CORRESP 1 filename1.txt LEGAL & COMPLIANCE, LLC LAURA ANTHONY, ESQUIRE STUART REED, ESQUIRE WWW.LEGALANDCOMPLIANCE.COM DIRECT E-MAIL: LANTHONY@LEGALANDCOMPLIANCE.COM July 18, 2006 VIA FEDERAL EXPRESS Securities and Exchange Commission Division of Corporation Finance 100 F Street, NE Washington, DC 20549 Attn: Michele M. Anderson, Legal Branch Chief RE: IELEMENT CORPORATION AMENDMENT NO. 2 TO REGISTRATION STATEMENT ON FORM SB-2 FILED JUNE 6, 2006 FILE NO. 333-131451 FORM 10-KSB FOR YEAR ENDED MARCH 31, 2005 FORM 10-QSB FOR THE QUARTERS ENDED JUNE 30, SEPTEMBER 30 AND DECEMBER 31, 2005 FILE NO. 0-29331 Dear Ms. Anderson: We have electronically filed herewith on behalf of IElement Corporation (the "Registrant") Amendment No. 3 to the above-referenced Registration Statement. In addition, and for your convenience, we are including a complete copy of the submission herewith for your review. The Amendment No. 3 is marked with "R" tags to show changes made from the previous filings. In addition, we have included a narrative response herein. We trust you shall deem Amendment No. 3 and the contents of this transmittal letter responsive to your comment letter dated June 19, 2006. In addition to responding to your specifically numbered changes we have updated sections of Amendment No. 3 where such update was appropriate and applicable. In particular, we have amended and updated the Industry Consolidation section under Regulatory Overview has been updated to reflect the status of the discussed mergers and acquisitions. Our responses below are numbered in accordance with Ms. Anderson's numbered comments: 1. The SB-2 has been updated to include financial statements and updated information for fiscal year end March 31, 2006. 2. Amendment No. 3 reflects the requested change. In addition, complete list of the shares referred to in Note 4, including the date of issuance, who the shares were to be issued to, and have since been issued to, the reason for the issuance, number of shares and dollar value of such issuance is as follows: Securities and Exchange Commission Division of Corporation Finance July 18, 2006 Page 2 Date Payee Reason Shares Amount ---- ----- ------ ------ ------ 8/12/2005 Tim Dean Smith Debt Repayment 80,000 $4,000.00 8/12/2005 Susan Walton Debt Repayment 400,000 $20,000.00 8/12/2005 Tim Dean Smith Debt Repayment 1,600,000 $80,000.00 8/12/2005 Jeremy Dean Smith Debt Repayment 1,800,000 $90,000.00 8/12/2005 Dolphin Capital Debt Repayment 2,900,000 $145,000.00 8/16/2005 Duane Morris, LLP Settlement 880,000 $44,000.00 8/17/2005 Michael Bloch Private Placement 2,000,000 $70,000.00 8/29/2005 Isaac de la Pena Debt Repayment 150,000 $7,500.00 8/29/2005 Johnathan Lowenthal Private Placement 500,000 $17,500.00 8/31/2005 Palladian Advisors Settlement 2,500,000 $100,000.00 9/12/2005 Wayne Schoenmakers Private Placement 100,000 $3,500.00 9/13/2005 Thomas Barrett Private Placement 200,000 $7,000.00 9/19/2005 William Goatley Private Placement 250,000 $8,750.00 9/26/2005 Robert Gillman Private Placement 500,000 $17,500.00 9/28/2005 Timothy Broder Private Placement 500,000 $17,500.00 9/30/2005 Thomas Piscula Private Placement 500,000 $17,500.00 10/3/2005 ROBERT ROWLEY Private Placement 500,000 $17,500.00 10/4/2005 John Niedfelt Private Placement 200,000 $7,000.00 10/4/2005 Jerome Niedfelt Private Placement 300,000 $10,500.00 10/4/2005 Michael Melson Private Placement 500,000 $17,500.00 10/4/2005 Raymond Dunwoodie Private Placement 500,000 $17,500.00 10/4/2005 Fred Matulka Private Placement 500,000 $17,500.00 10/7/2005 Oscar Greene Private Placement 500,000 $17,500.00 10/11/2005 Kenneth Meyer Private Placement 1,000,000 $35,000.00 10/14/2005 