**UNITED
        STATES**
 **SECURITIES
        AND EXCHANGE COMMISSION**
 Washington,
        D.C. 20549
  **FORM
        10-KSB/A**
 (AMENDMENT
        NO. 2)
   **[
        ] ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(D) OF THE**
 **SECURITIES
        EXCHANGE ACT OF 1934**
  **FOR
        THE FISCAL YEAR ENDED - MARCH 31, 2005 OR**
  **X
        TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(D) OF THE**
 **SECURITIES
        EXCHANGE ACT OF 1934**
  *Commission
        File Number 000-29331*
  **IELEMENT
        CORPORATION**
 (FORMERLY
        MAILKEY CORPORATION)
  (Exact
        Name of Small Business Issuer as Specified in Its Charter)
 
 Nevada                  76-0270295
                ---------------------------------------             -------------------------------------
                (State
                  or Other Jurisdiction of               IRS
                  Employer
                Incorporation
                  or Organization)              Identification
                  No.)
 
 17194
        Preston Rd.
 Suite
        102
        PMB 341
 Dallas,
        TX 75248
  (Address
        of Principal Executive Offices)
 
 1-214-254-3440
  
  (Issuer's
        Telephone Number, Including Area Code)
  **Securities
        registered pursuant to Section 12(b) of the Act:**
  Title
                  of Each Class                 Name
                  of
                  Exchange on which Registered
                -----------------------               ---------------------------------------
                None                   None
  Securities
        registered under Section 12(g) of the Exchange Act: None
  Common
        stock, $.001 par value per share
   
   Check
        whether the issuer (1) filed all reports required to be filed by Section
        13 or
        15(d) of the Exchange Act during the past 12 months (or for such shorter
        period
        that the registrant was required to file such reports), and (2) has been
        subject
        to such filing requirements for the past 90 days.
  Yes
        X No
   Check
        if
        there is no disclosure of delinquent filers in response to Item 405 of
        Regulation S-B contained in this form, and no disclosure will be contained,
        to
        the best of registrant's knowledge, in definitive proxy or information
        statements incorporated by reference in Part III of this Form 10-KSB or any
        amendment to this form 10-KSB. [X]
  State
        issuer's revenues for its most recent fiscal year: $5,954,772
  The
        aggregate market value of the voting common equity held by non-affiliates
        of the
        registrant based on the closing sale price of the registrant's common stock
        as
        reported on the OTC Bulletin Board on June 28, 2005, was $2,826,202.
   As
        of
        June 28, 2005, 94,850,535 shares of the registrant's common stock were
        outstanding.
   **Transitional
        Small Business Disclosure Format (check one):**
  Yes
        No X
   
  **DISCLOSURE
        REGARDING FORWARD-LOOKING STATEMENTS**
   This
        prospectus contains forward-looking statements . All statements other than
        statements of historical facts included or incorporated by reference in this
        prospectus, including, without limitation, statements regarding our future
        financial position, business strategy, budgets, projected revenues, projected
        costs and plans and objectives of management for future operations, are
        forward-looking statements. In addition, forward-looking statements generally
        can be identified by the use of forward-looking terminology, such as "may,"
        "will," "expects," "intends," "plans," "projects," "estimates," "anticipates,"
        or "believes" or the negative thereof or any variation thereon or similar
        terminology or expressions.
   These
        forward-looking statements are subject to risks and uncertainties that could
        cause actual results to differ materially from results proposed in such
        statements. Although we believe that the expectations reflected in such
        forward-looking statements are reasonable, we can give no assurance that
        such
        expectations will prove to be correct. Important factors that could cause
        actual
        results to differ materially from our expectations include, but are not limited
        to: our ability to fund future growth and implement our business strategy;
        our
        ability to integrate the operations of any businesses we may acquire; our
        ability to attract and retain customers and qualified personnel; competition
        in
        our industry and markets; general economic and business conditions, either
        nationally or internationally or in the jurisdictions in which we are doing
        business; the condition of the securities and capital markets; legislative
        or
        regulatory changes; and statements of assumption underlying any of the
        foregoing, as well as any other factors set forth under the caption "Risk
        Factors" and "Plan of Operation" under Item 1 of this report.
   All
        subsequent written and oral forward-looking statements attributable to us,
        or
        persons acting on our behalf, are expressly qualified in their entirety by
        the
        foregoing. Except as required by law, we assume no duty to update or revise
        our
        forward-looking statements based on changes in internal estimates or
        expectations or otherwise.
   Unless
        otherwise indicated or the context otherwise requires, all references to
        "MailKey," the "Company," "we," "us" or "our" and similar terms refer to
        MailKey
        Corporation and its subsidiaries.
  **EXPLANATORY NOTE**
This Form 10-KSB/A is being filed with restated financial statements.
 
  **IELEMENT
          CORPORATION**
 **FORM
          10-KSB**
  INDEX
                  
                  Part
                    I Page
                  
                  Item
                    1. Business
                    ...................................................................................................................................................
                    6
                  
                  Item
                    2. Description of
                    Property..........................................................................................................................
                    13
                  
                  Item
                    3. Legal
                    Proceedings...................................................................................................................................
                    13
                  
                  Item
                    4. Submission of Matters to a Vote of Security
                    Holders.......................................................................
                    13
                  
                  Part
                    II
                  
                  Item
                    5. Market for Registrant's Common Equity and
                  Related
                    Stockholder
                    Matters..............................................................................................................................
                    14
                  
                  Item
                    6. Management's Discussion and
                    Analysis.............................................................................................
                    15
                  
                  Item
                    7. Financial Statements and Supplementary
                    Data...................................................................................F-1
                  
                  Item
                    8. Changes in and Disagreements with Accountants
                  on
                    Accounting and Financial
                    Disclosure.........................................................................................................
                    18
                  
                  Item
                    8A. Controls and Procedures
                    ....................................................................................................................
                    18
                  
                  Part
                    III
                  
                  Item
                    9. Directors, Executive Officers, Promoters and
                  Control
                    Persons; Compliance with Section 16(a)
                  of
                    the Exchange
                    Act.............................................................................................................................................
                    18
                  
                  Item
                    10. Executive
                    Compensation.......................................................................................................................
                    21
                  
                  Item
                    11. Security Ownership of Certain Beneficial Owners
                  and
                    Management..................................................................................................................................................
                    24
                  
                  Item
                    12. Certain Relationships and Related
                    Transactions..............................................................................
                    25
                  
                  Item
                    13.
                    Exhibits.....................................................................................................................................................
                    25
                  
                  Item
                    14. Principal Accountant fees and
                    services.............................................................................................
                    25
                  
                  Item
                    15: Principal Accountant Fee and
                    Service.................................................................................................25
                  
                  Signatures..............................................................................................................................................................
                    28
 
