UNITED
STATES


SECURITIES
AND EXCHANGE COMMISSION


Washington,
D.C. 20549







FORM
10-K









(MARK
ONE)





[X]           Annual
Report Pursuant to Section 13 or 15(d) of the Securities Exchange Act of
1934




For the
fiscal year ended March 31, 2008





[  ]           Transition
Report Pursuant to Section 13 or 15(d) of the Securities Exchange Act of
1934





For the
transition period from ____________ to ____________




Commission
file number: 000-29331





IELEMENT
CORPORATION


(Exact
name of registrant as specified in its charter)




Nevada
            76-0270295(State
      or other jurisdiction
              of
      incorporation or organization)
            (IRS Employee
      Identification No.)




P.O. Box 279, 
      Lyndeborough,  New Hampshire
            03082(Address of
      principal executive offices)
            (Zip
      Code)




Registrant's
telephone number, including area code: (603) 654-2488





Securities
Registered pursuant to Section 12(b) of the Exchange Act:




Title of each
      class
            Name of each
      exchange on which registeredNone
            None




Securities
Registered pursuant to Section 12(g) of the Exchange Act:





Common
Stock, $0.001 Par Value


(Title
of class)





Indicate
by check mark if the registrant is a well-known seasoned issuer, as defined in
Rule 405 of the Securities Act. Yes o  No x





Indicate
by check mark if the registrant is not required to file reports pursuant to
Section 13 or Section 15(d) of the Act. Yes o  No x


Indicate
by check mark whether the registrant (1) has filed all reports required to be
filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the
preceding 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 o





Indicate
by check mark if disclosure of delinquent filers pursuant to Item 405 of
Regulation S-K (§ 229.405 of this chapter) is not contained herein, and will not
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-K
or any amendment to this Form 10-K.  x





Indicate
by check mark whether the registrant is a large accelerated filer, an
accelerated filer, a non-accelerated filer, or a smaller reporting company. See
the definitions of “large accelerated filer,” “accelerated filer” and “smaller
reporting company” in Rule 12b-2 of the Exchange Act.




Large accelerated
      filer o
            Accelerated filer
      oNon-accelerated
      filer o
            Smaller reporting
      company x





Indicate
by check mark whether the registrant is a shell company (as defined in Rule
12b-2 of the Exchange Act)  Yes x  No o







The
aggregate market value of the voting stock held by non-affiliates of the
registrant was $3,712,744 based on the number of shares held by non-affiliates
of the registrant as of May 31, 2008, and based on the closing sale price of
common stock as quoted on the OTCBB on September 28, 2007 ($0.112), the last day
of the second fiscal quarter. This calculation does not reflect a determination
that persons are affiliates for any other purposes.




APPLICABLE
ONLY TO REGISTRANTS INVOLVED IN BANKRUPTCY


PROCEEDINGS
DURING THE PRECEDING FIVE YEARS:





Indicate
by check mark whether the registrant has filed all documents and reports
required to be filed by Section 12, 13 or 15(d) of the Securities Exchange Act
of 1934 subsequent to the distribution of securities under a plan confirmed by a
court. Yes o 
No o





(APPLICABLE
ONLY TO CORPORATE REGISTRANTS)





Indicate
the number of shares outstanding of each of the registrant’s classes of common
stock, as of the latest practicable date.  The number of shares
outstanding of the registrant's common stock as of July 7, 2008 was
33,149,501








(DOCUMENTS
INCORPORATED BY REFERENCE)


None


IELEMENT
CORPORATION.


FORM
10-K


INDEX






PagePart
    IItem
      1.
            Business
            2Item
      1A.
            Risk
      Factors
            9Item
    1B.
            Unresolved Staff
      Comments
            N/AItem
    2.
            Properties
            12Item
    3.
            Legal
      Proceedings
            13Item
    4.
            Submission of
      Matters to a Vote of Security Holders
            13PART
    IIItem
    5.
            Market for
      Registrant’s Common Equity, Related Stockholder Matters and Issuer
      Purchases of Equity Securities
            13Item
    6.
            Selected Financial
      Data
            N/AItem
    7.
            Management’s
      Discussion and Analysis of Financial Condition and Results of
      Operations
            16Item
    7A.
            Quantitative and
      Qualitative Disclosures About Market Risk
            N/AItem
    8.
            Financial Statements
      and Supplementary Data
            F-1Item
    9.
            Changes in and
      Disagreements with Accountants on Accounting and Financial
      Disclosure
            23Item
    9A.
            Controls and
      Procedures
            23Item
    9B.
            Other
      Information
            23PART
    IIIItem
      10.
            Directors, Executive
      Officers and Corporate Governance
            23Item
    11.
            Executive
      Compensation
            24Item
    12.
            Security Ownership
      of Certain Beneficial Owners and Management and Related Stockholder
      Matters
            26Item
    13.
            Certain
      Relationships and Related Transactions, and Director
      Independence
            26Item
    14.
            Principal Accounting
      Fees and Services
            28PART
    IVItem
    15.
            Exhibits and
      Financial Statement Schedules
            28Signatures
            
            30













PART
I





This annual report on Form 10-K
contains forward-looking statements that are based on current expectations,
estimates, forecasts and projections about the Company, us, our future
performance, our beliefs and our Management's assumptions. In addition, other
written or oral statements that constitute forward-looking statements may be
made by us or on our behalf. Words such as "expects," "anticipates," "targets,"
"goals," "projects," "intends," "plans," "believes," "seeks," "estimates,"
variations of such words and similar expressions are intended to identify such
forward-looking statements. These statements are not guarantees of future
performance and involve certain risks, uncertainties and assumptions that are
difficult to predict or assess. Therefore, actual outcomes and results may
differ materially from what is expressed or forecast in such forward-looking
statements. Except as required under the federal securities laws and the rules
and regulations of the SEC, we do not have any intention or obligation to update
publicly any forward-looking statements after the filing of this Form 10-K,
whether as a result of new information, future events, changes in assumptions or
otherwise.




