country are open and will operate without interruption throughout the reorganization process, the resulting deleveraging is expected to strengthen UMS LLC's balance sheet, creating a strong and sustainable capital structure and maximizing shareholder value. We believe the financial restructuring plan we are announcing today is in the best interest of all UMS LLC's stakeholders." Source

Additionally, the company issued a letter to the shareholders explaining the last move. We had a look at it and found that the following words very well assessed the situation of the industry and justified TALK's bankruptcy:

"Massive investments in network infrastructure, intended to meet a projected demand that never materialized, left many companies with crushing debt and insufficient operating revenues. A wave of bankruptcy reorganizations cleaned up the balance sheets of many companies in the industry, including some of its largest players. Among these are names like Charter Communications, Hawaiian Telecom, Integra Telecom, Teligent, and Cable & Wireless USA." Source

But, what is happening now?Bankruptcy negotiations with lenders can last for a minimum of six months to two years or more. Given the last volumes exchanged in the market, it seems that something good looks to be happening. In our opinion, the only good thing that can happen here is that the company exits bankruptcy.We could check the last balance sheet of the company in this file reported by the court, and were glad to see that the company's Q1 2017 earnings were quite successful. In that file, investors can check out the revenues returned by the stores that are still open. This is a brief resume:

• Sales (wholesale): $176,979.34
• Sales (MetroRetail): $422,424.99
• Total Income and Deposits: $1,460,401.70
• Gross Profit: $849,797.07
• Expenses: $851,483.70

The company still needs to reduce the expenses that the company reports. But, it is sure that debt holders were happy to see that the company's revenues are strong. Investors can find the revenues increase, while the company is still in the process of Bankruptcy negotiations, by checking this link.When will the court decide? According to this file, the following dates are interesting:

• On July 6, 2017, the restructuring plan will be voted.
• On July 13, 2017, a hearing will be held in the United States Bankruptcy Court to accept the plan or to add any objections.

There may be an auction to acquire the rest of the company and T-Mobile USA (it is a debtor) could bid. We could find out that there is a company that had already made a bid for TALK:

"(iii) shall be in an amount equal to or greater than KHC’s Initial Bid plus $25,000.00 (iv) shall contain an acknowledgement that any such purchase of the New Interest is subject to the Plan and that the Reorganized Debtor shall be subject to the Plan upon entry of a Confirmation Order, and (v) shall be subject to the written approval or credit bid of T-Mobile USA, Inc., MetroPCS Texas, LLC and MetroPCS Georgia, LLC (the “T-Mobile Group”)" Source

ConclusionTALK filed for bankruptcy last year and the CEO justified the move by explaining the complicated situation of the sector. This year, it seems that things are going much better than in 2016. The quarterly reports disclosed by the court showed an increase in revenues. Additionally, the fact that the Bankruptcy Court may accept soon the reorganization plan is making the stock pick up as some smart money looks to be getting in ahead of the event. Furthermore, a company made a bid to buy the company and there may be an auction for TALK. This is all good news. Hence, this is a company to be followed closely. We will be updating our subscribers as soon as we know more. For the latest updates on TALK, sign up below!Disclosure: We have no position in any of the securities mentioned and have not been compensated for this article.