 **PART
        I**
   **ITEM
        1. DESCRIPTION OF BUSINESS**
   We
        were
        formed on July 19, 1996, as a Nevada corporation.
   On
        August
        8, 2001, we entered the online trading solutions market by acquiring Sutton
        Online, Inc., a Delaware corporation and an application service provider
        providing online trading solutions to individuals, broker dealers and financial
        institutions worldwide. In February 2003, we sold Sutton Online, Inc. and
        changed our business plan to that of seeking to enter into a business
        combination with one or more privately-held operating companies.
   On
        March
        25, 2004 (the "Effective Time"), pursuant to an Agreement and Plan of Merger,
        dated February 20, 2004, by and among us, G.D. Acquisition Corp., a Delaware
        corporation and our then wholly-owned subsidiary, MK Secure Solutions Limited,
        a
        British Virgin Islands private limited company, and Westvale Consultants
        Limited, a principal shareholder of MailKey, as amended by a First Amendment
        to
        Agreement and Plan of Merger, dated March 23, 2004, by and among us, G.D.
        Acquisition Corp., MK Secure Solutions Limited and Westvale Consultants,
        Ltd.,
        G.D. Acquisition Corp. was merged with and into MK Secure Solutions Limited,
        with MK Secure Solutions Limited remaining as the surviving entity and becoming
        our wholly-owned subsidiary.
   On
        November 9, 2004, the Company entered into an Agreement and Plan of Merger
        (the
        "Merger Agreement") by and among the MailKey Corporation (the "Company"),
        MailKey Acquisition Corp., a Delaware corporation and our wholly-owned
        subsidiary ("Merger Sub"), Inc., a Nevada Corporation ("IElement") and Ivan
        Zweig, pursuant to which we agreed to acquire all of the issued and outstanding
        shares of capital stock of iElement, Inc. This transaction closed in January
        2005. At the closing of the Merger, Merger Sub was merged into IElement,
        at
        which time the separate corporate existence of Merger Sub ceased and IElement
        now continues as the surviving company, as a wholly owned subsidiary of the
        Company. As a result of the merger, the Company issued 47,845,836 shares
        of
        common stock of the Company.
    6
   **OVERVIEW**
   In
        January of 2005, the Company closed its merger agreement with IElement, Inc.,
        a
        facilities-based nationwide telecommunications communications service provider
        for services to small and medium sized enterprises that seeks to provide
        broadband data, voice and wireless services using integrated T-1 lines with
        a
        Layer 2 Private Network solution to provide dedicated Internet access services,
        customizable business solutions for voice, data and Internet, and secure
        communications channels between our customers' offices, partners, vendors,
        customers and employees without the use of a firewall or encryption devices.
        In
        the first quarter 2005 the Company was unable to continue funding the
        development of its messaging security solutions, and the messaging security
        solutions rights were transferred to the development team in return for the
        cancellation of most of the liabilities which the Company owed to them. The
        Company retains an interest of 20% in the messaging security solutions; however
        to date there has been no commercialization of the solutions. In the first
        quarter 2005 the Company sold its insolvent British Virgin Islands subsidiary,
        MK Secure Solutions Limited, for $1 to a UK based accounting firm, SS Khehar
        & Company. SS Khehar & Company have agreed to undertake the winding up
        of the former subsidiary for a fee of $1,800.
  We
        now
        aim to grow IElement and establish it as a leading regional added-value carrier.
        The Company intends to:
  o
        Concentrate its resources on adding customers in the Dallas, Los Angeles
        and
        Chicago markets, while extending its sales reach into the next target markets.
  o
        Build
        out the necessary infrastructure to sell IElement broadband services (wireless
        or wireline), as well as reselling voice services over the same T1 or wireless
        equivalent.
  o
        Upsell
        added value managed services (Blackberry, secure email, VoIP, prepaid cellular,
        and storage) to our current and future customer base to raise our ARPC. Existing
        infrastructure can serve multiple new markets as they are brought online
        before
        we would need any capital expenditures or additional software licenses.
  o
        Look
        for acquisitions of wireless ISPs (WISPs), and other suitable telephony and/or
        data carriers, in secondary and tertiary markets which can be layered onto
        the
        Company's national backbone, which we expect will create economies of scale
        and
        operating efficiencies.
  IElement's
        focus is to become the leading regional Communication Service Provider (CSP)
        from California to Florida. IElement's added value, managed service strategy
        includes the potential development of additional subscription model services
        such as Managed Microsoft Exchange, prepaid and postpaid cellular services,
        email and network security,
   7
  residential/
        business based wireless, and Managed Blackberry(tm) services. The development
        of
        these services would allow IElement to offer SMEs access to Enterprise type
        applications with little or no software purchase, hardware investment, upgrade
        worries, or full-time administration of these services. These sell through
        services should increase the Average Revenue Per Customer, as well as help
        improve customer retention.
  We
        anticipate that the number of people who we employ may increase substantially
        over the next 12 months as we continue to execute on our business plan.
  **ENGAGE
        IN STRATEGIC ACQUISITIONS AND JOINT VENTURES**
  We
        intend
        to acquire, where appropriate, additional telecommunication companies, companies
        with technologies that we believe are complimentary to our existing
        technologies, as well as to acquire wireless broadband Internet service
        providers with strategically located networks that will enable the expansion
        of
        our national coverage area. In addition, we intend to acquire companies,
        businesses and assets that we believe are complementary to our business.
        We may
        seek to form joint ventures and seek joint venture partners in order to reduce
        our investment in a particular project and to help promote the development
        and
        sale of our products.
  **EMPLOYEES**
  As
        of
        June 28, 2005, we had approximately 15 employees and approximately 2
        consultants. None of our employees are represented by a labor union, and
        we have
        never experienced a work stoppage. We believe that our relations with our
        employees are good.
  **RISK
        FACTORS**
  The
        following risk factors, among others, may affect our business, financial
        condition and results of operations.
  **RISKS
        ASSOCIATED WITH OUR BUSINESS**
  IF
        WE
        ACQUIRE ANY COMPANIES OR TECHNOLOGIES IN THE FUTURE, SUCH COMPANIES AND
        TECHNOLOGIES COULD PROVE DIFFICULT TO INTEGRATE, DISRUPT OUR BUSINESS, DILUTE
        STOCKHOLDER VALUE AND ADVERSELY AFFECT OUR OPERATING RESULTS.
 8
  We
        intend
        to acquire or make investments in complementary companies, businesses, assets
        and/or technologies in the future. We have not made any acquisitions or
        investments to date, and therefore, our ability to make acquisitions or
        investments is unproven. Acquisitions and investments involve numerous risks,
        including:
  o
        inability to generate sufficient revenue or growth in revenue or to offset
        acquisition or investment costs;
  o
        difficulties in integrating operations, technologies, service and personnel;
  o
        diversion of financial and management resources from existing operations;
  o
        risk of
        entering new markets; and
  o
        potential loss of key employees;
  Acquisitions
        could also require us to record substantial amounts of goodwill and other
        intangible assets. Any future impairment of such goodwill, and the amortization
        of other intangible assets, would adversely affect our operating results.
        In
        addition, if we finance acquisitions by issuing convertible debt or equity
        securities, our existing stockholders may be diluted, which could affect
        the
        market price of our stock. If we finance such acquisitions with bank debt
        or
        high yield debt, these arrangements may impose substantial operating covenants
        on us and result in interest expense that could adversely affect our business
        and operating results. As a result, if we fail to properly evaluate and execute
        any future acquisitions or investments, our business and operating results
        may
        be seriously harmed.
  OUR
        GROWTH COULD STRAIN OUR PERSONNEL AND INFRASTRUCTURE RESOURCES, AND IF WE
        ARE
        UNABLE TO IMPLEMENT APPROPRIATE CONTROLS AND PROCEDURES TO MANAGE OUR GROWTH,
        WE
        MAY NOT BE ABLE TO SUCCESSFULLY IMPLEMENT OUR BUSINESS PLAN.
  As
        we
        implement our business plan, we may experience a period of rapid growth in
        our
        headcount and operations, which may place a significant strain on our
        management, administrative, operational and financial infrastructure.
  Our
        success will depend in part upon the ability of our senior management to
        manage
        this growth effectively. To do so, we must continue to hire, train and manage
        new employees as needed. If our new hires perform poorly, if we are unsuccessful
        in hiring, training, managing and integrating these new employees, or if
        we are
        not successful in retaining our existing employees, our business may be harmed.
        To manage the expected growth of our operations and personnel, we will need
        to
        continually improve our operational, financial and management controls and
        our
        reporting systems and procedures. The additional headcount and capital
        investments we are adding will increase our cost base, which will make it
        more
        difficult for us to offset any future revenue shortfalls by offsetting expense
        reductions in the short term. If we fail to successfully manage our growth,
        we
        will be unable to execute our business plan.
   9
   **THE
        MARKET IN WHICH WE PARTICIPATE IS INTENSELY COMPETITIVE, AND IF WE DO NOT
        COMPETE EFFECTIVELY, OUR OPERATING RESULTS COULD BE HARMED.**
  The
        market for telecommunications solutions, including local, long distance,
        data
        and Internet products and services, is intensely competitive and rapidly
        changing. Barriers to entry into this market have increased due to regulatory
        changes and increased costs of doing business with the Incumbent Local Exchange
        Carriers (ILECs), but these barriers have been offset by reductions in costs
        for
        bandwidth and the subsequent development of Voice over Internet Protocol
        (VoIP),
        which has allowed new competition to arise in the telephone services arena.
        Many
        of our competitors are larger and have more resources than we do. With the
        introduction of new technologies and market entrants, we expect competition
        to
        intensify in the future. Many of our current and potential competitors enjoy
        substantial competitive advantages, such as greater name recognition, longer
        operating histories, larger research, development and marketing budgets as
        well
        as substantially greater financial, technical and other resources. In addition,
        many of our current and potential competitors have access to larger customer
        bases and have more extensive marketing and distribution arrangements with
        resellers, distributors and OEMs than we do. As a result, our competitors
        may be
        able to respond more quickly and effectively than we can to new or changing
        opportunities, technologies, standards or customer requirements. Furthermore,
        because of these advantages, even if we develop products that are more effective
        than the products that our competitors offer, potential customers might accept
        competitive products in lieu of purchasing our products or services.
  We
        face
        competition from businesses that develop their own VoIP and other Internet
        based
        telecommunications services, as well as from ILECs who have achieved regulatory
        relief from the Telecommunications Act of 1996, and have begun to charge
        more
        for wholesale prices and in some cases eliminated the wholesale opportunity
        based on the size of the market. Our current and potential principal competitors
        include:
  o
        Other
        Competitive Local Exchange (CLECs) provider who provide many of the same
        telecommunications products and services that we do. Some examples of CLECs
        are
        : XO Communications, Xspedius, Logix Communications and McLeod Telecom; ILECs
        such as SBC Communications,Verizon, Qwest and Bell South who are the largest
        provider of local, long distance and Internet services to businesses; VoIP
        providers such as Vonage, Covad and mPower who can deliver local and long
        distance services over an Internet connection.
   10
   **WE
        ARE DEPENDENT ON OUR MANAGEMENT TEAM, AND THE LOSS OF ANY KEY MEMBER OF THIS
        TEAM MAY PREVENT US FROM IMPLEMENTING OUR BUSINESS PLAN IN A TIMELY MANNER.**
  Our
        success depends largely upon the continued services of our executive officers
        and other key personnel. We have entered into employment agreements with
        many of
        our employees. These agreements provide that the employees may discontinue
        their
        employment with us after providing us with little notice of their decision
        (typically one month. As a result, our employees could terminate their
        employment with us at any time without penalty and go to work for one of
        our
        competitors. We do maintain key person life insurance policy Ivan Zweig.
        The
        loss of one or more of our key employees could seriously harm our business.
  **OUR
        MANAGEMENT TEAM WAS ONLY RECENTLY FORMED, AND OUR SUCCESS DEPENDS ON ITS
        ABILITY
        TO WORK TOGETHER EFFECTIVELY.**
  We
        appointed Ivan Zweig, our Chairman and Chief Executive Officer, in January
        2005.
        Timothy Dean-Smith, our Chief Financial Officer, was appointed in September
        2004
        . In addition, the majority of our senior management team has joined us in
        the
        last 12 months. Our future success depends on the integration of this management
        team and its ability to work together effectively. If our management team
        fails
        to work together effectively, our business could be harmed.
  BECAUSE
        COMPETITION FOR OUR TARGET EMPLOYEES IS INTENSE, WE MAY NOT BE ABLE TO ATTRACT
        AND RETAIN THE HIGHLY SKILLED EMPLOYEES WE NEED TO SUPPORT OUR PLANNED GROWTH.
  To
        execute our growth plan, we must attract and retain highly qualified personnel.
        We may need to hire additional personnel in virtually all operational areas,
        including selling and marketing, , operations and technical support, customer
        service and administration.. We may not be successful in attracting and
        retaining qualified personnel. We have from time to time in the past
        experienced, and we expect to continue to experience in the future, difficulty
        in hiring and retaining highly skilled employees with appropriate
        qualifications. Many of the companies with which we compete for experienced
        personnel have greater resources than we have. If we fail to attract new
        personnel or fail to retain and motivate our current personnel, our business
        and
        future growth prospects could be severely harmed.
  **WE
        MAY BECOME INVOLVED IN LITIGATION, WHICH COULD BE COSTLY AND TIME CONSUMING
        TO
        DEFEND.**
  We
        may
        become involved in litigation such as securities class actions, intellectual
        property, employment (unfair hiring or terminations) and/ or issues pertaining
        to delivering E911 services, among others. For example, we may be subject
        to
        lawsuits by parties claiming that we did not offer E911 services that are
        required by law. Parties trying to call 911 from locations that we service
        may
        not be able to complete the call based on the fact that a T1 is a digital
        service, and that emergencies such as fires, power outages, or simple equipment
        failure could disable the ability for a person to dial out over our local
        lines.
        Any of these sources could claim we are interfering with the lawful conduct
        of
        their business. Although we believe we have properly informed our customers,
        given them information on backup E911 procedures, as well as paying for backup
        lines to be installed, litigation still may occur. Litigation involves costs
        in
        defending the action and the risk of an adverse judgment. Any resulting
        litigation, with or without merit, could result in substantial costs and
        divert
        management's attention and resources, which could seriously harm our business
        and operating results.
   **RISKS
        ASSOCIATED WITH OUR STOCK**
  WE
        INTEND
        TO ATTEMPT TO RAISE ADDITIONAL FUNDS IN THE FUTURE, AND SUCH ADDITIONAL FUNDING
        MAY BE DILUTIVE TO STOCKHOLDERS OR IMPOSE OPERATIONAL RESTRICTIONS.
  We
        intend
        to attempt to raise additional capital in the future to help fund our operations
        through sales of shares of our common stock or securities convertible into
        shares of our common stock, as well as issuances of debt. Such additional
        financing may be dilutive to our stockholders, and debt financing, if available,
        may involve restrictive covenants which may limit our operating flexibility.
        If
        additional capital is raised through the issuances of shares of our common
        stock
        or securities convertible into shares of our common stock, the percentage
        ownership of our stockholders will be reduced. These stockholders may experience
        additional dilution in net book value per share and any additional equity
        securities may have rights, preferences and privileges senior to those of
        the
        holders of our common stock.
  **THE
        MARKET PRICE OF OUR COMMON STOCK IS LIKELY TO BE HIGHLY VOLATILE AND SUBJECT
        TO
        WIDE FLUCTUATIONS.**
  The
        market price of our common stock is likely to be highly volatile and could
        be
        subject to wide fluctuations in response to a number of factors that are
        beyond
        our control, including:
  o
        announcements of new products or services by our competitors;
  o
        fluctuations in revenue from our indirect sales channels.
  In
        addition, the market price of our common stock could be subject to wide
        fluctuations in response to:
  o
        quarterly variations in our revenues and operating expenses;
  o
        announcements of technological innovations or new products or services by
        us;
        and
  o
        our
        technological capabilities to accommodate the future growth in our operations
        or
        those of our customers.
  In
        addition, the stock market has experienced significant price and volume
        fluctuations that have particularly affected the market price of the stock
        of
        many Internet-related companies, and that often have been unrelated or
        disproportionate to the operating performance of these companies. Market
        fluctuations such as these may seriously harm the market price of our common
        stock. Further, securities class action suits have been filed against companies
        following periods of market volatility in the price of their securities.
        If such
        an action is instituted against us, we may incur substantial costs and a
   11
  diversion
        of management attention and resources, which would seriously harm our business,
        financial condition and results of operations.
  **IF
        WE EXPERIENCE SIGNIFICANT FLUCTUATIONS IN OUR OPERATING RESULTS OR FAIL TO
        MEET
        REVENUE AND EARNINGS EXPECTATIONS, OUR STOCK PRICE MAY FALL.**
  Due
        to
        our limited operating history and the unpredictability of the telecommunications
        industry, we may not be able to accurately forecast our future operating
        results. In addition, our expenses are to a large extent fixed in the short
        term, and we expect that these expenses will increase in the future. We may
        not
        be able to adjust our spending quickly enough if our expenses exceed our
        expectations.
  Factors
        that could cause our quarterly financial results to fluctuate include:
  o
        the
        successful development of our products and implementation of our products
        by
        organizations;
  o
        the
        addition of added value products and services, and the effect those new products
        will have on our ability to retain existing customers and to win new customers;
  o
        the
        introduction of competitive services and the pricing of these services;
  o
        reduced
        demand for our T1 based services;
  o
        significant increases in expenses to drive the growth of our business, which
        may
        not yield corresponding increases in revenue;
  o
        the
        effectiveness of future legislation in further increasing the cost of leasing
        lines from the ILEC or decreasing the ability to buy wholesale services from
        the
        ILEC ;
  o
        changes
        in customer demands and needs for T1 based services; and
  As
        a
        result, we may not generate significantly increased revenues, and our earnings
        may be harmed. We believe that period-to-period comparisons of our historical
        operating results may not be meaningful, and you should not rely on them
        as an
        indication of future performance.
  **WE
        DO NOT INTEND TO PAY DIVIDENDS.**
  We
        have
        never declared or paid any cash dividends on our common stock. We currently
        intend to retain any future profits from operations to fund growth and do
        not
        expect to pay any dividends in the foreseeable future.
   12
  APPLICABLE
        SEC RULES GOVERNING THE TRADING OF "PENNY STOCKS" LIMITS THE TRADING AND
        LIQUIDITY OF OUR COMMON STOCK WHICH MAY AFFECT THE TRADING PRICE OF OUR COMMON
        STOCK.
  Our
        common stock currently trades on the OTC Bulletin Board. Since our common
        stock
        trades at a price below $5.00 per share, our common stock is considered a
        "penny
        stock" and is subject to SEC rules and regulations which impose limitations
        upon
        the manner in which our shares can be publicly traded. These regulations
        require
        the delivery, prior to any transaction involving our stock, of a disclosure
        schedule explaining the penny stock market and the associated risks. Under
        these
        regulations, certain brokers who recommend our securities to persons other
        than
        established customers or certain accredited investors must make a special
        written suitability determination regarding such a purchaser and receive
        such
        purchaser's written agreement to the transaction prior to sale. These
        regulations may have the effect of limiting the trading activity of our common
        stock and reducing the liquidity of an investment in our common stock.
  **ITEM
        2. DESCRIPTION OF PROPERTY**
  Our
        corporate headquarters and principal offices are located at 13714 Gamma Road,
        Farmers Branch, Texas 75244, where we sub-lease approximately 3284 square
        feet
        of office space for a monthly service charge of approximately $2500. This
        lease
        was negotiated as a month to month agreement. We believe that our office
        space
        is adequate to support our current operations.
  **ITEM
        3. LEGAL PROCEEDINGS**
  We
        are
        currently being sued by indirect sales agents who believe they have not been
        adequately compensated for past sales. We intend to vigorously defend the
        Company against these suits. We believe we have sufficient reserves set aside
        for these legal proceedings. The suits are as follows:
  o
        KK
        Solutions, Inc., vs. IElement, et al. filed on April 19, 2005 in Los Angeles
        Superior Court
  o
        Communications Plus Consultants Corporation, Inc vs. IElement, et al. filed
        on
        April 26, 2005 in Los Angeles Superior Court
  **ITEM
        4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS**
  In
        January 2005 the Board submitted to shareholders for shareholder approval
        the
        Company's Agreement and Plan of Merger (the "Merger Agreement") by and among
        the
        MailKey Corporation (the "Company"), MailKey Acquisition Corp., a Delaware
        corporation and our wholly-owned subsidiary ("Merger Sub"), Inc., a Nevada
        Corporation ("IElement") and Ivan Zweig, pursuant to which we agreed to acquire
        all of the issued and outstanding shares of capital stock of IElement, Inc.
        This
        transaction closed in January 2005. At the closing of the Merger, Merger
        Sub was
        merged into IElement, at which time the separate corporate existence of Merger
        Sub ceased and IElement now continues as the surviving company, as a wholly
        owned subsidiary of the Company. As a result of the merger, the Company issued
        47,845,836 shares of Common Stock of the Company.
  13
  **ITEM
        5. MARKET FOR COMMON EQUITY, RELATED STOCKHOLDER MATTERS AND SMALL BUSINESS**
  **ISSUER
        PURCHASES OF EQUITY SECURITIES**
  **MARKET
        INFORMATION**
  Our
        common stock currently trades on the OTC Bulletin Board under the symbol
        "MAKY".
        The following table sets forth the range of high and low bid prices for shares
        of our common stock on the OTC Bulletin Board for the periods indicated,
        as
        reported by Nasdaq. These quotations represent inter-dealer prices, without
        retail mark-up, markdown or commission, and may not represent actual
        transactions.
  Fiscal Year Ended March 31, 2005            High       Low
--------------------------------            ----       ---

Quarter ended March 31, 2005               $0.09     $0.03
Quarter ended December 31, 2004             1.01      0.06
Quarter ended September 30, 2004            3.00      0.85
Quarter ended June 30, 2004                 3.70      2.55

Fiscal Year Ended March 31, 2004            High       Low
--------------------------------            ----       ---

Quarter ended March 31, 2004               $3.25     $0.15
Quarter ended December 31, 2003             0.15      0.15
Quarter ended September 30, 2003            0.15      0.15
Quarter ended June 30, 2003                 2.40      0.15
 