Unless
the context otherwise requires, throughout this Annual Report on Form 10-K the
words “Company,” “we,” “us” and “our” refer to IElement Corporation and its
consolidated subsidiaries.





ITEM
1.BUSINESS





General





Current Business – Non-Operating Shell
Company





Effective
on December 20, 2007 with the divestiture of our sole operating subsidiary, we
became a non-operating shell corporation. We now intend to effect a merger,
acquisition or other business combination with an operating company by using a
combination of capital stock, cash on hand, or other funding sources, if
available. We intend to devote substantially all of our time to identifying
potential merger or acquisition candidates.  There can be no assurances
that we will enter into such a transaction in the near future or on terms
favorable to us, or that other funding sources will be available.





History of the Company





We are the product of a series of
mergers and acquisitions that began in 1996.





By way of
background, Northline Industrial Corporation was incorporated in Texas on
December 28, 1988 ("NIC"). NIC was
inactive until March 1996 whereupon it adopted a business plan providing for
reincorporation in Nevada and the establishment of a charter cargo airline under
the name "Air
Epicurean". Consistent therewith, on July 19, 1996 NIC formed Air
Epicurean, Inc. as a Nevada wholly-owned corporate subsidiary.




Air
Epicurean, Inc. is the original predecessor to the issuer and is now known as
IElement Corporation. In December 1996, NIC abandoned its previously adopted
business plan to establish air carrier operations and initiated a search for a
suitable merger candidate.




On March
5, 1997, NIC merged with and into Air Epicurean, Inc., the surviving
corporation. Effective May 8, 1997, Air Epicurean changed its name to Ikon
Ventures, Inc. ("Ikon"). Ikon remained
inactive until August 2001 whereupon it acquired in a share-for-share exchange
Sutton Online, Inc., a Delaware corporation. On October 31, 2001, Ikon changed
its name to Sutton Trading Solutions, Inc.




On April
23, 2003, Sutton Trading Solutions, Inc. changed its name to Global Diversified
Acquisition Corp. ("GDAC") to reflect
that its principal activity was to seek a business combination with one or more
as yet unidentified privately held businesses.




2


On March
25, 2004, pursuant to an Agreement and Plan of Merger, 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 effectuated by the issuance of shares such that the
former MKSS shareholders owned approximately 90% of the outstanding GDAC stock
after the transaction. GDAC then changed its name to MailKey Corporation ("MailKey").




On
November 9, 2004, we entered into an Agreement and Plan of Merger (the "Merger Agreement")
with MailKey Acquisition Corp., a Delaware corporation and our wholly-owned
subsidiary ("Merger
Sub"), IElement, Inc., a Nevada Corporation formed in December 2002
("I-Element")
and Ivan Zweig, pursuant to which we agreed to acquire all of the issued and
outstanding capital stock of I-Element. This transaction closed on January 19,
2005. At the closing of the Merger, Merger Sub was merged into I-Element, at
which time the separate corporate existence of Merger Sub ceased and I-Element
continued as the surviving company.




Under the
terms of the Merger Agreement, we issued our common stock in exchange for all of
the outstanding capital stock of I-Element.  I-Element was a
facilities-based nationwide communications service provider that provided
state-of-the-art telecommunications services to small and medium sized
enterprises ("SMEs"). In connection
with the closing of the merger in January 2005, we entered into a letter of
intent with Ivan Zweig and Kramerica Capital Corporation ("Kramerica"), a
corporation wholly-owned by Mr. Zweig, pursuant to which the parties will enter
into an employment agreement with Mr. Zweig whereby he continued to serve as our
Chief Executive Officer, a position he had held since March 2003.  In
addition, the letter of intent conveyed certain rights to Kramerica in the event
of a default by the Company of certain financial obligations associated with the
merger.  Effective January 24, 2005, Mr. Zweig was also appointed to
our Board of Directors.




On
January 19, 2005, upon the consummation of the merger, we issued eight (8)
promissory notes to: (a) Kramerica, (b) certain members of Mr. Zweig's immediate
family and (c) others in the aggregate amount of $376,956.16 (the "Notes"). The Notes
were payable in 36 monthly installments with the first payment commencing six
months after the closing of the merger and were secured by substantially all of
our assets. We did not make any payments on the Notes. On March 25, 2006 each of
the Notes were cancelled and we issued new convertible promissory notes to the
same individuals in the same principal amount of $376,956.16.




The Note
holders have the right to convert all or a portion of the outstanding balance,
at any time until the notes are paid in full, into our common stock at a
conversion price of $0.035 per share. The aggregate principal of the Kramerica
notes was $120,000 and were issued for services rendered prior to issuance. The
$50,000 note was originally issued on June 1, 2004 for services prior to that
date and was restated subsequent to the merger on January 19, 2005. The
remaining $70,000 note was issued on January 19, 2005 for services rendered
prior to that date. On October 6, 2006 we reached agreements with the holders of
these eight Notes to extend the first payment date until April 1, 2007. We did
not make any payments on the Notes.




On August
1, 2005, we filed with the SEC an Information Statement on Schedule 14C to
change our name from MailKey Corporation to IElement Corporation. Concurrent
with this name change, we received a new stock trading symbol (IELM.OB) on the
NASDAQ Over-the-Counter Electronic Bulletin Board.  We also received
stockholder consent to amend our Articles of Incorporation to increase the
number of shares of common stock authorized from 100 million shares to 2 billion
shares, and to authorize 200 million shares of Blank Check Preferred Stock.,
none of which have been designated or issued.