William Cail Private Placement 25,000 $875.00 10/14/2005 Trey Investments Private Placement 150,000 $5,250.00 10/18/2005 Richard Crose Private Placement 500,000 $17,500.00 10/27/2005 Frank Davis Private Placement 200,000 $7,000.00 11/1/2005 Global Equity Trading Private Placement 500,000 $17,500.00 11/16/2005 Holger Pfeiffer Private Placement 250,000 $8,750.00 11/18/2005 Calder Capital Private Placement 500,000 $17,500.00 11/21/2005 Bellano Family Trust Private Placement 300,000 $10,500.00 12/1/2005 Brett Jensen Employee Comensation 200,000 $7,000.00 12/1/2005 JEFF WILSON Employee Comensation 714,286 $25,000.00 12/2/2005 Marianne Issels Private Placement 250,000 $8,750.00 12/5/2005 Robert Flaster Private Placement 200,000 $7,000.00 12/5/2005 Ulrich Nusser Private Placement 250,000 $8,750.00 12/6/2005 William Harner Private Placement 150,000 $5,250.00 12/6/2005 Sat Paul Dewan Private Placement 300,000 $10,500.00 12/6/2005 Annette Bohmer Private Placement 500,000 $17,500.00 12/7/2005 Robert Smith Private Placement 300,000 $10,500.00 12/8/2005 Thomas Weis Private Placement 250,000 $8,750.00 12/9/2005 Laurence B. Straus Private Placement 300,000 $10,500.00 12/9/2005 Jurgen Popp Private Placement 1,500,000 $52,500.00 12/12/2005 Stefan Muller Private Placement 500,000 $17,500.00 12/12/2005 Veronica Kristi Prenn Private Placement 1,500,000 $52,500.00 12/13/2005 Global Equity Trading Private Placement 2,000,000 $70,000.00 12/14/2005 AK Asset Management Private Placement 1,000,000 $35,000.00 12/15/2005 Stefan Muller Consulting Payment 1,000,000 $60,000.00 12/15/2005 Jurgen Popp Consulting Payment 1,000,000 $60,000.00 12/15/2005 Glenn Jensen Private Placement 3,000,000 $105,000.00 12/16/2005 Clarence Keck Private Placement 150,000 $5,250.00 12/16/2005 Benjamin Eichholz Private Placement 1,500,000 $52,500.00 12/16/2005 Ryan Cornelius Private Placement 1,500,000 $52,500.00 12/19/2005 Christiane Loberbauer Private Placement 250,000 $8,750.00 12/19/2005 Fred Schmitz Private Placement 5,000,000 $175,000.00 12/20/2005 Jorn Follmer Private Placement 500,000 $17,500.00 12/23/2005 Matthias Graeve Private Placement 250,000 $8,750.00 12/23/2005 Hendrik Paulus Private Placement 500,000 $17,500.00 12/27/2005 Donald Kennedy Consulting Payment 20,000 $1,000.00 12/27/2005 John Fox Consulting Payment 100,000 $5,000.00 12/27/2005 Film & Music Entertainment Private Placement 1,000,000 $35,000.00 12/27/2005 Gerd Weger Private Placement 10,000,000 $350,000.00 12/28/2005 General Research GmbH Private Placement 500,000 $17,500.00 12/30/2005 Vista Capital Consulting Payment 1,000,000 $70,000.00 12/30/2005 Vittorio Boeri Private Placement 500,000 $17,500.00 12/30/2005 Red Giant Productions Private Placement 500,000 $17,500.00
Securities and Exchange Commission Division of Corporation Finance July 18, 2006 Page 3 3. The 168,680 shares were issued to Quality Sound Communications on March 8, 2006. In addition, the Selling Stockholder table has been amended to reflect that Quality Sound beneficially owns 1,795,210 of which 1,626,530 are included in the offering. Amendment No. 3 reflects this change. 4. On March 1, 2003. Lance Stovall was the sole IElement shareholder and he owned the one share outstanding on that date (split adjusted, the Company financial statements now reflect 4 shares). Mr. Stovall also owned 500 shares of ICCC reflecting well below 1%. On March 1, 2003 the ICCC shareholders were (those with over a 5% stake are noted): Kramerica Corp. (65%) Hugh Fagan Aaron Zweig Richard & Heather Zweig Vivienne Infante Michael Koerner David Nolan Eric Trimble Chet Zalesky March Enterprises Terry Byrne (6%) Barry Brault (7%) Jerry Graham Alex Ponnath (7%) Jeffery