 The
        last
        price of our common stock as reported on the OTC Bulletin Board on June 28,
        2005, was $0.04 per share.
  **HOLDERS**
  As
        of
        June 28, 2005, the number of stockholders of record of our common stock was
        300.
  **DIVIDENDS**
  We
        have
        not paid any cash dividends on our common stock to date, nor do we currently
        anticipate paying any cash dividends on our common stock in the foreseeable
        future. We currently intend to retain future earnings, if any, to finance
        the
        operation and development of our business.
   14
  **TRANSFER
        AGENT**
  The
        transfer agent for our common stock is Madison Stock Transfer, P.O. Box 145,
        Brooklyn, NY 11229; (718) 627-4453.
  **ITEM
        6. MANAGEMENT'S DISCUSSION AND ANALYSIS OR PLAN OF OPERATION**
  The
        following discussion should be read in conjunction with, and is qualified
        in its
        entirety by, our consolidated financial statements and notes thereto included
        elsewhere in the annual report. Historical results are not necessarily
        indicative of trends in operating results for any future period.
  The
        statements contained in the annual report that are not historical facts are
        forward-looking statements that evolve a number of risks and uncertainties.
        The
        actual results of the future events described in such forward-looking statements
        in this annual report could differ materially from those stated in such
        forward-looking statements.
  This
        "Plan of Operation" and other parts of this report contain forward-looking
        statements that involve risks and uncertainties. All forward-looking statements
        included in this report are based on information available to us on the date
        hereof, and we assume no obligation to update any such forward-looking
        statements. Our actual results may differ materially from those anticipated
        in
        these forward-looking statements as a result of a number of factors, including
        those set forth under the caption "Risk Factors" and elsewhere in this report.
        The following should be read in conjunction with our audited financial
        statements and the related notes thereto contained elsewhere in this report.
  **OUR
        PLAN OF OPERATION**
  In
        January of 2005, the Company closed its merger agreement with IElement, Inc.,
        a
        facilities-based nationwide telecommunications communications service provider
        for services to small and medium sized enterprises that seeks to provide
        broadband data, voice and wireless services using integrated T-1 lines with
        a
        Layer 2 Private Network solution to provide dedicated Internet access services,
        customizable business solutions for voice, data and Internet, and secure
        communications channels between our customers' offices, partners, vendors,
        customers and employees without the use of a firewall or encryption devices.
        In
        the first quarter 2005 the Company was unable to continue funding the
        development of its messaging security solutions, and the rights were transferred
        to the development team in return for the cancellation of most of the
        liabilities which the Company owed to them. The Company retains an interest
        of
        20% in the messaging security solutions; however to date there has been no
        commercialization of the solutions. In the first quarter 2005, the Company
        sold
        its insolvent British Virgin Islands subsidiary, MK Secure Solutions Limited,
        for $1 to a UK based accounting firm, SS Khehar & Company. SS Khehar &
Company have agreed to deal with the winding up of the former subsidiary,
        for a
        fee of $1,800.
   15
 We
        now
        aim to grow IElement and establish it as a leading regional added-value carrier.
  IElement's
        focus is to become the leading regional Communication Service Provider (CSP)
        from California to Florida. IElement's added value, managed service strategy
        includes the potential development of additional subscription model services
        such as Managed Microsoft Exchange, prepaid and postpaid cellular services,
        email and network security, residential/ business based wireless, and Managed
        Blackberry(tm) services. The development of these services would allow IElement
        to offer SMEs the chance to have access to Enterprise type applications with
        little or no software purchase, hardware investment, upgrade worries, or
        full-time administration of these services. These sell through services should
        increase the ARPC, as well as help improve customer retention.
  The
        Company intends to:
  o
        Concentrate its resources on adding customers in the Dallas, Los Angeles
        and
        Chicago markets, while extending its sales reach into the next target markets.
  o
        Build
        out the necessary infrastructure to sell IElement broadband services (wireless
        or wireline), as well as reselling voice services over the same T1 or wireless
        equivalent.
  o
        Upsell
        added value managed services to our current and future customer base to raise
        our Average Revenue Per Customer (ARPC). Existing infrastructure can serve
        multiple new markets as they are brought online, before we would need any
        capital expenditures or additional software licenses.
  o
        Look
        for acquisitions of wireless ISPs (WISPs), and other suitable telephony and/or
        data carriers, in secondary and tertiary markets, which can be layered onto
        the
        Company's national backbone, which should create economies of scale and
        operating efficiencies.
  We
        anticipate that the number of people who we employ may increase substantially
        over the next 12 months as we continue to execute on our business plan.
  **LIQUIDITY
        AND CAPITAL RESOURCES**
  Since
        our
        inception, we have funded our operations primarily through private sales
        of
        equity securities and the utilization of short-term convertible debt. As
        of
        March 31, 2005, we had a cash balance of $340,321.
  We
        do not
        currently maintain a line of credit or term loan with any commercial bank
        or
        other financial institution. To date, our capital needs have been principally
        met through the receipt of proceeds from sales of our equity and debt
        securities.
  We
        believe that our current cash resources will not be sufficient to sustain
        our
        current operations for the next twelve (12) months, and that we will need
        to
        raise additional capital to execute our business plan. The Company anticipates,
        based on currently proposed plans and assumptions relating to its operations,
        that it is essential to secure additional working capital. Additionally,
        in the
        event that the Company's plans change, its assumptions prove to be inaccurate
        or
        its cash flow proves to be insufficient (due to unanticipated expenses,
        inadequate revenues, difficulties, problems or otherwise), the Company may
        be
        required to seek additional financing or curtail its activities.
 16
  We
        intend
        to obtain additional cash resources within the next twelve (12)
        months through sales of debt or equity securities. The sale of any additional
        equity or convertible debt securities will result in additional dilution
        to our
        shareholders. The issuance of additional debt will result in increased expenses
        and could subject us to covenants that may have the effect of restricting
        our
        operations. If we are unable to obtain additional funds when they are needed
        or
        if such funds cannot be obtained on terms favorable to us, we may be required
        to
        delay or scale back any plans we may have to acquire such companies, businesses,
        assets or technologies. The Company currently has no arrangements or
        understandings for additional financing and there can be no assurance that
        additional financing will be available to the Company if required.
  **OFF-BALANCE
        SHEET ARRANGEMENTS**
  As
        of
        March 31, 2005, we did not have any relationships with unconsolidated entities
        or financial partners, such as entities often referred to as structured finance
        or special purpose entities, that had been established for the purpose of
        facilitating off-balance sheet arrangements or other contractually narrow
        or
        limited purposes. As such, we are not materially exposed to any financing,
        liquidity, market or credit risk that could arise if we had engaged in such
        relationships.
  **Plant
        & Equipment**
  The
        Company expects it will be able to continue to purchase and capitalize
        telecommunication equipment as required for growing business needs.
  **CRITICAL
        ACCOUNTING POLICIES**
  Our
        discussion and analysis of our financial condition and results of operations
        are
        based upon our consolidated financial statements and accompanying notes,
        which
        have been prepared in accordance with accounting principals generally accepted
        in the United States. The preparation of these financial statements requires
        management to make estimates and assumptions that affect the reported amounts
        of
        assets, liabilities, revenues and expenses, and related disclosure of contingent
        assets and liabilities. When making these estimates and assumptions, we consider
        our historical experience, our knowledge of economic and market factors and
        various other factors that we believe to be reasonable under the circumstances.
        Actual results may differ under different estimates and assumptions.
  The
        accounting estimates and assumptions discussed in this section are those
        that we
        consider to be the most critical to an understanding of our financial statements
        because they inherently involve significant judgments and uncertainties.
  **REVENUE
        RECOGNITION**
  The
        Company records its transactions under the accrual method of accounting whereby
        income is recognized when the services are provided rather than when billed
        or
        the fees are collected, and costs and expenses are recognized in the period
        they
        are incurred rather than paid for.
 17
 **ITEM
        7. FINANCIAL STATEMENTS**
  See
        Financial Statements beginning on page F-1.
  **ITEM
        8. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND FINANCIAL
        DISCLOSURE.**
  Not
        applicable.
  **ITEM
        8A. CONTROLS AND PROCEDURES**
  An
        evaluation of the effectiveness of our "disclosure controls and procedures"
        (as
        such term is defined in Rules 13a-15(e) or 15d-15(e) of the Securities Exchange
        Act of 1934, as amended (the "Exchange Act")) was carried out by us under
        the
        supervision and with the participation of Graham Norton-Standen, our preceding
        chief executive officer and chief financial, and our current chief executive
        officer and chief financial officer, Ivan Zweig and Tim Dean Smith,
        respectively, officer. Based upon that evaluation, Mr. Zweig and Mr. Dean
        Smith
        concluded that, as of the end of the period covered by this Annual Report,
        our
        disclosure controls and procedures were effective to provide reasonable
        assurance that information we are required to disclose in reports that we
        file
        or submit under the Exchange Act is recorded, processed, summarized and reported
        within the time periods specified in the Securities and Exchange commission
        rules and forms. There has been no change in our internal control over financial
        reporting identified in connection with that evaluation that occurred during
        our
        most recent fiscal quarter that has materially affected, or is reasonably
        likely
        to materially affect, our internal control over financial reporting.
  **PART III**
  **ITEM
        9. DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT**
  The
        following sets forth certain information about each of our directors and
        executive officers.
  Name                      Age        Positions Held
----                      ---        --------------
Ivan Zweig                32         Chief Executive Officer and Chairman
Tim Dean-Smith            39         Chief Financial Officer and Director
Susan Walton              XX         Director
 
 The
        following is a brief summary of the business experience of each of our directors
        and executive officers:
  IVAN
        ZWEIG has been our Chairman, Chief Executive Officer and since the closing
        of
        the merger on January 18, 2005. Ivan Zweig founded the ICCC in December of
        1998.
        The concept started merely as a re-biller of different carriers in the industry
        for Internet traffic.
 18
  With
        excellence constantly being the number one goal, the Company began to buy
        wholesale from NKOB networks, which evolved into the goal of becoming a
        facilities based carrier. ICCC sold off its assets to IELEMENT in March of
        2003
        excluding any and all regulated licenses or permits. Ivan was the Western
        Region
        Dedicated Sales Manager of NET-tel Communications from February of 1998 until
        he
        founded ICCC. He was responsible for Internet sales for 52 reps in the Western
        Region. Ivan was previously employed by MidCom Communications, where he was
        a
        Sales Manager after being an Account Executive for a short time. MidCom was
        purchased by Winstar, and then all of the management team migrated over to
        NET-tel from MidCom when that opportunity arose. Before Midcom, Ivan raised
        over
        $500,000 from private investors to fund a health food and nutrition franchise
        called Smoothie King. He purchased the rights to build 18 stores in the Bay
        Area
        and sold his interest after building the first two. Additionally, he started
        a
        city magazine called Dallas/Ft.Worth Lifestyles. Ivan sold enough advertising
        as
        an account executive in the first 60 days to carry the magazine for the entire
        first year of operations. This was Ivan's first venture after college and
        a
        brief stint of playing professional baseball. Ivan attended Tulane University
        and was a member of Team USA in 1991, which played in Cuba for the Pan American
        Games. He was also a two-time All-American pitcher while at Tulane.
  TIM
        DEAN-SMITH has been our Chief Financial Officer and director since the closing
        of the merger in January of 2005 and has been with the Company since its
        March
        2004 merger with MK Secure Solutions Limited, which Mr. Dean-Smith founded.
        Mr.
        Dean-Smith has been providing venture capital and/or management and fund-raising
        services to the following companies since the dates specified: (i) Polestar
        Space Applications, an internet/GPS asset tracking business specializing
        in the
        commercial shipping and yachting markets, since October 1998; (ii) Nextbus,
        a
        San Francisco based company that provides real time bus arrival information
        to
        passengers via the internet and mobile phone networks, since March 1996;
        (iii)
        ByBox, a logistics solutions company that produces locker banks that can
        be
        remotely programmed to enable the secure delivery of letters and parcels
        by
        couriers for consumers and businesses, since August 1999. In November 1998,
        Mr.
        Dean-Smith was an early investor in Valuad, a financial analysis software
        company that was acquired in July 2001, and in April 1999 was an early investor
        in Ibidlive, a technology company that enabled real time bidding in auctions
        via
        the internet, fixed phone lines and mobile phones and in which QXL PLC acquired
        a controlling stake in December 1999. Mr Dean-Smith was a founding investor
        and
        Chairman of Cube8 Group, an internet investment company, from August 1999
        until
        its merger with Room Service Deliveries (UK) Limited in January 2002. From
        1992
        to 1996, Mr. Dean-Smith engaged in the purchase, investment and development
        or
        refurbishment of commercial property and residential properties in London,
        England. Mr. Dean-Smith studied for an MBA at London Business School and
        the
        Haas School of Business (University of California, Berkeley), receiving his
        MBA
        in 1995, and studied law at King's College in London, graduating with an
        LLB
        with Honors in 1986.
  **BOARD
        OF DIRECTORS**
  Our
        Board
        of Directors is currently comprised of Ivan Zweig, Tim Dean-Smith, and Susan
        Walton. We anticipate that each of Messrs. Zweig, Dean-Smith and Ms. Walton
        will
 19
  serve
        as
        Directors until the next annual meeting of shareholders or until their
        respective successor is duly elected and qualified. Directors are elected
        at the
        annual meeting of shareholders or by written consent of the shareholders,
        and
        each Director holds office until his successor is duly elected and qualified
        or
        he resigns, unless sooner removed. Officers are elected annually by our Board
        of
        Directors and serve at the discretion of the Board. During the fiscal year
        ended
        March 31, 2004, the Board of Directors held no meetings. All actions of the
        Board of Directors were taken by written consent. We do not currently have
        any
        committees of our Board of Directors.
  **DIRECTOR
        COMPENSATION**
  Messrs.
        Zweig and Dean-Smith received no compensation as directors, as they are also
        officers of the Company. Ms. Walton receives $5,000 per month as compensation
        for being on the board of directors. Members of our board are entitled to
        be
        reimbursed for their reasonable costs and expenses incurred in attending
        board
        meetings.
  **DIRECTOR
        NOMINATIONS**
  We
        currently have approximately 15 employees and conduct limited operations.
        As a
        result, our Board of Directors is currently comprised of only 3 individuals,
        Ivan Zweig, Tim Dean-Smith and Susan Walton. Each of Messrs. Zweig, Dean-Smith
        and Ms. Walton are integrally involved with our business and operations and
        are
        able to contribute valuable insights into the identification of suitable
        candidates for nomination to the Board. As a result, we believe that it is
        in
        our best interest that our entire Board oversee the composition and operations
        of our Board of Directors and therefore, we have not created a standing
        nominating committee of the Board.
  **SHAREHOLDER
        COMMUNICATIONS**
  In
        light
        of the limited operations we conduct and the limited number of record and
        beneficial shareholders that we have, we have not implemented any formal
        procedures for shareholder communication with our Board of Directors. Any
        matter
        intended for the Board, or for any individual member or members of the Board,
        should be directed to our corporate secretary at MailKey Corporation, 17194
        Preston Rd., Suite 102 PMB 341, Dallas, TX 75248. In general, all shareholder
        communication delivered to the corporate secretary for forwarding to the
        Board
        or specified Board members will be forwarded in accordance with the
        shareholder's instructions. However, the corporate secretary reserves the
        right
        to not forward to Board members any abusive, threatening or otherwise
        inappropriate materials.
  **AUDIT
        COMMITTEE AND AUDIT COMMITTEE FINANCIAL EXPERT**
  Our
        Board
        of Directors has not created a standing audit committee of the Board. Instead,
        our full Board of Directors acts as our audit committee.
  The
        Board
        of Directors determined that our internal controls are adequate to insure
        that
        financial information is recorded, processed, summarized and reported in
        a
        timely and accurate manner in accordance with applicable rules and regulations
        of the Securities and Exchange Commission. Accordingly, our Board of Directors
        concluded that the benefits of
 20
  retaining
        an individual who qualifies as an "audit committee financial expert," as
        that
        term is defined in Item 401(e) of Regulation S-B promulgated under the
        Securities Act, would be outweighed by the costs of retaining such a person.
        As
        a result, no member of our Board of Directors is an "audit committee financial
        expert."
  SECTION
        16 BENEFICIAL OWNERSHIP REPORTING COMPLIANCE
  Section
        16(a) of the U.S. Securities and Exchange Act of 1934, as amended (the "Exchange
        Act"), requires our officers and directors and persons who own more than
        ten
        percent (10%) of our common stock to file with the SEC initial reports of
        ownership and reports of changes in ownership of our common stock. Such
        officers, directors and ten percent (10%) stockholders are also required
        by
        applicable SEC rules to furnish to us copies of all forms filed with the
        SEC
        pursuant to Section 16(a) of the Exchange Act. Based solely on our review
        of the
        copies of such forms received by us or written representations from such
        persons
        that no other reports were required for such persons, we believe that during
        the
        fiscal year ended March 31, 2005, all Section 16(a) filing requirements
        applicable to our officers, directors and ten percent (10%) stockholders
        were
        satisfied in a timely fashion.
  **CODE
        OF BUSINESS CONDUCT AND ETHICS**
  We
        have
        adopted a Code of Business Conduct and Ethics that applies to our principal
        executive officer, principal financial officer, principal accounting officer
        or
        controller, or persons performing similar functions. Our Code of Business
        Conduct and Ethics is designed to deter wrongdoing and promote:
  (i)
        honest and ethical conduct, including the ethical handling of actual or apparent
        conflicts of interest between personal and professional relationships;
  (ii)
        full, fair, accurate, timely and understandable disclosure in reports and
        documents that we file with, or submit to, the SEC and in our other public
        communications; (iii) compliance with applicable governmental laws, rules
        and
        regulations; (iv) the prompt internal reporting of violations of the code
        to an
        appropriate person or persons identified in the code; and (v) accountability
        for
        adherence to the Code of Ethics.
  A
        copy of
        our Code of Business Conduct and Ethics is attached hereto as Exhibit 14.1
        and
        incorporated by reference herein.
  **ITEM
        10. EXECUTIVE COMPENSATION**
  The
        following table provides certain summary information concerning compensation
        paid to or accrued by the executive officers named below during the three
        months
        ended March 31, 2005, and the years ended December 31, 2004 and 2003.
  **SUMMARY
        COMPENSATION TABLE**
  **ANNUAL
        COMPENSATION**
  Name and
Principal Position           Calendar    Salary ($)   Bonus ($)      ALL
Compensation ($)               Year                                 OTHER
----------------             --------    ----------  -----------  ----------
Ivan Zweig                     2005        75,000          -0-       -0-
CHAIRMAN,                      2004       300,000      60,000        -0-
CHIEF EXECUTIVE OFFICER        2003       180,000          -0-       -0-