On August
8, 2005, Tim Dean-Smith and Susan Walton resigned their positions on our Board
of Directors (the “Board”). The
resignations of Mr. Dean-Smith and Ms. Walton were consistent with the
expectations of the parties pursuant to the terms of our merger with I-Element
in January 2005, and did not arise from any disagreement on any matter relating
to operations, policies, practices or the general direction of the Company.
Neither Mr. Dean-Smith nor Ms. Walton served on any subcommittees of the Board.
 Ivan Zweig was appointed as the interim Chief Financial Officer and to the
Board.




3


In March
2006, Ivan Zweig, as our only Director, appointed Lance Stovall and Ken Willey
to the Board of Directors until the next annual meeting, at which time all three
Directors were up for re-election. On December 6, 2006 the Board of
Directors unanimously appointed Charles Carlson to the Board of Directors until
the next annual meeting.




On
December 15, 2006 at our annual shareholders meeting, Ivan Zweig, Lance
Stovall and Ken Willey were re-elected to the Board of Directors. Charles
Carlson also continued to serve his initial term on the Board of Directors but
was not up for re-election. Mr. Carlson resigned his position on the Board of
Directors in April 2007. His resignation did not arise from any disagreement on
any matter relating to operations, policies, practices or the general
direction of the Company.




On
December 27, 2006, we entered into a Management Services and Vendor Agreement
with Sutioc Enterprises, Inc, to offer management and vendor services to both
Sutioc Enterprises, Inc. and its majority owned subsidiary U.S. Wireless, Inc.
In addition to being a majority shareholder, Sutioc Enterprises was party to a
Management Agreement with US Wireless Online, Inc. whereby Sutioc Enterprises
was appointed the Manager of US Wireless Online with broad discretion to retain
the services of third parties to perform management and other services both on
behalf of Sutioc Enterprises, in its capacity as Manager for US Wireless Online,
and for US Wireless Online directly.  Both our management agreement
with Sutioc and Sutioc’s agreement with US Wireless were terminated on August
30, 2007.




On June
19, 2007, we reached agreement with the eight Note holders to extend the payment
terms so that the first of 36 monthly payments on each of the notes was due on
April 1, 2008. Four of these eight Note holders received on June 19, 2007 a
total of 5,400,000 shares of our common stock  in exchange for
extension of the principle repayment terms.  On January 23, 2008 six
of the eight Notes were converted into 3,173,612 shares of our common stock. The
total aggregate principle balance of the remaining two  notes as of
March 31, 2008was $173,845.




On June
27, 2007, Ken Willey resigned from his position on the Board of Directors. His
resignation did not arise from any disagreement on any matter relating to
operations, policies, practices or the general direction of the
Company.




On August
7, 2007 our Board of Directors unanimously appointed Art Eckert to the Board
until the next annual meeting. On September 13, 2007 the Board removed Art
Eckert from the Board. Mr. Eckert was removed as a result of the
termination of negotiations with Micro Data Systems regarding a potential merger
transaction. Mr. Eckert was previously appointed to the Board of Directors as an
advisor to Micro Data Systems and to assist in the due diligence
process.




On
December 20, 2007 we sold our main operating subsidiary, I-Element, Inc. along
with certain assets and liabilities related to that telecommunications business,
to Ivan Zweig.  In conjunction with this transaction, Mr. Zweig
released us from any and all liability under his employment agreement as well as
a consulting agreement with Kramerica, both dated January 1, 2007, and resigned
all officer and director positions he held with us.  In addition, Mr.
Zweig agreed to cancel all of his outstanding warrants and options to purchase
our capital stock.  Mr. Zweig and I-Element also agreed to indemnify
us from liabilities arising prior to December 20, 2007.




On
December 20, 2007, we entered into a Stock Purchase Agreement with Newsgrade
Corporation (“Newsgrade”), pursuant
to which we agreed to purchase from Newsgrade one (1) million shares of common
stock of The Retirement Solutions.com, Inc. (“TRS”).  As
consideration for the purchase, we agreed to pay to Newsgrade at closing
$200,000 in the form of a Convertible Promissory Note (the “Convertible Note”)
due and payable one year from issuance with 10% interest and convertible into
shares of our common stock.




4


On
December 20, 2007 and December 24, 2007, our Board of the Directors
appointed Susan Pursel and Paul Lengemann to the Board of Directors,
respectively.  Also effective December 20, 2007 Susan Pursel was
appointed as our Chairman, Chief Executive Officer, President, Secretary and
Treasurer.  That same day, Lance Stovall resigned from the Board of
Directors.




Susan
Pursel and Paul Lengemann are currently our sole officers and
directors.  Ms. Pursel and Mr. Lengemann shall serve until the next
annual meeting.  Ms. Pursel is a minority stockholder of Newsgrade and
former President of StockDataNews.com, Inc., a wholly owned subsidiary of
Newsgrade. Mr. Lengemann was President of Stockdiagnostics.com, Inc., a wholly
owned subsidiary of Newsgrade between 2002 and 2004.




Our Board
of Directors on December 27, 2007 approved a reverse split of our common stock
in a ratio of one (1) new share for every sixteen (16) existing shares of common
stock. Our  authorized shares of common stock was proportionately
reduced.  The record and effective date of the reverse split was
January 11, 2008.




On
January 22, 2008 we issued a total of 3,173,612 post split (50,777,778
pre-split) shares of common stock in exchange for the release of indebtedness in
the total amount of $203,111.  The debt was evidenced by Notes issued
to Kramerica, Inc., Ivan Zweig and his family,  who had sold the debt
to third parties prior to the conversion.




Recent
Former Business – Telecommunications Company




Prior to
the sale of I-Element, we were a facilities-based nationwide communications
service provider that offered telecommunications services to small and
medium sized businesses.  As a facilities-based provider, we owned our own
network equipment including telephone switches. That is, we sold local and long
distance telephone service and Internet access primarily via digital T-1
connections and tailored the particular service to the customer's needs by
regulating bandwidth, number of telephone lines, and type of service. Our Layer
2 Private Network  service allowed businesses with multiple locations to
connect all of their locations securely without the use of firewalls or
encryption devices and without routing traffic over the internet.  In
addition, we developed, tested and deployed our Voice over Internet Protocol
service. We had a network presence in 18 major markets in the United States,
including facilities in Los Angeles, Dallas, Chicago and smaller facilities in
ten other cities.