Brault Robert Zweig Derrick Stilwell Blake Martensen Chris Zamora Lance Stovall Bill & Debra Chase Andrew Goodman Peter Walther Heather Walther Mark Addy Seanne McLay Albert Marerro Michael O'Reilly Sean Duncan Alex Nelson Shanna Hunter McLain Martensen Because ICCC and IElement did not have common shareholders, the Company is not required to account for the transaction under paragraphs 11-13 of Appendix D of SFAS 141. Since IElement did not have separate business operations at the time of the transaction and ICCC shareholders received a majority of the shares of the combined entity, the Company has restated its financials to account for the transaction as a recapitalization with no fair value, goodwill or customer list adjustments. 5. In restating the Company's financials to show the transaction with ICCC as a recapitalization, the Company has revised the date of the share exchange to coincide with both the asset transfer/liability assumption and the date on which ICCC and IElement shareholders agreed to the recapitalization and affected the transfer of assets, liabilities and shares. March 1, 2003 is the correct date to recognize the transaction according to FAS 141, paragraph 48. 6. The supplemental disclosure of noncash activities has been updated to include the assumption of accounts payable and accrued liabilities and the acquisition of fixed assets from the March 31, 2003 ICCC transaction. 7. Amendment No. 3 reflects the requested change. 8. Revenue and Cost Recognition on Page F-13 has been amended to address the credibility of the customers in greater detail. 9. The option table on page 30 of the amendment filed 6-7-06 included option grants in calendar year 2005. The Company granted no options during the fiscal year ended 3-31-05. This table has been updated to include all option grants for the year ended 3-31-06. No options or warrants have been included in calculating the net loss per share of common stock because including options and warrants would be anti-dilutive and reduce the Company's net loss per share of common stock. 10. Amendment No. 3 reflects the requested change. 11. Amendment No. 3 reflects the requested change. 12. Amendment No. 3 reflects the requested change. 13. Amendment No. 3 reflects the requested change. The Statement of Cash Flows has been updated to present bad debt expense separately from (increase) decrease in accounts receivable. 14. Amendment No. 3 reflects the requested change. 15. Amendment No. 3 reflects the requested change. 16. IElement shall file amended Form 10-KSBA for the year ended March 31, 2005 and amended Forms 10-QSBA for the quarters ended June 30, September 30 and December 31, 2005 as soon hereafter as can reasonably be completed and expects to make such filings within 10 days. In addition, IElement shall also file an amended 10KSB for the year ended March 31, 2006 to reflect the restated financial statements contained in Amendment No. 3. Securities and Exchange Commission Division of Corporation Finance July 18, 2006 Page 4 17. IElement shall file amended Form 10-KSBA for the year ended March 31, 2005 and amended Forms 10-QSBA for the quarters ended June 30, September 30 and December 31, 2005 as soon hereafter as can reasonably be completed and expects to make such filings within 10 days. In addition, IElement shall also file an amended 10KSB for the year ended March 31, 2006 to reflect the restated financial statements contained in Amendment No. 3. 18. IElement shall file the requested Form 8-K. We look forward to your comments on Amendment No. 3 and the foregoing responses. Legal & Compliance, LLC By: /s/ Laura Anthony -------------------------------- Laura Anthony, Esq.