Timothy Dean-Smith             2005        27,000          -0-       -0-
CHIEF FINANCIAL OFFICER        2004       120,000          -0-       -0-
DIRECTOR                       2003        80,000          -0-       -0-

Graham Norton-Standen          2005            -0-         -0-       -0-
FORMER CHAIRMAN,               2004         7,182          -0-       -0-
CHIEF EXECUTIVE OFFICER,       2003            -0-         -0-       -0-
AND SECRETARY

Andrew J. Kacic (1)            2005            -0-         -0-       -0-
FORMER CHAIRMAN AND            2004            -0-         -0-    3,750 (2)
CHIEF EXECUTIVE OFFICER        2003            -0-         -0-       -0-
 
 (1)
        Mr.
        Kacic was an executive officer and Director of the Company from November
        2002
        until his resignation on March 26, 2004.
  (2)
        Consisted of 25,000 shares of our common stock issued to Mr. Kacic under the
        Company's 2001 Employee Stock Compensation Plan, calculated based on the
        closing
        price of $.15 per share on the OTC Bulletin Board on March 25, 2004, the
        date of
        grant.
  Graham
        Norton Standen, our preceding Chairman, Chief Executive Officer and Secretary,
        received annual compensation in the amount of approximately $420,000. Roger
        B.
        Ponting, our former Chief Financial Officer, received annual compensation
        in the
        amount of approximately $140,000.
  21
  **OPTION/SAR
        GRANTS IN LAST FISCAL YEAR**
  (INDIVIDUAL
        GRANTS)
  We
        did
        not grant any stock options or stock appreciation rights to any of our named
        executive officers during the fiscal year ended March 31, 2005.
   **AGGREGATED
        OPTION/SAR EXERCISES IN LAST FISCAL**
  **YEAR
        AND FISCAL YEAR-END OPTION/SAR VALUES**
  Ivan
        Zweig exercised 10,153,486 stock options prior to the merger with IElement
        in
        January 2005. No other stock options or stock appreciation rights were exercised
        by any of our named executive officers during the fiscal year ended March
        31,
        2005, and no stock appreciation rights were issued and outstanding at the
        end of
        such fiscal year.
  The
        following table provides certain summary information concerning the number
        of
        stock options exercised by such executive officers during the fiscal year
        ended
        March 31, 2005, and the aggregate number and value of options issued and
        outstanding at the end of such fiscal year.
  Number
                  of Securities Value of Unexercised
                Underlying
                  In-the-Money
                Unexercised
                  Options Options at
                Shares
                  at Fiscal Year-End (#) Fiscal Year-End ($)
                Acquired
                  on Value Exercisable/ Exercisable/
                Name                                              
                  Exercise  Realized  Unexercisable  Unexercisable
                  (1)
                -------------------------------------------------------------------------------------------------------------------------------------------
                Ivan
                  Zweig                                   
                  10,153,486                
                  ---                       
                  0 /
                  0                                       
                  ---
                
                Timothy
                  Dean Smith
                
                Graham
                  Norton-Standen                    
                  ---                      
                  ---                
                  366,600 /
                  1,133,400                     
                  ---
                
                Andrew
                  J.
                  Kacic                                   ---                     
                  ---                             
                  ---                                     
                  ---
 
 (1)
        The
        last price of our common stock as reported on the OTC Bulletin Board on June
        28,
        2005, was $0.035 per share.
  **LONG-TERM
        INCENTIVE PLANS AND AWARDS IN LAST FISCAL YEAR**
  We
        did
        not make any awards under long-term incentive plans to any of our named
        executive officers during the fiscal year ended March 31, 2005.
 22
  **EQUITY
        COMPENSATION PLAN INFORMATION**
  The
        following table provides information as of March 31, 2005 with respect to
        shares
        of our common stock that may be issued under our existing equity compensation
        plan.
 
 Number
                    of securities to be issued upon exercise of outstanding options,
                    warrants
                    and rights (a)
                Weighted-Average
                    exercise price of outstanding options , warrants , and rights
                    (b)
                Remaining
                    available for future issuance under equity compensation plans
                    (excluding
                    securities reflected in column(a)) (c)Equity
                    compensation plans
                0
                Not
                    applicable
                3,675,000approved
                    by security holders (1)Equity
                    compensation plans not
                0
                Not
                    applicable
                1,500,000approved
                    by security holdersTotal
                0
                Not
                    applicable
                5,175,000
 
 (1)
        Consists of the 2001 Employee Stock Compensation Plan.
  **DESCRIPTION
        OF PLANS NOT APPROVED BY SECURITY HOLDERS**
  In
        March
        2004, the board of directors of MK Secure Solutions Limited adopted the MK
        Secure Solutions Limited Employee Benefit Trust (the "Trust"). The Trust
        provides for the distribution by one or more trustees ("Trustees") of income,
        property and other assets of the Trust ("Trust Property") to current and
        former
        employees and directors of MK Secure Solutions Limited, or any parent to
        or
        subsidiaries of MK Secure Solutions Limited, as well as members of such persons'
        immediate family (the "Beneficiaries"). The Trust was formed for the purpose
        of
        providing incentives to the Beneficiaries to exert maximum efforts for the
        success of MK Secure Solutions Limited.
  The
        Trust
        has been funded with approximately $12,500 and 1,500,000 shares of our common
        stock. Under the terms of the Trust, Trustees may distribute the Trust Property
        for the benefit of any one or more of the Beneficiaries in such manner as
        the
        Trustees determine in their sole discretion. The Trustees are entitled to
        remuneration for services performed as well as reimbursement of reasonable
        expenses incurred in the performance of such services.
 23
 Trustees
        may be appointed to and removed from the Trust in MK Secure Solutions Limited's
        sole discretion. The current Trustee is Confiance Limited, a Guernsey private
        limited company.
  As
        of
        June 30, 2005, the Trustee had not made any distributions of Trust Property
        to
        any Beneficiaries. There was no activity under the Trust during the fiscal
        year
        ended 2005.
  **ITEM
        11. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT AND RELATED
        STOCKHOLDER MATTERS**
  The
        following table sets forth, as of March 31, 2005, information with respect
        to
        the securities holdings of all persons that we, pursuant to filings with
        the SEC
        and our stock transfer records, have reason to believe may be deemed the
        beneficial owner of more than five percent (5%) of the common stock. The
        following table also sets forth, as of such date, the beneficial ownership
        of
        the common stock by all of our executive officers and directors, both
        individually and as a group. The beneficial owners set forth below have been
        determined in accordance with Rule 13d-3 under the Securities Exchange Act
        of
        1934, as amended.
  Amount
                  andNature
                  of Percentage
                Name
                  and Address of Beneficial Owner Beneficial Ownership of Class
                  (1)
                ------------------------------------  --------------------  ------------
                Ivan
                  Zweig                                  18,770,966
                  (2)  19.8%
                
                Tim
                  Dean-Smith                                  
                  4,982,752  5.3%
                
                Susan
                  Walton                                     
                  441,777 0. 47%
                
                
                
                All
                  directors and executive officers as a group 24,195,495 25.5%
                
                Including
                  all above, regardless of status as current director/
                  officer.
 
  (1)
        The
        percentages have been calculated based upon 94,850,535 shares of common stock
        outstanding as of June 28, 2005 plus, for each person or group, the number
        of
        shares of our common stock issuable upon the exercise of any convertible
        securities beneficially owned by such person or group.
  (2)
        Includes 18,685,966 shares owned by Kramerica Corp., over which Mr. Zweig
        has
        sole voting and investment power, and 0 (zero) shares issuable upon the exercise
        of outstanding options.
    24
  **ITEM
        12. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS**
  NONE.
  **ITEM
        13. EXHIBITS, LIST AND REPORTS ON FORM 8-K**
  (a)
                  The following documents are filed as exhibits to this report.
                
                Exhibit
                  No. Description
                -----------
                  -----------
                
                3.1
                  Articles of Incorporation (incorporated by reference to
                  Exhibit
                3.1(1)
                  to the Company's Registration Statement on Form 10SB
                filed
                  with the SEC on February 3, 2000 (the "Registration
                Statement"))
                
                3.2
                  Bylaws (incorporated by reference to Exhibit 3.2 to the
                Registration
                  Statement)
                
                3.3
                  Articles of Amendment to Articles of Incorporation
                  (incorporated
                by
                  reference to Exhibit 3.1(2) to the Registration Statement)
                
                3.4
                  Articles of Amendment to Articles of Incorporation
                  (incorporated
                by
                  reference to Exhibit 3.1(3) to the Company's Annual Report on
                Form
                  10-KSB for the year ended March 31, 2003)
                
                3.5
                  Certificate of Correction to Articles of Amendment to
                  Articles
                of
                  Incorporation (incorporated by reference to Exhibit 3.1(4) to
                the
                  Company's Annual Report on Form 10-KSB for the year ended
                March
                  31, 2003)
                
                4.1
                  Specimen Stock Certificate (incorporated by reference to
                  Exhibit
                4.1
                  to the Registration Statement)
                
                10.1
                  Stock Purchase and Sale Agreement, dated as of February 5,
                  2003,
                by
                  and between MailKey Corporation (f/k/a/ Sutton Trading
                Solutions,
                  Inc.) and Link Investment Holdings Inc. Limited
                (incorporated
                  by reference to Exhibit 10.1 to the Company's
                Quarterly
                  Report on Form 10-QSB for the quarter ended December
                31,
                  2002)
                
                31.1
                  Certification of Chief Executive Officer of the Company
                  required
                by
                  Rule 13a-14(a) under the Securities Exchange Act of 1934, as
                amended
  31.2
                  Certification of Chief Finanical Officer of the Company
                  required
                by
                  Rule 13a-14(a) under the Securities Exchange Act of 1934, as
                amended
                
                32
                  Certification of Chief Executive Officer and Chief Financial
                Officer
                  of the Company required by Rule 13a-14(b) under the
                Securities
                  Exchange Act of 1934, as amended
 
 (b)
        Reports on Form 8-K.
  ---------------------------------------------------------------------------------------------------
                DATE
                  OF
                  EVENT                                           
                  REPORTED ITEMS REPORTED
                ----------------------------------------------------------------------------------------------------
                April
                  12,
                  2005                                                            
                  (8-K/A) 4 and 7
                -----------------------------------------  --------------------------------------
                April
                  5,
                  2005                                                              
                  (8-K/A) 4 and 9
                -----------------------------------------  --------------------------------------
                February
                  28,
                  2005                                                      (8-K/A)
                  4 and 9
                ----------------------------------------- ------------------------------------
                February
                  4,
                  2005                                                                    
                  4
                -----------------------------------------   --------------------------------------
                January
                  25,
                  2005                                                          1,
                  2, 3, 5 and 9
                -----------------------------------------   --------------------------------------
                January
                  6,
                  2005                                                                       
                  1
                -----------------------------------------   --------------------------------------
                November
                  12,
                  2004                                                                 
                  1
                -----------------------------------------   --------------------------------------
                November
                  10,
                  2004                                                                 
                  5
                -----------------------------------------   --------------------------------------
                October
                  25,
                  2004                                                                
                  1 and 9
                -----------------------------------------   --------------------------------------
                October
                  6,
                  2004                                                                       
                  5
                -----------------------------------------   --------------------------------------
                September
                  8,
                  2004                                                              
                  1and 9
                -----------------------------------------   --------------------------------------
                July
                  14,
                  2004                                                                        
                  Item 4
                -----------------------------------------   --------------------------------------
                June
                  8,
                  2004                                                                        
                   Item 4
                -----------------------------------------   --------------------------------------
                April
                  9,
                  2004                                                                  
                  Item 1, 2 and 7
                -----------------------------------------   --------------------------------------
 