In
addition to the above operations, from December 2006 through August 30, 2007 we
provided management and vendor services, on behalf of Sutioc Enterprises, Inc.,
to Sutioc’s customer base of wireless subscribers.




As our
revenue and customer base continued to decline and competition in the
telecommunications industry continued to increase, our business model suffered
in two respects. First, our customers left us for other providers and second,
when we did renew our customers' contracts, we did so at rates up to 20 percent
lower than they had been paying. To combat this revenue attrition, we
intended to partner with a company that has a dedicated sales force. This would
have allowed us to pursue new customers that more than replaced the revenue lost
to attrition.




Our overall financial condition
improved significantly with the completion of our private equity placement in
January 2006 and the increased liquidity it brought. Since that time, however,
our overall financial condition continued to deteriorate.  Our
telecommunications business was failing because of our negative cash
flow.  While we pursued a number of business combinations and
fundraising opportunities, we were unable to complete an acquisition or secure
adequate funding.  Consequently, we enhanced our financial position by
selling I-Element, Inc. and exiting the telecommunications business on December
20, 2007.




5


We
previously factored most of our accounts receivable with an outside agency until
December 20, 2007 whereupon we ceased such activity in connection with the sale
of I-Element, Inc.




As of
July 7, 2008 we had six (6) subsidiaries: (a) I-Element, (b) IElement
Telephone of California formed on November 14, 2005 to acquire and administer a
telecommunications license in the state of California, (c) IElement Telephone of
Arizona formed on March 13, 2006 to acquire and administer a telecommunications
license in the state of Arizona, (d) IElement Telephone of Nevada, Inc. formed
on July 11, 2006 to acquire and administer a telecommunications license in the
state of Nevada, (e) IElement Telephone of Kentucky, Inc. formed on December 29,
2006 to acquire and administer a telecommunications license in the state of
Kentucky, and (f) IElement Telephone of Pennsylvania, Inc. formed on December
29, 2006 to acquire and administer a telecommunications license in the state of
Pennsylvania.None of these
subsidiaries are active.




General
Regulatory Overview




Prior to
the sale of I-Element, we were subject to federal, state and local governmental
regulation.  Telecommunications service providers are subject to the
requirements and restrictions arising under the Communications Act of 1934 as
modified in part by the Telecommunications Act of 1996, state utility laws, and
the rules and policies of the Federal Communications Commission, state
regulators and other governmental entities. The FCC has jurisdiction over all
telecommunications carriers to the extent that they provide interstate or
international communications services in the U.S.  The FCC also has
jurisdiction over certain issues relating to interconnection between providers
of local exchange service and the provision of service via fixed wireless
spectrum.  Additionally, municipalities and other local government agencies
may regulate limited aspects of the telecommunications business, such as use of
government-owned rights-of-way, and may require permits such as zoning approvals
and building permits.




Competition




We
competed with both competitive local exchange carriers who leased access lines
from incumbent local exchange carriers as well as the local carriers themselves.
Some of our competitors had substantially greater financial resources than we
did and were able to offer prospective customers discounts or subsidies that are
substantially greater than we could offer. In addition,  we competed
with internet service providers to some extent.





Current Business
Plan





We are a
shell company in that we have nominal operations and nominal assets. At this
time, our purpose is to seek, investigate and, if such investigation warrants,
acquire an interest in business opportunities presented to us by persons or
firms who or which desire to seek the perceived advantages of an Exchange Act
registered corporation. We will not restrict our search to any specific
business, industry, or geographical location and we may participate in a
business venture of virtually any kind or nature. This discussion of the
proposed business is purposefully general and is not meant to be restrictive of
our virtually unlimited discretion to search for and enter into potential
business opportunities. We anticipate that we may be able to participate in only
one potential business venture because of our nominal assets and limited
financial resources. This lack of diversification should be considered a
substantial risk to our shareholders because it will not permit us to offset
potential losses from one venture against gains from another.




We may
seek a business opportunity with entities which have recently commenced
operations, or which wish to utilize the public marketplace in order to raise
additional capital in order to expand into new products or markets, to develop a
new product or service, or for other corporate purposes.




6


We intend
to promote ourselves privately.  We have not yet begun such
promotional activities. We anticipate that the selection of a business
opportunity in which to participate will be complex and risky. Due to general
economic conditions, rapid technological advances being made in some industries
and shortages of available capital, we believe that there are numerous firms
seeking the perceived benefits of a publicly registered corporation. Such
perceived benefits may include facilitating or improving the terms on which
additional equity financing may be sought, providing liquidity for incentive
stock options or similar benefits to key employees, providing liquidity (subject
to restrictions of applicable statutes), for all shareholders, and other
factors. Potentially, available business opportunities may occur in many
different industries and at various stages of development, all of which will
make the task of comparative investigation and analysis of such business
opportunities difficult and complex.




We have,
and will continue to have, little or no capital with which to provide the owners
of business opportunities with any significant cash or other assets. On March
31, 2008, we had a cash balance of approximately $3,609 and a cash equivalents
balance of $153,125.  However, we believe we will be able to offer
owners of acquisition candidates the opportunity to acquire a controlling
ownership interest in a publicly registered company without incurring the cost
and time required to conduct an initial public offering. The owners of the
business opportunities will, however, incur significant legal and accounting
costs in connection with the acquisition of a business opportunity, including
the costs of preparing Form 8K's, 10Q’s, 10K's, agreements and related reports
and documents. The Securities Exchange Act of 1934 (the "34 Act"), specifically
requires that any merger or acquisition candidate comply with all applicable
reporting requirements, which include providing audited financial statements to
be included within the numerous filings relevant to complying with the `34
Act.  We have not conducted market research and are not aware of
statistical data which would support the perceived benefits of a merger or
acquisition transaction for the owners of a business
opportunity.




The
analysis of new business opportunities will be undertaken with such outside
assistance as is appropriate. We intend to concentrate on identifying
preliminary prospective business opportunities which may be brought to our
attention through our present associations. In analyzing prospective business
opportunities, we will consider such matters as the available technical,
financial and managerial resources; working capital and other financial
requirements; history of operations, if any; prospects for the future; nature of
present and expected competition; the quality and experience of management
services which may be available and the depth of that management; the potential
for further research, development, or exploration; specific risk factors not now
foreseeable but which then may be anticipated to impact our proposed activities;
the potential for growth or expansion; the potential for profit; the perceived
public recognition of acceptance of products, services, or trades; name
identification; and other relevant factors.




We expect
to meet personally with management and key personnel of the business opportunity
as part of the investigation. To the extent possible, we intend to utilize
written reports and investigation to evaluate the above factors.




The
foregoing criteria are not intended to be exhaustive and there may be other
criteria that we may deem relevant. In connection with an evaluation of a
prospective or potential business opportunity, we will be expected to conduct a
due diligence review.




We may
from time to time utilize outside consultants or advisors to effectuate our
business purposes described herein. No policies have been adopted regarding use
of such consultants or advisors, the criteria to be used in selecting such
consultants or advisors, the services to be provided, the term of service, or
regarding the total amount of fees that may be paid. However, because of our
limited resources, it is likely that any such fee would be paid in stock and not
in cash.




7


We will
not restrict our search for any specific kind of firm, but may acquire a venture
which is in its preliminary or development stage, which is already in operation,
or in essentially any stage of its corporate life. It is impossible to predict
at this time the status of any business in which we may become engaged, in that
such business may need to seek additional capital, may desire to have its shares
publicly traded, or may seek other perceived advantages which we may
offer. The time and costs required to pursue new business opportunities,
which includes negotiating and documenting relevant agreements and preparing
requisite documents for filing pursuant to applicable securities laws, cannot be
ascertained with any degree of certainty.




We intend
to devote such time as is necessary to carry out our affairs. The exact length
of time required for the pursuit of any new potential business opportunities is
uncertain. No assurance can be made that we will be successful in our efforts.
We cannot project the amount of time that our management will actually devote to
our plan of operation.




We intend
to conduct our activities so as to avoid being classified as an "Investment
Company" under the Investment Company Act of1940, and therefore avoid
application of the costly and restrictive registration and other provisions of
the Investment Company Act of 1940 and the regulations promulgated
thereunder.




At
present, we are a development stage company with no revenues and no specific
business plan or purpose. Our business plan is to seek new business
opportunities or to engage in a merger or acquisition with an unidentified
company.




Acquisition
of Opportunities




In
implementing a structure for a particular business acquisition, we may become a
party to a merger, consolidation, reorganization, joint venture, or licensing
agreement with another corporation or entity. We may also acquire stock or
assets of an existing business. On the consummation of a transaction, it is
probable that our present management and our shareholders will no longer be in
control of the Company. In addition, our directors may, as part of the terms of
the acquisition transaction, resign and be replaced by new directors without a
vote of our shareholders or may sell our stock. Any and all such sales will only
be made in compliance with the securities laws of the United States and any
applicable state.




It is
anticipated that any securities issued in any such reorganization would be
issued in reliance upon an exemption from registration under applicable federal
and state securities laws. In some circumstances, however, as a negotiated
element of its transaction, we may agree to register all or a part of such
securities immediately after the transaction is consummated or at specified
times thereafter. If such registration occurs, of which there can be no
assurance, it will be undertaken by the surviving entity after we have
successfully consummated a merger or acquisition.




With
respect to any merger or acquisition, negotiations with target company
management are expected to focus on the percentage of the Company which the
target company shareholders would acquire in exchange for all of their
shareholdings in the target company. Depending upon, among other things, the
target company's assets and liabilities, our shareholders will in all likelihood
hold a substantially lesser percentage ownership interest in the Company
following any merger or acquisition. The percentage ownership may be subject to
significant reduction in the event we acquire a target company with substantial
assets. Any merger or acquisition can be expected to have a significant dilutive
effect on the percentage of shares held by our then shareholders.




We will
participate in a business opportunity only after the negotiation and execution
of appropriate written agreements. Although the terms of such agreements cannot
be predicted, generally such agreements will require some specific
representations and warranties by all of the parties thereto, will specify
certain events of default, will detail the terms of closing and the conditions
which must be satisfied by each of the parties prior to and after such closing,
will outline the manner of bearing costs, including costs associated with our
attorneys and accountants, will set forth remedies on default and will include
miscellaneous other terms.




8


Competition




We will
remain an insignificant participant among the firms which engage in the
acquisition of business opportunities. There are many established venture
capital and financial concerns which have significantly greater financial and
personnel resources and technical expertise. In view of our combined extremely
limited financial resources and limited management availability, we will
continue to be at a significant competitive disadvantage compared to our
competitors.




Employees




As of
April 30, 2008, we had one full time
employee.   The Company does not anticipate hiring additional
employees in the near future.





ITEM
1A.RISK
FACTORS





An
investment in our Common Stock is highly speculative, involves a high degree of
risk and should be considered only by those persons who are able to afford a
loss of their entire investment. In evaluating the Company and our business,
prospective investors should carefully consider the following risk factors in
addition to the other information included in this Annual Report.





We
Are A Non-Operating Shell Company.





We are a
public shell company with no operations and we are seeking to effect a merger,
acquisition or other business combination with an operating company by using a
combination of capital stock, cash on hand, or other funding sources, if
available. There can be no assurances that we will be successful in identifying
acquisition candidates or that if identified we will be able to consummate a
transaction on terms acceptable to us.