 **ITEM
        14. CONTROLS AND PROCEDURES**
  As
        required by Rule 13a-15 under the Securities Exchange Act of 1934, as amended,
        as of the end of the period covered by this report, MailKey carried out an
        evaluation of the effectiveness of the design and operation of MailKey's
        disclosure controls and procedures. This evaluation was carried out by Ivan
        Zweig, MailKey's Chief Executive Officer and Timothy Dean-Smith, MailKey's
        Chief
        Financial Officer, who concluded that MailKey's disclosure controls and
        procedures are effective. There have been no significant changes in MailKey's
        internal controls or in other factors, which could significantly affect internal
        controls subsequent to the date MailKey carried out its evaluation.
    25
  Disclosure
        controls and procedures are controls and other procedures that are designed
        to
        ensure that information required to be disclosed in MailKey's reports filed
        or
        submitted under the Exchange Act is recorded, processed, summarized and
        reported, within the time periods specified in the SEC's rules and forms.
        Disclosure controls and procedures include, without limitation, controls
        and
        procedures designed to ensure that information required to be disclosed in
        MailKey's reports filed under the Exchange Act is accumulated and communicated
        to management, including MailKey's Chief Executive Officer and Chief Financial
        Officer, to allow timely decisions regarding required disclosure.
  **ITEM
        15. Principal Accountant Fees and Services**
  The
        aggregate fees billed for the year ended March 31, 2005 for professional
        services rendered by BAGELL, JOSEPHS & COMPANY, L.L.C. ("BJC"), for the
        audit of the Company's annual financial statements and review of financial
        statements included in the Company's Form 10-QSB or services that are normally
        provided by the accountant in connection with statutory and regulatory filings
        or engagements for the year ended March 31, 2005 was $19,500.
  BJC
        also
        performed the Company's independent audit to examine the financial statements
        of
        the Company for the fiscal years ended March 31, 2004. BJC has performed
        the
        following services and has been paid the following fees for these fiscal
        years.
  **Audit
        Fees**
  The
        aggregate fees billed for the year ended March 31, 2005 for professional
        services rendered by BJC for the audit of the Company's annual financial
        statements and review of financial statements included in the Company's Form
        10-QSB or services that are normally provided by the accountant in connection
        with statutory and regulatory filings or engagements for the year ended March
        31, 2005 was $19,500.
  **Audit-Related
        Fees**
  No
        fees
        were billed for the year ended March 31, 2005 for assurance and related services
        by BJC that are reasonably related to the performance of the audit or review
        of
        the Company's financial statements and are not reported under the category
        Audit
        Fees described above.
  **Tax
        Fees**
  No
        fees
        were billed for the year ended March 31, 2005 for tax compliance, tax advice,
        or
        tax planning services by BJC that are reasonably related to the performance
        of
        the audit or review of the Company's financial statements and are not reported
        under the category Audit Fees described above.
    26
  **All
        Other Fees**
  No
        fees
        were billed for the year ended March 31, 2005 for products and services provided
        by BJC, other than the services reported in the Audit Fees, Audit-Related
        Fees,
        and Tax Fees categories above.
  **Audit
        Committee Pre-Approval Policies**
  The
        Company's standing audit committee currently does not have any pre-approval
        policies or procedures concerning services performed by BJC. All the services
        performed by BJC that are described above were pre-approved by the Company's
        standing audit committee. None of the hours expended on BJC's engagement
        to
        audit the Company's financial statements for the year ended March 31, 2005
        were
        attributed to work performed by persons other than BJC's full-time, permanent
        employees.
   27
 ITEM
        7. FINANCIAL STATEMENTS AND SUPPLEMENTARY
        DATA
 **IELEMENT CORPORATION AND SUBSIDIARY
(FORMERLY MAILKEY CORPORATION)
CONSOLIDATED FINANCIAL STATEMENTS
FOR THE YEARS ENDED MARCH 31, 2006 AND DECEMBER 31, 2004 AND 2003
AND
FOR THE THREE MONTHS ENDED MARCH 31, 2005 AND 2004**
 
  **IELEMENT CORPORATION
        AND SUBSIDIARY**
 **CONSOLIDATED
        FINANCIAL STATEMENTS**
 **FOR
        THE THREE MONTHS ENDED MARCH 31, 2005 AND 2004**
 **AND
        THE YEARS ENDED DECEMBER 31, 2004 AND 2003**
  **TABLE
        OF CONTENTS**
  Consolidated
        Audited Financial Statements:..
 
 **PAGE(S)**
 
 Report
                  of Independent Registered Public Accounting
                  Firm                                                      F-1
                
                Consolidated
                  Balance Sheet as of March 31,
                  2005                                                                       F-2
                
                Consolidated
                  Statements of Operations for the Three
                Months
                  Ended March 31, 2005 and 2004 and the Years
                Ended
                  December 31, 2004 and
                  2003                                                                                                F-3
                
                Consolidated
                  Statement of Changes in Stockholders'
                (Deficit)
                  for the Period March 11, 2003 (Inception)
                to
                  March 31,
                  2005                                                                                                                         
                  F-4 - F-7
                
                Consolidated
                  Statements of Cash Flow for the Three
                Months
                  Ended March 31, 2005 and 2004 and the Years
                Ended
                  December 31, 2004 and
                  2003                                                                                           
                  F-4 - F-5
                
                Notes
                  to Consolidated Financial
                  Statements.                                                                          
                  F-6 - F-19
   
 
 **BAGELL,
          JOSEPHS & COMPANY, L.L.C.**
 Certified
          Public Accountants
 High
          Ridge Commons
 Suites
          400-403
 200
          Haddonfield Berlin Road
 Gibbsboro,
          New Jersey 08026
 (856)
          346-2828 Fax (856) 346-2882
  **REPORT
        OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM**
   IElement Corporation
        and Subsidiary
 (Formerly
        Mailkey Corporation)
   Dallas,
        Texas
   We
        have
        audited the accompanying consolidated balance sheet of MailKey Corporation
        and
        Subsidiary (the "Company") as of March 31, 2005 and the related statements
        of
        operations and cash flow for the three months ended March 31, 2005 and 2004,
        the
        years ended December 31, 2004 and 2003 and the related statement of
        stockholders' equity (deficit) from March 11, 2003 (inception) to March 31,
        2005. These consolidated financial statements are the responsibility of the
        Company's management. Our responsibility is to express an opinion on these
        consolidated financial statements based on our audits.
   We
        conducted our audits in accordance with standards of the Public Company
        Accounting Oversight Board (United States). Those standards require that
        we plan
        and perform the audits to obtain reasonable assurance about whether the
        consolidated financial statements are free of material misstatement. An audit
        includes examining, on a test basis, evidence supporting the amounts and
        disclosures in the consolidated financial statements. An audit also includes
        assessing the accounting principles used and significant estimates made by
        management, as well as evaluating the overall consolidated financial statement
        presentation. We believe that our audits provide a reasonable basis for our
        opinion.
   The
        accompanying consolidated financial statements for the three months ended
        March
        31, 2005 and 2004 and for the years ended December 31, 2004 and 2003 have
        been
        prepared assuming that the Company will continue as a going concern. As
        discussed in Note 8 to the consolidated financial statements, the Company
        has
        sustained operating losses and capital deficits that raise substantial doubt
        about its ability to continue as a going concern. Management's plan in regard
        to
        these matters are also described in Note 8. The consolidated financial
        statements do not include any adjustments that might result from the outcome
        of
        these uncertainties.
   In
        our
        opinion, the consolidated financial statements referred to above present
        fairly,
        in all material respects, the financial position of MailKey Corporation and
        Subsidiary as of March 31, 2005 and the results of its operations and cash
        flow
        for the three months ended March 31, 2005 and 2004 and the years ended December
        31, 2004 and 2003 and changes in stockholders' equity (deficit) from March
        11,
        2003 (inception) to March 31, 2005 in conformity with accounting principles
        generally accepted in the United States of America.
   As
        described in Note 1 to the financial statements , the
        accompanying financial statements have been restated.
  MEMBER
                  OF:
                BAGELL,
                  JOSEPHS & COMPANY, L.L.C. AMERICAN INSTITUTE OF CERTIFIED
                  PUBLIC
                ACCOUNTANTS
                  NEW JERSEY SOCIETY OF
                CERTIFIED
                  PUBLIC
                ACCOUNTANTS
                  PENNSYLVANIA INSTITUTE OF
                CERTIFIED
                  PUBLIC ACCOUNTANTS
                
                /s/
                  BAGELL, JOSEPHS & COMPANY, L.L.C.
                -------------------------------------
                Certified
                  Public Accountants
                Gibbsboro,
                  New Jersey
                August
                  9, 2006
 
  F-1
 **IELEMENT
                    CORPORATION AND SUBSIDIARY**
                  **(FORMERLY
                    MAILKEY CORPORATION)**
                  **CONSOLIDATED
                      BALANCE SHEET (RESTATED)**
                    **March
                      31,
                      2005****ASSETS****Restated****March
                    31,****2005****CURRENT
                    ASSETS:**Cash
                    and cash equivalents
                
                $
                340,321Accounts
                    receivable, net
                
                
                520,644Other
                    current assets
                
                
                1,780**Total
                    current assets**
                
                
                862,745Fixed
                    assets, net of depreciation
                
                
                889,051**OTHER
                    ASSETS:**Deposits
                
                
                58,993**Total
                    other assets**
                
                
                58,993**TOTAL
                    ASSETS**
                
                $
                1,810,789**LIABILITIES
                    AND STOCKHOLDERS' EQUITY (DEFICIT)****CURRENT
                    LIABILITIES:**Accounts
                    payable and accrued expenses
                
                $
                1,400,992Customer
                    deposits
                
                
                164,112Receivable
                    financing payable
                
                
                483,114Commissions
                    payable
                
                
                176,136Liability
                    for stock to be issued
                
                
                75,000Deferred
                    revenue
                
                
                815,036Current
                    portion - notes payable
                
                
                461,590**Total
                    current liabilities**
                
                
                3,575,980**LONG-TERM
                    LIABILITIES:**Notes
                    payable, net of current portion
                
                
                293,188**Total
                    long-term liabilities**
                
                
                293,188**Total
                    Liabilities**
                
                
                3,869,168**STOCKHOLDERS'
                    EQUITY (DEFICIT)**Common
                    stock, $.001 Par Value, 100,000,000 sharesauthorized;
                    91,783,730 shares issued and outstandingat
                    March 31, 2005
                
                
                91,783Additional
                    paid-in capital
                
                
                (1,172,836
                )Accumulated
                    deficit
                
                
                (977,326
                )**Total
                    Stockholders' Equity (Deficit)**
                
                
                (2,058,379
                )**TOTAL
                    LIABILITIES AND STOCKHOLDERS' EQUITY (DEFICIT)**
                
                $
                1,810,789
  F-2
  **IELEMENT
                      CORPORATION AND SUBSIDIARY****(FORMERLY
                      MAILKEY CORPORATION)****CONSOLIDATED
                      STATEMENTS OF OPERATIONS (RESTATED)****FOR
                      THE THREE MONTHS ENDED MARCH 31, 2005 AND 2004
                      AND****THE
                      YEARS ENDED DECEMBER 31, 2004 AND 2003****Restated**
                  
                  
                  **Restated**
                  
                  
                  **Restated**
                  
                  
                  **Restated****Three
                      Months Ended**
                  **Years
                      Ended****March
                      31,**
                  
                  
                  **March
                      31,**
                  
                  
                  **December
                      31,**
                  
                  
                  **December
                      31,****2005**
                  
                  
                  **2004**
                  
                  
                  **2004**
                  
                  
                  **2003****(Audited)**
                  
                  
                  **(Unaudited)**
                  
                  
                  **(Audited)**
                  
                  
                  **(Audited)****OPERATING
                      REVENUE:**Service
                      income
                  
                  $
                  1,228,411
                  
                  $
                  1,530,427
                  
                  $
                  5,954,772
                  
                  $
                  4,552,436**OPERATING
                      EXPENSES**Cost
                      of Sales, excluding depreciation
                  
                  
                  736,275
                  
                  
                  819,756
                  
                  
                  3,042,978
                  
                  
                  2,716,680General
                      and administrative
                  
                  
                  687,928
                  
                  
                  458,311
                  
                  
                  2,033,764
                  
                  
                  1,116,810Selling
                      expenses
                  
                  
                  116,263
                  
                  
                  109,240
                  
                  
                  519,600
                  
                  
                  518,425Depreciation
                      & amortization
                  
                  
                  68,164
                  
                  
                  60,403
                  
                  
                  260,806
                  
                  
                  159,070Interest
                      expense
                  
                  
                  6,992
                  
                  
                  31,354
                  
                  
                  138,576
                  
                  
                  122,100Receivable
                      factoring fees
                  
                  
                  29,874
                  
                  
                  33,085
                  
                  
                  129,021
                  
                  
                  118,504**Total
                      Operating Expenses**
                  
                  
                  1,645,496
                  
                  
                  1,512,149
                  
                  
                  6,124,745
                  
                  
                  4,751,589**INCOME
                      (LOSS) BEFORE OTHER (EXPENSE)**
                  
                  
                  (417,085
                  )
                  
                  18,278
                  
                  
                  (169,973
                  )
                  
                  (199,153
                  )**OTHER
                      (EXPENSE)**Loss
                      on sale of investments
                  
                  
                  -
                  
                  
                  (86,558
                  )
                  
                  (125,068
                  )
                  
                  (65,903
                  )**Total
                      Other Expenses**
                  
                  
                  -
                  
                  
                  (86,558
                  )
                  
                  (125,068
                  )
                  
                  (65,903
                  )**NET
                      LOSS BEFORE PROVISION FOR INCOME TAXES**
                  
                  
                  (417,085
                  )
                  
                  (68,280
                  )
                  
                  (295,041
                  )
                  
                  (265,056
                  )**Provision
                      for Income Taxes**
                  
                  
                  -
                  
                  
                  -
                  
                  
                  -
                  
                  
                  -**NET
                      LOSS APPLICABLE TO COMMON SHARES**
                  
                  $
                  (417,085
                  )
                  $
                  (68,280
                  )
                  $
                  (295,041
                  )
                  $
                  (265,056
                  )**NET
                      LOSS PER BASIC AND DILUTED SHARES**
                  
                  $
                  (0.01
                  )
                  $
                  (0.00
                  )
                  $
                  (0.02
                  )
                  $
                  (0.02
                  )**WEIGHTED
                      AVERAGE NUMBER OF COMMON****SHARES
                      OUTSTANDING**
                  
                  
                  56,697,484
                  
                  
                  14,525,433
                  
                  
                  14,913,483
                  
                  
                  12,167,110The
                      accompanying notes are an integral part of these consolidated
                      financial
                      statements.
   F-3
 
 **IELEMENT CORPORATION
                    AND SUBSIDIARY**
                  **(FORMERLY
                    MAILKEY
                    CORPORATION)****CONSOLIDATED
                    STATEMENT OF CHANGES IN STOCKHOLDERS' EQUITY (DEFICIT) - AUDITED
                    (RESTATED)****FOR
                    THE PERIOD MARCH 1, 2003 TO MARCH 31, 2005****Restated**
                
                
                **Restated**
                
                
                **Restated**
                
                
                **Restated**
                
                
                **Restated**
                
                
                **Restated****Additional**
                
                
                **Paid
                    - In**
                
                
                
                
                
                **Unearned****Common
                    Stock**
                
                **Paid
                    - In**
                
                
                **Capital-**
                
                
                **Accumulated**
                
                
                **Compensation****Shares**
                
                
                **Amount**
                
                
                **Capital**
                
                
                **Warrants**
                
                
                **Deficit**
                
                
                **Expense**
                
                
                **Total**Beginning
                    Balance March 1, 2003 (Restated)
                
                
                4
                
                $
                -
                
                $
                -
                
                $
                -
                
                $
                (265,056
                )
                $
                -
                
                $
                (265,056
                )Issuance
                    of common stock in exchange for redemptionof
                    shares of Integrated Communications ConsultantsCorporation
                    ("ICCC") - recapitalization
                
                
                14,369,364
                
                
                14,369
                
                
                (14,369
                )
                
                -
                
                
                -
                
                
                -
                
                
                -Excess
                    liabilities assumed from recapitalization of ICCC
                
                
                -
                
                
                -
                
                
                (2,079,665
                )
                
                -
                
                
                -
                
                
                -
                
                
                (2,079,665
                )Issuance
                    of common stock as 1% premium forredemption
                    of ICCC shares
                
                
                143,687
                
                
                144
                
                
                -
                
                
                -
                
                
                (144
                )
                