We
Have A Limited Operating History And Minimal Assets And Have Had No Operations
And Generated No Revenues Since December 2007.





We have a
limited operating history, and have had no operations since December 2007 and no
revenues or earnings from operations since approximately December 2007. We have
no significant assets or financial resources. We will, in all likelihood,
sustain operating expenses without corresponding revenues, at least until the
consummation of a business combination. This may result in us incurring a net
operating loss which will increase continuously until we can consummate a
business combination with a target company. There is no assurance that we can
identify such a target company and consummate such a business
combination.





Our
Auditor Has Raised Doubt As To Whether We Can Continue As A Going
Concern.





We have
not generated any revenues nor have we had any operations since December 2007.
We had cash and cash equivalents of $156,734 and an accumulated deficit of
$6,405,526 as of March 31, 2008. These factors among others indicate that we may
be unable to continue as a going concern, particularly in the event that we
cannot obtain additional financing and/or attain profitable operations. The
accompanying financial statements do not include any adjustments that might
result from the outcome of this uncertainty and if we cannot continue as a going
concern, your investment in us could become devalued or even
worthless.





We Have Not Paid Dividends To Our
Stockholders.





We have
never paid, nor do we anticipate paying, any cash dividends on our common stock.
Future debt, equity instruments or securities may impose additional restrictions
on our ability to pay cash dividends.




9




Shareholders Who Hold Unregistered
Shares Of Our Common Stock Are Not Eligible To Sell Our Securities Pursuant To
Rule 144, Due To Our Status As A “Blank Check” Company And A “Shell
Company”





We are
characterized as both a “blank check” company and a “shell company.” The term
"blank check company" is defined as a company that is a development stage
company that has no specific business plan or purpose or has indicated that its
business plan is to engage in a merger or acquisition with an unidentified
company or companies, or other entity or person; and is issuing "penny stock,"
as defined in Rule 3a51-1 under the Securities Exchange Act of
1934.  Because we are a “blank check” company, Rule 144 of the
Securities Act of 1933, as amended (“Rule 144”) is not
available to our shareholders and we are required to comply with additional SEC
rules regarding any offerings we may undertake.




Additionally,
pursuant to Rule 144, a “shell company” is defined as a company that has no or
nominal operations; and, either no or nominal assets; assets consisting solely
of cash and cash equivalents; or assets consisting of any amount of cash and
cash equivalents and nominal other assets.  As such, we are a “shell
company” pursuant to Rule 144, and as such, sales of our securities pursuant to
Rule 144 are not able to be made until: (a) we have ceased to be a “shell
company; (b) we are subject to Section 13 or 15(d) of the Securities Exchange
Act of 1934, as amended, and have filed all of our required periodic reports for
a period of one year; and a period of at least twelve months has elapsed from
the date “Form 10 information” has been filed with the Commission reflecting the
Company’s status as a non-shell company.  Because none of our
securities can be sold pursuant to Rule 144, until at least a year after we
cease to be a shell company, any securities we issue to consultants, employees,
in consideration for services rendered or for any other purpose will have no
liquidity until and unless such securities are registered with the Commission
and/or until a year after we cease to be a shell company and have complied with
the other requirements of Rule 144, as described above.




As a
result of us being a blank check company and a shell company, it will be harder
for us to fund our operations and pay our consultants with our securities
instead of cash.  Additionally, as we may not ever cease to be a blank
check company or a shell company, investors who hold our securities may be
forced to hold such securities indefinitely.





There
May Be Conflicts Of Interest Between Our Management And Our Non-Management
Stockholders.





Conflicts
of interest create the risk that management may have an incentive to act
adversely to the interests of other investors. A conflict of interest may arise
between our management's personal pecuniary interest and its fiduciary duty to
our stockholders. Further, our management's own pecuniary interest may at some
point compromise its fiduciary duty to our stockholders.





The
Nature Of Our Proposed Operations Is Highly Speculative.





The
success of our proposed plan of operation will depend to a great extent on the
operations, financial condition and management of the identified target company.
While management will prefer business combinations with entities having
established operating histories, there can be no assurance that we will be
successful in locating candidates meeting such criteria. In the event we
complete a business combination, of which there can be no assurance, the success
of our operations will be dependent upon management of the target company and
numerous other factors beyond our control.





The
Competition For Business Opportunities And Combinations Is Great.





We are
and will continue to be an insignificant participant in the business of seeking
mergers with and acquisitions of business entities. A large number of
established and well-financed entities, including venture capital firms, are
active in mergers and acquisitions of companies which may be merger or
acquisition target candidates for us. Nearly all such entities have
significantly greater financial resources, technical expertise and managerial
capabilities than us and, consequently, we will be at a competitive disadvantage
in identifying possible business opportunities and successfully completing a
business combination. Moreover, we will also compete with numerous other small
public companies in seeking merger or acquisition candidates.




10


We
Have No Current Agreements In Place For A Business Combination Or Other
Transaction, And We Currently Have No Standards For Potential Business
Combinations, And As A Result, Our Management Has Sole Discretion Regarding Any
Potential Business Combination.





We have
no current arrangement, agreement or understanding with respect to engaging in a
business combination with a specific entity. There can be no assurance that we
will be successful in identifying and evaluating suitable business opportunities
or in concluding a business combination. Management has not identified any
particular industry or specific business within an industry for evaluation by
us. There is no assurance that we will be able to negotiate a business
combination on terms favorable to us. We have not established a specific length
of operating history or a specified level of earnings, assets, net worth or
other criteria which we will require a target company to have achieved, or
without which we would not consider a business combination with such business
entity. Accordingly, we may enter into a business combination with a business
entity having no significant operating history, losses, limited or no potential
for immediate earnings, limited assets, negative net worth or other negative
characteristics.