                -
                
                
                -Balance,
                    December 31, 2003, (Restated)
                
                
                14,513,055
                
                
                14,513
                
                
                (2,094,034
                )
                
                -
                
                
                (265,200
                )
                
                -
                
                
                (2,344,721
                )Shares
                    of common stock issued in exercise of options
                
                
                26,400
                
                
                26
                
                
                49
                
                
                -
                
                
                -
                
                
                -
                
                
                75Accounts
                    payable converted to common stock
                
                
                35,200
                
                
                35
                
                
                4,965
                
                
                -
                
                
                -
                
                
                -
                
                
                5,000Issuance
                    of common stock in conversion of notes payable
                
                
                423,209
                
                
                423
                
                
                247,577
                
                
                -
                
                
                -
                
                
                -
                
                
                248,000Shares
                    issued for cash
                
                
                206,391
                
                
                206
                
                
                119,094
                
                
                -
                
                
                -
                
                
                -
                
                
                119,300Net
                    loss for the period
                
                
                -
                
                
                -
                
                
                -
                
                
                -
                
                
                (295,041
                )
                
                -
                
                
                (295,041
                )Balance,
                    December 31, 2004, (Restated)
                
                
                15,204,255
                
                
                15,203
                
                
                (1,722,349
                )
                
                -
                
                
                (560,241
                )
                
                -
                
                
                (2,267,387
                )Shares
                    of common stock issued in exercise of options
                
                
                16,115,345
                
                
                16,115
                
                
                29,667
                
                
                -
                
                
                -
                
                
                -
                
                
                45,782Issuance
                    of common stock in conversion ofnotes
                    payable
                
                
                16,526,236
                
                
                16,527
                
                
                809,785
                
                
                -
                
                
                -
                
                
                -
                
                
                826,312Effects
                    of reverse merger
                
                
                34,726,355
                
                
                34,726
                
                
                (511,014
                )
                
                -
                
                
                -
                
                
                -
                
                
                (476,288
                )Issuance
                    of shares at $0.025 per sharefor
                    services
                
                
                7,487,587
                
                
                7,488
                
                
                179,701
                
                
                -
                
                
                -
                
                
                -
                
                
                187,189Issuance
                    of shares at $0.025 per sharein
                    conversion of accounts payable
                
                
                693,280
                
                
                693
                
                
                16,639
                
                
                -
                
                
                -
                
                
                -
                
                
                17,332Issuance
                    of shares at $0.025 per sharein
                    conversion of debt to equity
                
                
                1,030,672
                
                
                1,031
                
                
                24,735
                
                
                -
                
                
                -
                
                
                -
                
                
                25,766Net
                    loss for the year ended March 31, 2005
                
                
                -
                
                
                -
                
                
                -
                
                
                -
                
                
                (417,085
                )
                
                -
                
                
                (417,085
                )Balance
                    March 31, 2005 (Restated)
                
                
                91,783,730
                
                $
                91,783
                
                $
                (1,172,836
                )
                $
                -
                
                $
                (977,326
                )
                $
                -
                
                $
                (2,058,379
                )The
                    accompanying notes are an integral part of the consolidated financial
                    statements.
   F-4
  **IELEMENT
                    CORPORATION AND SUBSIDIARY****(FORMERLY
                    MAILKEY CORPORATION)****CONSOLIDATED
                    STATEMENTS OF CASH FLOW (RESTATED)****FOR
                    THE THREE MONTHS ENDED MARCH 31, 2005 AND 2004
                    AND****THE
                    YEARS ENDED DECEMBER 31, 2004 AND 2003****Restated**
                
                
                **Restated**
                
                
                **Restated**
                
                
                **Restated****Three
                    Months Ended**
                **Years
                    Ended****March
                    31,**
                
                
                **March
                    31,**
                
                
                **December
                    31,**
                
                
                **December
                    31,****2005**
                
                
                **2004**
                
                
                **2004**
                
                
                **2003****(Audited)**
                
                
                **(Unaudited)**
                
                
                **(Audited)**
                
                
                **(Audited)****CASH
                    FLOWS FROM OPERATING ACTIVITIES**Net
                    (loss)
                
                $
                (417,085
                )
                $
                (68,280
                )
                $
                (295,041
                )
                $
                (265,056
                )**Adjustments
                    to reconcile net loss to net cash****provided
                    by (used in) operating activities:**Depreciation
                    and amortization
                
                
                68,164
                
                
                60,403
                
                
                260,806
                
                
                159,070Bad
                    debt expense
                
                
                4,821
                
                
                17,626
                
                
                63,498
                
                
                52,241Stock
                    issued for services
                
                
                187,189
                
                
                -
                
                
                -
                
                
                -Loss
                    on disposal of equipment
                
                
                1,877
                
                
                -
                
                
                2,296
                
                
                -**Changes
                    in assets and liabilities**(Increase)
                    decrease in accounts receivable
                
                
                62,540
                
                
                221,720
                
                
                96,436
                
                
                (800,180
                )(Increase)
                    decrease in other current assets
                
                
                2,470
                
                
                (2,471
                )
                
                (4,077
                )
                
                (173
                )(Increase)
                    decrease in deposits
                
                
                10,530
                
                
                468
                
                
                (14,517
                )
                
                (40,006
                )Increase
                    (decrease) in accounts payable
                
                
                294,777
                
                
                (19,316
                )
                
                154,463
                
                
                (1,259,056
                )Increase
                    in accrued interest
                
                
                -
                
                
                17,289
                
                
                77,364
                
                
                56,507Increase
                    (decrease) in payroll taxes payable
                
                
                (17,230
                )
                
                27,232
                
                
                17,230
                
                
                -Increase
                    (decrease) in customer deposits
                
                
                (4,878
                )
                
                (14,819
                )
                
                (35,010
                )
                
                204,000Increase
                    (decrease) in receivable financing payable
                
                
                (20,807
                )
                
                (342,679
                )
                
                (153,082
                )
                
                657,003Increase
                    in commissions payable
                
                
                18,411
                
                
                43,786
                
                
                98,994
                
                
                58,731Increase
                    (decrease) in refunds payable
                
                
                (1,079
                )
                
                (1,526
                )
                
                (936
                )
                
                2,015Increase
                    (decrease) in deferred revenue
                
                
                (19,940
                )
                
                93,331
                
                
                (262,959
                )
                
                1,097,935Total
                    adjustments
                
                
                586,845
                
                
                101,044
                
                
                300,506
                
                
                188,087**Net
                    cash provided by (used in) operating activities**
                
                
                169,760
                
                
                32,764
                
                
                5,465
                
                
                (76,969
                )**CASH
                    FLOWS FROM INVESTING ACTIVITIES**Proceeds
                    from sale of equipment
                
                
                2,800
                
                
                -
                
                
                3,451
                
                
                -Acquisition
                    of fixed assets
                
                
                (9,485
                )
                
                (163,766
                )
                
                (233,396
                )
                
                (251,023
                )**Net
                    cash (used in) investing activities**
                
                
                (6,685
                )
                
                (163,766
                )
                
                (229,945
                )
                
                (251,023
                )The
                    accompanying notes are an integral part of these consolidated
                    financial
                    statements
 F-5
  **IELEMENT
                      CORPORATION AND SUBSIDIARY****(FORMERLY
                      MAILKEY CORPORATION)****CONSOLIDATED
                      STATEMENTS OF CASH FLOW (CONTINUED) (RESTATED)****FOR
                      THE THREE MONTHS ENDED MARCH 31, 2005 AND 2004
                      AND****THE
                      YEARS ENDED DECEMBER 31, 2004 AND 2003****Restated**
                  
                  
                  **Restated**
                  
                  
                  **Restated**
                  
                  
                  **Restated****Three
                      Months Ended**
                  **Years
                      Ended****March
                      31,**
                  
                  
                  **March
                      31,**
                  
                  
                  **December
                      31,**
                  
                  
                  **December
                      31,****2005**
                  
                  
                  **2004**
                  
                  
                  **2004**
                  
                  
                  **2003****(Audited)**
                  
                  
                  **(Unaudited)**
                  
                  
                  **(Audited)**
                  
                  
                  **(Audited)****CASH
                      FLOWS FROM FINANCING ACTIVITES**Payments
                      of notes payable
                  
                  $
                  (32,909
                  )
                  $
                  (32,600
                  )
                  $
                  (465,344
                  )
                  $
                  (46,193
                  )Proceeds
                      from notes payable
                  
                  
                  22,450
                  
                  
                  100,000
                  
                  
                  625,331
                  
                  
                  467,054Common
                      stock issued for cash
                  
                  
                  -
                  
                  
                  -
                  
                  
                  119,300
                  
                  
                  -Proceeds
                      in exercise of stock options
                  
                  
                  39,954
                  
                  
                  -
                  
                  
                  75
                  
                  
                  -**Net
                      cash provided by financing activities**
                  
                  
                  29,495
                  
                  
                  67,400
                  
                  
                  279,362
                  
                  
                  420,861**NET
                      INCREASE (DECREASE) IN CASH****AND
                      CASH EQUIVALENTS**
                  
                  
                  192,570
                  
                  
                  (63,602
                  )
                  
                  54,882
                  
                  
                  92,869**CASH
                      AND CASH EQUIVALENTS -****BEGINNING
                      OF YEAR / PERIOD**
                  
                  
                  147,751
                  
                  
                  92,869
                  
                  
                  92,869
                  
                  
                  -**CASH
                      AND CASH EQUIVALENTS - END OF****YEAR
                      / PERIOD**
                  
                  $
                  340,321
                  
                  $
                  29,267
                  
                  $
                  147,751
                  
                  $
                  92,869**SUPPLEMENTAL
                      DISCLOSURE OF CASH FLOW****INFORMATION:****CASH
                      PAID DURING THE YEAR FOR:**Interest
                      expense
                  
                  $
                  2,563
                  
                  $
                  3,890
                  
                  $
                  34,983
                  
                  $
                  6,459**SUPPLEMENTAL
                      DISCLOSURE OF NONCASH****ACTIVITIES:**Accounts
                      payable converted to equity
                  
                  $
                  17,332
                  
                  $
                  5,000
                  
                  $
                  5,000
                  
                  $
                  -Accounts
                      payable converted to debt
                  
                  $
                  70,000
                  
                  $
                  -
                  
                  $
                  50,000
                  
                  $
                  -Common
                      stock issued for conversion of notes payable
                  
                  $
                  852,078
                  
                  $
                  -
                  
                  $
                  248,000
                  
                  $
                  -Issuance
                      of stock for redemption of ICCC shares
                  
                  $
                  -
                  
                  $
                  -
                  
                  $
                  -
                  
                  $
                  4,123Debt
                      converted to accounts payable
                  
                  $
                  126,000
                  
                  $
                  -
                  
                  $
                  -
                  
                  $
                  -Liabilities
                      assumed to acquire fixed assets from ICCC
                  
                  $
                  -
                  
                  $
                  -
                  
                  $
                  -
                  
                  
                  2,079,665Debt
                      converted in exercise of options
                  
                  $
                  5,828
                  
                  $
                  -
                  
                  $
                  -
                  
                  $
                  -Accounts
                      payable and accrued expensesacquired
                      in reverse merger
                  
                  $
                  63,343
                  
                  $
                  -
                  
                  $
                  -
                  
                  $
                  -Debt
                      acquired in reverse merger
                  
                  $
                  337,945
                  
                  $
                  -
                  
                  $
                  -
                  
                  $
                  -Stock
                      issued for services
                  
                  $
                  187,189
                  
                  $
                  -
                  
                  $
                  -
                  
                  $
                  -The
                      accompanying notes are an integral part of these consolidated
                      financial
                      statements
   F-6
 **IELEMENT CORPORATION
          AND SUBSIDIARY**
 (FORMERLY
          MAILKEY
          CORPORATION)
 **NOTES
          TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)**
 **FOR
          THE THREE MONTHS ENDED MARCH 31, 2005 AND 2004 AND**
 **THE
          YEARS ENDED DECEMBER 31, 2004 AND 2003**
 
 **NOTE
        1-**  **ORGANIZATION
        AND BASIS OF PRESENTATION**
 
 MK
        Secure
        Solutions Ltd. was established as a messaging security and management. On
        March
        25, 2004, pursuant to an Agreement and Plan of Merger, Global Diversified
        Acquisition Corp. ("GDAC"), acquired all of the outstanding capital stock
        of MK
        Secure Solutions Ltd ("MKSS"), a holding company incorporated on March 11,
        2003,
        under the laws of the British Virgin Islands. The transaction was effected
        by
        the issuance of shares such that the former MKSS shareholders owned
        approximately 90% of the outstanding MailKey stock after the transaction.
        GDAC
        then changed its name to MailKey Corporation ("MailKey").
 
 The
        Company's Chairman and Chief Executive Officer resigned in September 2004
        and
        the Company's Chief Financial Officer and member of the Board resigned in
        November 2004. Both positions have been filled by the Company's founder and
        deputy chairman.
 
 In
        the
        first quarter of 2005 the Company was unable to continue funding the development
        of its messaging security solutions, and the rights were transferred to the
        development team in return for the cancellation of most of the liabilities
        which
        the Company owed to them. The Company retains an interest of 20% in the
        messaging security solutions; however to date there has been no
        commercialization of the solutions. In the first quarter 2005 the Company
        sold
        its insolvent British Virgin Islands subsidiary, MK Secure Solutions Limited,
        for $1 to a UK based accounting firm, SS Khehar & Company. SS Khehar &
Company has agreed to deal with the winding up of the former subsidiary,
        for a
        fee of $1,800.
 
 On
        November 9, 2004, the Company entered into an Agreement and Plan of Merger
        (the
        "Merger Agreement") by and among the MailKey Corporation, MailKey Acquisition
        Corp., a Delaware corporation and our wholly-owned subsidiary ("Merger Sub"),
        Inc., a Nevada Corporation, IElement, Inc. ("IElement") and Ivan Zweig, pursuant
        to which the Company agreed to acquire all of the issued and outstanding
        shares
        of capital stock of IElement. This transaction closed in January 2005. At
        the
        closing of the Merger, Merger Sub was merged into IElement, at which time
        the
        separate corporate existence of Merger Sub ceased and IElement now continues
        as
        the surviving company. The Share Exchange has been accounted for as a reverse
        merger under the purchase method of accounting. Accordingly, IElement will
        be
        treated as the continuing entity for accounting purposes and the historical
        financial statements presented will be those of IElement.
 
 Under
        the
        terms of the Merger Agreement, MailKey issued its common stock, $.001 par
        value
        per share, in exchange for all of the issued and outstanding shares of capital
        stock of IElement. The exchange ratio setting forth the number of shares
        of
        MailKey common stock issued for each issued and outstanding share of capital
        stock of IElement was 3.52 shares of MailKey common stock for each issued
        and
        outstanding share of capital stock of IElement.
  F-7
 **IELEMENT CORPORATION
          AND SUBSIDIARY**
 (FORMERLY
          MAILKEY
          CORPORATION)
 **NOTES
          TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)**
 **FOR
          THE THREE MONTHS ENDED MARCH 31, 2005 AND 2004 AND**
 **THE
          YEARS ENDED DECEMBER 31, 2004 AND 2003**
 
 **NOTE
        1-**  **ORGANIZATION
        AND BASIS OF PRESENTATION** **(CONTINUED)**
 
 IElement,
        incorporated in Nevada on December 30, 2002, is a facilities-based nationwide
        communications service provider that provides state-of-the-art
        telecommunications services to small and medium sized enterprises (“SMEs”).
        IElement provides broadband data, voice and wireless services by offering
        integrated T-1 lines as well as Layer 2 Private Network solutions that provide
        SMEs with dedicated Internet access services, customizable business solutions
        for voice, data, wireless and Internet, and secure communications channels
        between the SME offices, partners, vendors, customers and employees without
        the
        use of a firewall or encryption devices. IElement has a network presence
        in 18
        major markets in the United States, including facilities in Los Angeles,
        Dallas,
        and Chicago. The Company started business in 2003.
 