Reporting
Requirements May Delay Or Preclude An Acquisition.





Section
13 of the Securities Exchange Act of 1934 (the "Exchange Act")
requires companies subject thereto to provide certain information about
significant acquisitions including audited financial statements for the company
acquired and a detailed description of the business operations and risks
associated with such company's operations. The time and additional costs that
may be incurred by some target companies to prepare such financial statements
and descriptive information may significantly delay or essentially preclude
consummation of an otherwise desirable acquisition by us. Additionally,
acquisition prospects that do not have or are unable to obtain the required
audited statements may not be appropriate for acquisition so long as the
reporting requirements of the Exchange Act are applicable.





We Have Not Conducted Any Market
Research Regarding Any Potential Business Combinations.





We have
neither conducted, nor have others made available to it, market research
indicating that demand exists for the transactions contemplated by us. Even in
the event demand exists for a transaction of the type contemplated by us, there
is no assurance we will be successful in completing any such business
combination.





We
Do Not Plan To Diversify Our Operations In The Event Of A Business
Combination.





Our
proposed operations, even if successful, will in all likelihood result in our
engaging in a business combination with only one target company. Consequently,
our activities will be limited to those engaged in by the business entity which
we will merge with or acquire. Our inability to diversify our activities into a
number of areas may subject us to economic fluctuations within a particular
business or industry and therefore increase the risks associated with our
operations.





Any
Business Combination Will Likely Result In A Change In Control And In Our
Management.





A
business combination involving the issuance of our common stock will, in all
likelihood, result in shareholders of a target company obtaining a controlling
interest in the Company. Any such business combination may require our
shareholder to sell or transfer all or a portion of their common stock. The
resulting change in control of the Company will likely result in removal of the
present management of the Company and a corresponding reduction in or
elimination of participation in the future affairs of the Company.




11




Reduction
Of Percentage Share Ownership Following Business Combination.





Our
primary plan of operation is based upon a business combination with a business
entity which, in all likelihood, will result in our issuing securities to
shareholders of such business entity. The issuance of previously authorized and
unissued common stock would result in a reduction in percentage of shares owned
by our present shareholders and could therefore result in a change in control of
our management.





Our Business Will Have No Revenues
Unless And Until We Merge With Or Acquire An Operating
Business.





We have
had no revenues from operations for approximately the past four (4) months. We
have had no operations for approximately the past five (5) months. We may not
realize any revenues unless and until we successfully merge with or acquire an
operating business.





We
May Be Forced To Rely On Unaudited Financial Statements In Connection With Any
Business Combination.





We will
require audited financial statements from any business entity we propose to
acquire. No assurance can be given; however, that audited financials will be
available to us prior to a business combination. In cases where audited
financials are unavailable, we will have to rely upon unaudited information that
has not been verified by outside auditors in making our decision to engage in a
transaction with the business entity. The lack of the type of independent
verification which audited financial statements would provide increases the risk
that we, in evaluating a transaction with such a target company, will not have
the benefit of full and accurate information about the financial condition and
operating history of the target company. This risk increases the prospect that a
business combination with such a business entity might prove to be an
unfavorable one for us.





Investors
May Face Significant Restrictions On The Resale Of Our Common Stock Due To
Federal Regulations Of Penny Stocks.





Our
common stock will be subject to the requirements of Rule 15(g)9, promulgated
under the Securities Exchange Act as long as the price of our common stock is
below $5.00 per share. Under such rule, broker-dealers who recommend low-priced
securities to persons other than established customers and accredited investors
must satisfy special sales practice requirements, including a requirement that
they make an individualized written suitability determination for the purchaser
and receive the purchaser's consent prior to the transaction. The Securities
Enforcement Remedies and Penny Stock Reform Act of 1990, also requires
additional disclosure in connection with any trades involving a stock defined as
a penny stock. Generally, the Commission defines a penny stock as any equity
security not traded on an exchange or quoted on NASDAQ that has a market price
of less than $5.00 per share. The required penny stock disclosures include the
delivery, prior to any transaction, of a disclosure schedule explaining the
penny stock market and the risks associated with it. Such requirements could
severely limit the market liquidity of the securities and the ability of
purchasers to sell their securities in the secondary market.





ITEM
2.PROPERTY





We leased office space for
our corporate headquarters
and principal offices at 13714 Gamma Road, Suite 120 Farmers Branch, TX
75244.  The
lease payable on amonth-to-month basis at $3,284 per month.As of December 20, 2007the lease was assigned toI-Element, Inc.  in connection with
the sale to Mr. Zweig.




12


We share
office space with our President and Director, Susan Pursel at 61 Brandy Brook,
Road, Lyndeborough, NH 03082. The Company does not have a lease and the Company
pays no rent for the leased space. The Company does not own any properties nor
does it lease any other properties. The Company does not believe it will need to
maintain an office at any time in the foreseeable
future in order to carry out its plan of operations as described
herein.




Our
mailing address is P.O. Box 279,  Lyndeborough,  New Hampshire
03082.





ITEM
3.LEGAL
PROCEEDINGS





We are not a party to any pending legal
proceedings nor are any of our property the subject of any pending legal
proceedings.




ITEM
4.SUBMISSION OF
MATTERS TO A VOTE OF SECURITY HOLDERS





The Company did not submit any matters
to a vote of its stockholders, through the solicitation of proxies or otherwise,
during the fourth quarter of fiscal 2008.





PART
II





ITEM
5.MARKET FOR
REGISTRANT’S COMMON EQUITY, RELATED STOCKHOLDER MATTERS AND ISSUER PURCHASES OF
EQUITY SECURITIES





Our
common stock is quoted on the OTC Bulletin Board under the symbol "IELE.OB".
Prior to April 2005, there was no active market for our common stock. We have a
March 31 fiscal year.