 In
        connection with the closing of the merger, MailKey entered into a letter
        of
        intent with Ivan Zweig and Kramerica Capital Corporation ("Kramerica"), a
        corporation wholly-owned by Mr. Zweig, which contemplates that MailKey and
        IElement will enter into a four year employment agreement with Kramerica
        and Mr.
        Zweig pursuant to which Mr. Zweig will serve as the Chief Executive Officer
        of
        MailKey and IElement. The letter of intent provides that Mr. Zweig will receive
        an annual base salary of $300,000. In addition to his base salary, Mr. Zweig
        will be entitled to annual performance bonuses with targets ranging from
        $1,000,000 to $3,000,000 during the second, third and fourth years provided
        IElement achieves certain performance goals. If Mr. Zweig is terminated without
        cause, MailKey is obligated to pay the remaining salary owed to Mr. Zweig
        for
        the complete term of the employment agreement, to pay off all notes owed
        to Mr.
        Zweig or Kramerica, all outstanding options shall become fully vested, MailKey
        shall pay all earned performance bonuses and all accrued vacation. If Mr.
        Zweig
        is terminated for any reason other than cause, MailKey shall pay in full
        the
 
 Notes
        owed to either Mr. Zweig or Kramerica Capital Corporation and at least 75%
        of
        the earned bonus plan set forth by the directors. Effective January 24, 2005,
        Mr. Zweig was also appointed to the Board of Directors of MailKey.
 
 Ivan
        Zweig has served as the Chief Executive Officer of IElement since March 2003.
        Mr. Zweig is also the Chief Executive Officer, director and sole shareholder
        of
        Kramerica, a personnel services corporation. Since December 1998, Mr. Zweig
        has
        served as the Chief Executive Officer and director of Integrated Communications
        Consultants Corp. ("ICCC"), a nationwide data carrier specializing in high
        speed
        Internet access and secure data transaction. ICCC provides IElement with
        resold
        telecom services and IElement pays ICCC approximately $97,000 on a monthly
        basis
        for such services. On October 1, 2004, ICCC filed for Chapter 11 bankruptcy
        protection in the United States Bankruptcy Court, Northern District of Texas,
        Dallas Division.
  F-8
  **IELEMENT CORPORATION
          AND SUBSIDIARY**
 (FORMERLY
          MAILKEY
          CORPORATION)
 **NOTES
          TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)**
 **FOR
          THE THREE MONTHS ENDED MARCH 31, 2005 AND 2004 AND**
 **THE
          YEARS ENDED DECEMBER 31, 2004 AND 2003**
 
 **NOTE
        1-**  **ORGANIZATION
        AND BASIS OF PRESENTATION** **(CONTINUED)**
 
 Upon
        the
        consummation of the acquisition, IElement has issued outstanding promissory
        notes to, among others, Kramerica in the aggregate amount of $120,000 (the
        "Notes"). IElement has also issued Notes in the aggregate amount to members
        of
        Mr. Zweig's immediate family. The Notes are payable in 36 monthly installments
        with the first payment commencing six months after the closing of the merger
        and
        will continue to be secured by substantially all of the assets of IElement.
 
 The
        Company’s consolidated financial statements are prepared on the accrual basis of
        accounting in accordance with accounting principles generally accepted in
        the
        United States of America, and have been presented on a going concern basis
        which
        contemplates the realization of assets and the satisfaction of liabilities
        in
        the normal course of business.
 
 **RESTATEMENT**
 
 The
        restatement relates to the recapitalization of IElement by Integrated
        Communications Consultants Corporation (ICCC) on March 1, 2003. In a
        recapitalization, fair value adjustments and goodwill are not recognized.
        This
        restatement corrects the reporting of this transaction by removing those
        adjustments relating to fair value and goodwill.
 
 The
        restatement also reclassified the presentation of certain expenses in Cost
        of
        Sales in the Statement of Operations, which are now presented as Operating
        Expenses. In addition, Bad Debt Expense and Accounts Receivable are now
        presented separately in the Statement of Cash Flows.
 
 The
        effects of the restatement adjustments on IElement’s previously reported Balance
        Sheet for the period ended March 31, 2005 are summarized below.
 **3/31/05** **3/31/05**
 Balance
        SheetAs
        RestatedAs           
        Previously Reported
 
 Goodwill $
        0 $2,079,665
 
 Total
        other
        assets $
        58,993 $2,138,658
 
 Total
        assets $1,810,789 $3,890,454
 
 Additional
        paid-in
        capital ($1,172,836) $
        906,829
 
 Total
        stockholders’ equity
        (deficit) ($2,058,379) $
        21,286
 
 Total
        liabilities and
        stockholders’ $1,810,789 $3,890,454
 Equity
        (deficit)
  F-9
  **IELEMENT CORPORATION
          AND SUBSIDIARY**
 (FORMERLY
          MAILKEY
          CORPORATION)
 **NOTES
          TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)**
 **FOR
          THE THREE MONTHS ENDED MARCH 31, 2005 AND 2004 AND**
 **THE
          YEARS ENDED DECEMBER 31, 2004 AND 2003**
 
 **NOTE
        2-**   **SUMMARY
        OF SIGNIFICANT ACCOUNTING POLICIES**
 
 **Basis
        of Consolidation**
 
 The
        consolidated financial statements include the financial position and results
        of
        IElement. All significant intercompany accounts and transactions have been
        eliminated in consolidation.
 
 **Use
        of Estimates**
 
 The
        preparation of consolidated financial statements in conformity with accounting
        principles generally accepted in the United States of America requires
        management to make estimates and assumptions that affect the reported amounts
        of
        assets and liabilities and disclosure of contingent assets and liabilities
        at
        the date of the consolidated financial statements and the reported amounts
        of
        revenues and expenses during the reporting period. Actual results could differ
        from those estimates.
 
 **Cash
        and Cash Equivalents**
 
 The
        Company considers all highly liquid debt instruments and other short-term
        investments with an initial maturity of three months or less to be cash or
        cash
        equivalents.
 
 The
        Company maintains cash and cash equivalents with a financial institution
        which
        is insured by the Federal Deposit Insurance Corporation up to $100,000. At
        various times throughout the year the Company had amounts on deposit at the
        financial institution in excess of federally insured limits.
  **Revenue
        and Cost Recognition**
 
 The
        Company records its transactions under the accrual method of accounting whereby
        income is recognized when the services are provided rather than when billed
        or
        the fees are collected, and costs and expenses are recognized in the period
        they
        are incurred rather than paid for.
  **Accounts
        Receivable**
 
 The
        Company factors 99% of its billings with an outside agency. The Company invoices
        its customers on the 28 th of the
        month for services to be rendered two months subsequent to the billing date.
        The
        Company receives 75% of the aggregate net face value of the assigned accounts
        at
        the time of placement with the factor.
 
 **Deferred
        Revenue**
 
 Deferred
        revenue consists of customers billed in advance of revenue being earned.
  F-10
  **IELEMENT CORPORATION
          AND SUBSIDIARY**
 (FORMERLY
          MAILKEY
          CORPORATION)
 **NOTES
          TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)**
 **FOR
          THE THREE MONTHS ENDED MARCH 31, 2005 AND 2004 AND**
 **THE
          YEARS ENDED DECEMBER 31, 2004 AND 2003**
 
 **NOTE
        2-**  **SUMMARY
        OF SIGNIFICANT ACCOUNTING POLICIES - (CONTINUED)**
 
 **Provision
        for Bad Debt**
 
 Under
        SOP
        01-6 “Accounting for Certain Entities (including Entities with Trade
        Receivables), the Company has intent and belief that all amounts in accounts
        receivable are collectible. The Company has determined that based on their
        collections an allowance for doubtful accounts of $6,673 and $6,098 has been
        recorded at March 31, 2005 and December 31, 2004.
 
 Bad
        debt
        expense for the three months ended March 31, 2005 and 2004 was $4,821 and
        $17,626, respectively and for the years ending December 31, 2004 and 2003
        was
        $63,498 and $52,241, respectively.
 
 **Advertising
        Costs**
 
 The
        Company expenses the costs associated with advertising and marketing as
        incurred. Advertising and marketing expenses, included in the statements
        of
        operations for the three months ended March 31, 2005 and 2004 were $660 and
        $9,216, respectively, and for the years ended December 31, 2004 and 2003
        were
        $24,556 and $5,901, respectively.
 
 **Income
        Taxes**
 
 The
        income tax benefit is computed on the pretax loss based on the current tax
        law.
        Deferred income taxes are recognized for the tax consequences in future years
        of
        differences between the tax basis of assets and liabilities and their financial
        reporting amounts at each year-end based on enacted tax laws and statutory
        tax
        rates. No benefit is reflected for the three months ended March 31, 2005
        and
        2004 and for the years ended December 31, 2004 and 2003,
        respectively.
 
 **Fair
        Value of Financial Instruments**
 
 The
        carrying amount reported in the balance sheets for cash and cash equivalents,
        accounts receivable, accounts payable and accrued expenses approximate fair
        value because of the immediate or short-term maturity of these financial
        instruments. The carrying amount reported for notes payable approximates
        fair
        value because, in general, the interest on the underlying instruments fluctuates
        with market rates.
 
 **Fixed
        Assets**
  Fixed
        assets are stated at cost. Depreciation is computed using the straight-line
        method over the estimated useful lives of the assets.
 
 Furniture
        and equipment   5
        Years
 Telecommunications
        equipment  5
        Years
  F-11
  **IELEMENT CORPORATION
          AND SUBSIDIARY**
 (FORMERLY
          MAILKEY
          CORPORATION)
 **NOTES
          TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)**
 **FOR
          THE THREE MONTHS ENDED MARCH 31, 2005 AND 2004 AND**
 **THE
          YEARS ENDED DECEMBER 31, 2004 AND 2003**
 
 **Fixed
        Assets - (Continued)**
 
 When
        assets are retired or otherwise disposed of, the costs and related accumulated
        depreciation are removed from the accounts, and any resulting gain or loss
        is
        recognized in income for the period. The cost of maintenance and repairs
        is
        charged to income as incurred; significant renewals and betterments are
        capitalized. Deduction is made for retirements resulting from renewals or
        betterments.
 
 **(Loss)
        Per Share of Common Stock**
 
 Historical
        net (loss) per common share is computed using the weighted average number
        of
        common shares outstanding. Common stock equivalents were not included in
        the
        computation of diluted earnings per share when the Company reported a loss
        because to do so would be antidilutive for the periods presented.
 
 The
        following is a reconciliation of the computation for basic and diluted
        EPS:
 
  The
        Company had no options or warrants granted during the period, therefore there
        were no common stock equivalents.
  F-12
  **IELEMENT CORPORATION
          AND SUBSIDIARY**
 (FORMERLY
          MAILKEY
          CORPORATION)
 **NOTES
          TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)**
 **FOR
          THE THREE MONTHS ENDED MARCH 31, 2005 AND 2004 AND**
 **THE
          YEARS ENDED DECEMBER 31, 2004 AND 2003**
 
 **Stock-Based
        Compensation**
 
 Employee
        stock awards under the Company's compensation plans are accounted for in
        accordance with Accounting Principles Board Opinion No. 25 (“APB 25”),
“ *Accounting
        for Stock Issued to Employees* ”,
        and
        related interpretations. The Company provides the disclosure requirements
        of
        Statement of Financial Accounting Standards No. 123, “ *Accounting
        for Stock-Based Compensation* ”
(“SFAS
        123”), and related interpretations. Stock-based awards to non-employees are
        accounted for under the provisions of SFAS 123 and has adopted the enhanced
        disclosure provisions of SFAS No. 148 “Accounting for Stock-Based Compensation-
        Transition and Disclosure, an amendment of SFAS No. 123”.
 
 The
        Company measures compensation expense for its employee stock-based compensation
        using the intrinsic-value method. Under the intrinsic-value method of accounting
        for stock-based compensation, when the exercise price of options granted
        to
        employees is less than the estimated fair value of the underlying stock on
        the
        date of grant, deferred compensation is recognized and is amortized to
        compensation expense over the applicable vesting period. In each of the periods
        presented, the vesting period was the period in which the options were granted.
        All options were expensed to compensation in the period granted rather than
        the
        exercise date.
 
 The
        Company measures compensation expense for its non-employee stock-based
        compensation under the Financial Accounting Standards Board (FASB) Emerging
        Issues Task Force (EITF) Issue No. 96-18, “ *Accounting
        for Equity Instruments that are Issued to Other Than Employees for Acquiring,
        or
        in Conjunction with Selling, Goods or Services* ”.
 
 The
        fair
        value of the option issued is used to measure the transaction, as this is
        more
        reliable than the fair value of the services received. The fair value is
        measured at the value of the Company’s common stock on the date that the
        commitment for performance by the counterparty has been reached or the
        counterparty’s performance is complete. The fair value of the equity instrument
        is charged directly to compensation expense and additional paid-in
        capital.
 
 Stock-based
        compensation for the three months ended March 31, 2005 and 2004 was $0 and
        $0,
        respectively and for the years ended December 31, 2004 and 2003 was $0 and
        $0,
        respectively.
 
 **Recent
        Accounting Pronouncements**
 
 On
        October 3, 2001, the FASB issued Statement of Financial Accounting Standards
        No.
        144, “ *Accounting
        for the Impairment or Disposal of Long-Lived Assets”* (“SFAS
        144”), that is applicable to financial statements issued for fiscal years
        beginning after December 15, 2001. The FASB’s new rules on asset
        impairment
  F-13
  **IELEMENT CORPORATION
          AND SUBSIDIARY**
 (FORMERLY
          MAILKEY
          CORPORATION)
 **NOTES
          TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)**
 **FOR
          THE THREE MONTHS ENDED MARCH 31, 2005 AND 2004 AND**
 **THE
          YEARS ENDED DECEMBER 31, 2004 AND 2003**
 
 **Recent
        Accounting Pronouncements (Continued)**
 
 supersede
        SFAS 121, *“Accounting
        for the Impairment of Long-Lived Assets and for Long-Lived Assets to Be Disposed
        Of,”* and
        portions of Accounting Principles Board Opinion 30, “Reporting the Results of
        Operations.”
 
 This
        Standard provides a single accounting model for long-lived assets to be disposed
        of and significantly changes the criteria that would have to be met to classify
        an asset as held-for-sale. Classification as held-for-sale is an important
        distinction since such assets are not depreciated and are stated at the lower
        of
        fair value and carrying amount.
 
 This
        Standard also requires expected future operating losses from discontinued
        operations to be displayed in the period (s) in which the losses are incurred,
        rather than as of the measurement date as presently required. The adoption
        of
        SFAS No. 144 did not have an impact on the Company's results of operations
        or
        financial position.
 
 In
        April
        2002, the FASB issued SFAS No. 145, Rescission of FASB Statements No. 4,
        44 and
        64, Amendment of FASB Statement No. 13, and Technical Corrections. This
        statement rescinds SFAS No. 4, “ *Reporting
        Gains and Losses from Extinguishment of Debt,* ”
and
        an
        amendment of that statement, SFAS No. 44, “ *Accounting
        for Intangible Assets of Motor Carriers* ,”
and
        SFAS No. 64, “ *Extinguishments
        of Debt Made to Satisfy Sinking-Fund Requirements* ”.
        This
        statement amends SFAS No. 13, *“Accounting
        for Leases”* ,
        to
        eliminate inconsistencies between the required accounting for sales-leaseback
        transactions and the required accounting for certain lease modifications
        that
        have economic effects that are similar to sales-leaseback transactions.
 
 Also,
        this statement amends other existing authoritative pronouncements to make
        various technical corrections, clarify meanings, or describe their applicability
        under changed conditions. Provisions of SFAS No. 145 related to the rescissions
        of SFAS No. 4 were effective for the Company on November 1, 2002 and provisions
        affecting SFAS No. 13 were effective for transactions occurring after May
        15,
        2002. The adoption of SFAS No. 145 did not have a significant impact on the
        Company's results of operations or financial position.
 
 In
        June
        2003, the FASB issued SFAS No. 146, “ *Accounting
        for Costs Associated with Exit or Disposal Activities* ”.
        This
        statement covers restructuring type activities beginning with plans initiated
        after December 31, 2002. Activities covered by this standard that are entered
        into after that date will be recorded in accordance with provisions of SFAS
        No.
        146. The adoption of SFAS No. 146 did not have a significant impact on the
        Company's results of operations or financial position.
  F-14
  **IELEMENT CORPORATION
          AND SUBSIDIARY**
 (FORMERLY
          MAILKEY
          CORPORATION)
 **NOTES
          TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)**
 **FOR
          THE THREE MONTHS ENDED MARCH 31, 2005 AND 2004 AND**
 **THE
          YEARS ENDED DECEMBER 31, 2004 AND 2003**
 
 **Recent
        Accounting Pronouncements (Continued)**
 
 In
        December 2002, the FASB issued Statement No. 148, “ *Accounting
        for Stock-Based Compensation-Transition and Disclosure, an amendment of FASB
        Statement No. 123* ”(“SFAS
        148”). SFAS 148 amends FASB Statement No. 123, “ *Accounting
        for Stock-Based Compensation* ,”
to
        provide alternative methods of transition for an entity that voluntarily
        changes
        to the fair value based method of accounting for stock-based employee
        compensation. It also amends the disclosure provisions of that Statement
        to
        require prominent disclosure about the effects on reported net income of
        an
        entity’s accounting policy decisions with respect to stock-based employee
        compensation. Finally, this Statement amends Accounting Principles Board
        (“APB”)
        Opinion No. 28, “ *Interim
        Financial Reporting* ”,
        to
        require disclosure about those effects in interim financial information.
        SFAS
        148 is effective for financial statements for fiscal years ending after December
        15, 2002. The Company will continue to account for stock-based employee
        compensation using the intrinsic value method of APB Opinion No. 25,
“ *Accounting
        for Stock Issued to Employees* ,”
but
        has adopted the enhanced disclosure requirements of SFAS 148.
 
 In
        May
        2003, the FASB issued SFAS Statement No. 150, " *Accounting
        for Certain Financial Instruments with Characteristics of both Liabilities
        and
        Equity* ".
        This
        Statement establishes standards for how an issuer classifies and measures
        certain financial instruments with characteristics of both liabilities and
        equity. It requires that an issuer classify a financial instrument that is
        within its scope as a liability (or an asset in some circumstances). This
        statement is effective for financial instruments entered into or modified
        after
        May 31, 2003, and otherwise is effective at the beginning of the first interim
        period beginning after June 15, 2003, except for mandatorily redeemable
        financial instruments of nonpublic entities, if applicable. It is to be
        implemented by reporting the cumulative effect of a change in an accounting
        principle for financial instruments created before the issuance date of the
        Statement and still existing at the beginning of the interim period of adoption.
        The adoption of this statement did not have a significant impact on the
        Company's results of operations or financial position.
 
 In
        November 2002, the FASB issued Interpretation No. 45 ("FIN 45"), “ *Guarantor's
        Accounting and Disclosure Requirements for Guarantees, Including Indirect
        Guarantees of Indebtedness of Others* ”.
        FIN 45
        requires a company, at the time it issues a guarantee, to recognize an initial
        liability for the fair value of obligations assumed under the guarantees
        and
        elaborates on existing disclosure requirements related to guarantees and
        warranties. The recognition requirements are effective for guarantees issued
        or
        modified after December 31, 2002 for initial recognition and initial measurement
        provisions. The adoption of FIN 45 did not have a significant impact on the
        Company's results of operations or financial position.
 
 In
        January 2003, the FASB issued FASB Interpretation No. 46 ("FIN 46"),
“ *Consolidation
        of Variable Interest Entities, an Interpretation of ARB No. 51* ”.
        FIN 46
        requires certain variable interest entities to be consolidated by the
        primary
  F-15
  **IELEMENT CORPORATION
          AND SUBSIDIARY**
 (FORMERLY
          MAILKEY
          CORPORATION)
 **NOTES
          TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)**
 **FOR
          THE THREE MONTHS ENDED MARCH 31, 2005 AND 2004 AND**
 **THE
          YEARS ENDED DECEMBER 31, 2004 AND 2003**
 
 **Recent
        Accounting Pronouncements (Continued)**
 
 beneficiary
        of the entity if the equity investors in the entity do not have the
        characteristics of a controlling financial interest or do not have sufficient
        equity at risk for the entity to finance its activities without additional
        subordinated financial support from other parties. FIN 46 is effective for
        all
        new variable interest entities created or acquired after January 31, 2003.
        For
        variable interest entities created or acquired prior to February 1, 2003,
        the
        provisions of FIN 46 must be applied for the first interim or annual period
        beginning after June 15, 2003. The adoption of FIN 46 did not have a significant
        impact on the Company' results of operations or financial position.
 
 On
        December 16, 2004, the Financial Accounting Standards Board ("FASB") published
        Statement of Financial Accounting Standards No. 123 (Revised 2004), *“Share-Based
        Payment”* ("SFAS
        123R"). SFAS 123R requires that compensation cost related to share-based
        payment
        transactions be recognized in the financial statements. Share-based payment
        transactions within the scope of SFAS 123R include stock options, restricted
        stock plans, performance-based awards, stock appreciation rights, and employee
        share purchase plans.
 
 The
        provisions of SFAS 123R are effective for small business issuers as of the
        first
        interim period that begins after December 15, 2005. Accordingly, the Company
        will implement the revised standard in the first quarter of fiscal year 2006.
        Currently, the Company accounts for its share-based payment transactions
        under
        the provisions of APB 25, which does not necessarily require the recognition
        of
        compensation cost in the financial statements. Management is assessing the
        implications of this revised standard, which may materially impact the Company's
        results of operations in the first quarter of fiscal year 2006 and
        thereafter.
 
 On
        December 16, 2004, FASB issued Statement of Financial Accounting Standards
        No.
        153, *“Exchanges
        of Non-monetary Assets, an amendment of APB Opinion No. 29, Accounting for
        Non-monetary Transactions”* (" SFAS
        153"). This statement amends APB Opinion 29 to eliminate the exception for
        non-monetary exchanges of similar productive assets and replaces it with
        a
        general exception for exchanges of non-monetary assets that do not have
        commercial substance. Under SFAS 153, if a non-monetary exchange of similar
        productive assets meets a commercial-substance criterion and fair value is
        determinable, the transaction must be accounted for at fair value resulting
        in
        recognition of any gain or loss. SFAS 153 is effective for non-monetary
        transactions in fiscal periods that begin after June 15, 2005. The Company
        does
        not anticipate that the implementation of this standard will have a material
        impact on its financial position, results of operations or cash flow.
  F-16
  **IELEMENT CORPORATION
          AND SUBSIDIARY**
 (FORMERLY
          MAILKEY
          CORPORATION)
 **NOTES
          TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)**
 **FOR
          THE THREE MONTHS ENDED MARCH 31, 2005 AND 2004 AND**
 **THE
          YEARS ENDED DECEMBER 31, 2004 AND 2003**
 
 **NOTE
        3-**  **FIXED
        ASSETS**
 
 Property
        and equipment as of March 31, 2005 was as follows:
 
  
 There
        was
        $68,164 and $60,403 charged to operations for depreciation expense for the
        three
        months ended March 31, 2005 and 2004, respectively and $260,806 and $156,691
        was
        charged to operations for depreciation expense for the years ended December
        31,
        2004 and 2003, respectively.
  F-17
  **IELEMENT CORPORATION
          AND SUBSIDIARY**
 (FORMERLY
          MAILKEY
          CORPORATION)
 **NOTES
          TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)**
 **FOR
          THE THREE MONTHS ENDED MARCH 31, 2005 AND 2004 AND**
 **THE
          YEARS ENDED DECEMBER 31, 2004 AND 2003**
 
 **NOTE
        4-**  **NOTES
        PAYABLE**
 
 The
        Company has several notes payable at March 31, 2005. Proceeds from the notes
        were utilized to finance the general working capital requirements of the
        Company, purchase equipment and pay certain liabilities assumed by the Company
        in the purchase of the principal assets of Integrated Communications Consultants
        Corporation in March of 2003. The notes carry varying interest rates between
        zero and 5.75%. Prior to the effective merger of IElement with MailKey, certain
        of the notes were converted into shares of common stock.
 
 Accrued
        interest on the notes is $4,767 at March 31, 2005.
 
 The
        notes
        payable balances at March 31, 2005 were as follows:
  **NOTE
        5-**  **OPERATING
        LEASES**
 
 The
        Company leases office space under leases commencing in March and June of
        2004.
        The leases are payable on a month-to-month basis. Monthly payments under
        the
        current leases are $3,900. The Company also leased additional office space
        in
        Texas and California. The Company ceased leasing this additional space during
        the year ended December 31, 2004.
  F-18
  **IELEMENT CORPORATION
          AND SUBSIDIARY**
 (FORMERLY
          MAILKEY
          CORPORATION)
 **NOTES
          TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)**
 **FOR
          THE THREE MONTHS ENDED MARCH 31, 2005 AND 2004 AND**
 **THE
          YEARS ENDED DECEMBER 31, 2004 AND 2003**
 
 **NOTE
        5-**  **OPERATING
        LEASES - (CONTINUED)**
 
 Rental
        payments charged to expense for the three months ended March 31, 2005 and
        2004
        were $11,700 and $15,050, respectively and during the years ended December
        31,
        2004 and 2003 were $82,072 and $68,750, respectively.
 
 **NOTE
        6-**  **STOCKHOLDERS’
        EQUITY (DEFICIT)**
 
 Common
        Stock
 
 As
        of
        March 31, 2005, the Company has 100,000,000 shares of common stock authorized
        at
        a par value of $0.001, and 91,783,730 shares issued and
        outstanding.
 
 The
        following details the stock transactions for the three months ended March
        31,
        2005:
 
 The
        Company issued 4,578,223 shares of common stock due to the exercise of
        options.
 
 The
        Company issued 4,694,953 shares of common stock for the conversion of debt
        to
        equity valued at $826,312.
 
 The
        Company issued 7,487,587 shares of common stock for services valued at
        $187,189.
 
 The
        Company issued 693,280 shares of common stock in conversion of accounts payable
        to equity valued at $17,332.
 
 The
        Company issued 1,030,672 shares of common stock for the conversion of debt
        to
        equity valued at $25,766.
 
 In
        connection with the recapitalization, there were $337,945 in notes payable
        and
        $63,343 in liabilities assumed by the new company.
 
 **NOTE
        7-**  **PROVISION
        FOR INCOME TAXES**
 
 Deferred
        income taxes will be determined using the liability method for the temporary
        differences between the financial reporting basis and income tax basis of
        the
        Company’s assets and liabilities. Deferred income taxes will be measured based
        on the tax rates expected to be in effect when the temporary differences
        are
        included in the Company’s tax return. Deferred tax assets and liabilities are
        recognized based on anticipated future tax consequences attributable to
        differences between financial statement carrying amounts of assets and
        liabilities and their respective tax bases.
  F-19
  **IELEMENT CORPORATION
        AND SUBSIDIARY**
 (FORMERLY
        MAILKEY
        CORPORATION)
 **NOTES
        TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)**
 **FOR
        THE THREE MONTHS ENDED MARCH 31, 2005 AND 2004 AND**
 **THE
        YEARS ENDED DECEMBER 31, 2004 AND 2003**
 
 **NOTE
        7-**  **PROVISION
        FOR INCOME TAXES - (CONTINUED)**
 
 At
        March
        31, 2005, deferred tax assets consist of the following:
 
 Net
        deferred tax
        assets $294,392
 Less:
        valuation
        allowance (294,392)
 $ -0-
 
 At
        March
        31, 2005, the Company had deficits accumulated in the approximate amount
        of
        $981,305, available to offset future taxable income through 2023. The Company
        established valuation allowances equal to the full amount of the deferred
        tax
        assets due to the uncertainty of the utilization of the operating losses
        in
        future periods.
 
 **NOTE
        8-**  **GOING
        CONCERN**
 
 As
        shown
        in the accompanying consolidated financial statements the Company has sustained
        net operating losses for the three months ended March 31, 2005 and 2004 and
        the
        years ended December 31, 2004 and 2003. There is no guarantee that the Company
        will be able to raise enough capital or generate revenues to sustain its
        operations. This raises substantial doubt about the Company’s ability to
        continue as a going concern.
 
 The
        Company’s future success is dependent upon its ability to achieve profitable
        operations and generate cash from operating activities, and upon additional
        financing. There is no guarantee that the Company will be able to raise enough
        capital or generate revenues to sustain its operations. Management believes
        they
        can raise the appropriate funds needed to support their business plan and
        acquire an operating, cash flow positive company.
 
 The
        consolidated financial statements do not include any adjustments relating
        to the
        recoverability or classification of recorded assets and liabilities that
        might
        result should the Company be unable to continue as a going
        concern.
  F-20
  **SIGNATURES**
   In
            accordance with Section 13 or 15(d) of the Securities Exchange Act of
            1934, the
            registrant has duly caused this report to be signed on its behalf by
            the
            undersigned, thereunto duly authorized.
    **IELEMENT
            CORPORATION**
 (FORMERLY
            MAILKEY
            CORPORATION)
  *By:
                      /s/ Ivan Zweig*
                    *------------------------------*
                    *Date:
                      August 9*, 2006
                    *Name:
                      Ivan Zweig*
                    *Title:
                      Chief Executive Officer,*
                    *Chairman
                      and Principal Accounting Officer*
                    *Chief
                      Financial Officer*
 
  In
            accordance with the Exchange Act, this report has been signed below by
            the
            following persons on behalf of the registrant and in the capacities and
            on the
            dates indicated.