Prices
reported represent prices between dealers, do not include markups, markdowns or
commissions and do not necessarily represent actual transactions. The following
table sets forth high and low bid quotations of our common stock (broken-down
into fiscal quarters) for the periods indicated as reported on the OTC
Bulletin:





Quarter
      Ended
            Bid
      High
            Bid
      LowFiscal
      Year 2008March
      31, 2008
            $0.4
            $0.007December
      31, 2007
            $0.4
            $0.001September
      30, 2007
            $0.024
            $0.001June
      30, 2007
            $0.02
            $0.01Fiscal
      Year 2007March
      31, 2007
            $0.04
            $0.02December
      31, 2006
            $0.05
            $0.03September
      30, 2006
            $0.08
            $0.028June
      30, 2006
            $0.08
            $0.04




13


As of March 31, 2008, there were 309
holders of record of our common stock and approximately 500 beneficial
holders.





We have
never declared or paid cash dividends on our capital stock. We currently intend
to retain all available funds and any future earnings for use in the operation
and expansion of our business and do not anticipate paying any cash dividends in
the foreseeable future.





Recent
Sales of Unregistered Securities.





On May
20, 2008 we issued a total of  1,200,000 shares of our common stock to
Bluewell, LLC for consulting services rendered valued at $12,000.  The
shares were issued in reliance on Section 4(2) of the Securities Act of
1933.




On May
20, 2008 we issued a total of  1,000,000 shares of our common stock to
Probatus Financial Advisors  for consulting services rendered valued
at $10,000.  The shares were issued in reliance on Section 4(2) of the
Securities Act of 1933.




On May
20, 2008 we issued a total of  800,000 shares of our common stock to
GDBC, Inc. for consulting services rendered valued at $8,000.  The
shares were issued in reliance on Section 4(2) of the Securities Act of
1933.




On May
20, 2008 we issued a total of  1,000,000 shares of our common stock to
Vista Capital, S.A. for consulting services rendered valued at
$10,000.  The shares were issued in reliance on Section 4(2) of the
Securities Act of 1933.




On May
20, 2008 we issued a total of  600,000 shares of our common stock to
Euro Market Advisory, Inc. for consulting services rendered valued at
$6,000.  The shares were issued in reliance on Section 4(2) of the
Securities Act of 1933.




On May
19, 2008 we issued a total of 750,000 shares of our common stock to Susan
Pursel, our Chief Executive Officer, as a bonus for services
rendered.  The shares were valued at $.01 per share or $7,500 total
value.  The shares were issued in reliance on Section 4(2) of the
Securities Act of 1933.




On
January 23, 2008 we issued 3,173,612 shares of our common stock at $0.064 per
share to various entities to convert notes payable in the amount of
$203,111.  The shares were issued in reliance on Section 3(9) of the
Securities Act of 1933.




On
January 17, 2008 we issued 4,197,646 shares of our common stock at $0.064 per
share to 12 note holders to convert notes payable in the amount of $268,649. The
shares were issued in reliance on Section 4(2) and/or Section 3(9) of the
Securities Act of 1933.




On
January 17, 2008 we issued 62,500 shares of our common stock at $0.15 per share
to Paul Lengemann for consulting services rendered in the amount of $9,375. The
shares were issued in reliance on Section 4(2) and/or Section 3(9) of the
Securities Act of 1933 and contain a restrictive legend in accordance with Rule
144.




On
December 21, 2007 we issued 187,500 shares of our common stock, adjusted for our
reverse stock split effective January 11, 2008, at $0.064 per share to Susan
Pursel for consulting services rendered in the amount of $12,000. The shares
were issued in reliance on Section 4(2) and/or Section 3(9) of the Securities
Act of 1933 and contain a restrictive legend in accordance with Rule
144.




14


On
December 21, 2007 we issued 625,000 shares of our common stock, adjusted for our
reverse stock split effective January 11, 2008, at $0.064 per share to Susan
Pursel for consulting services rendered in the amount of $40,000. The shares
were issued in reliance on Section 4(2) and/or Section 3(9) of the Securities
Act of 1933 and contain a restrictive legend in accordance with Rule
144.




On
December 14, 2007 we issued 625,000 shares of our common stock, adjusted for our
reverse stock split effective January 11, 2008, at $0.0768 per share to Dan
Plenzo for consulting services rendered in the amount of $48,000. The shares
were issued in reliance on Section 4(2) and/or Section 3(9) of the Securities
Act of 1933 and contain a restrictive legend in accordance with Rule
144.




On
December 10, 2007 we issued 162,309 shares of our common stock, adjusted for our
reverse stock split effective January 11, 2008, at $0.064 per share to Dominic
Antonini to retire accounts payable in the amount of $10,388. The shares were
issued in reliance on Section 4(2) and/or Section 3(9) of the Securities Act of
1933 and contain a restrictive legend in accordance with Rule 144.




On
November 7, 2007 we issued 218,750 shares of our common stock, adjusted for our
reverse stock split effective January 11, 2008, at $0.032 per share to Sat Dewan
for cash in the amount of $7,000. The shares were issued in reliance on Section
4(2) and/or Section 3(9) of the Securities Act of 1933 and contain a restrictive
legend in accordance with Rule 144.




On
October 9, 2007 we issued 434,032 shares of our common stock, adjusted for our
reverse stock split effective January 11, 2008, at $0.064 per share to Walten
Hansen to convert a note payable valued at $27,778. The shares were issued in
reliance on Section 4(2) and/or Section 3(9) of the Securities Act of 1933 and
contain a restrictive legend in accordance with Rule 144.




On
September 20, 2007 we revoked 24,000,000 shares that had previously been issued
as payment for consulting services rendered.




On July
24, 2007 we issued 3,000,000 shares of our common stock at $0.011 per share to
Stonegate Ventures for a total value of $33,000 to pay for consulting services
rendered. The shares were issued in reliance on Section 4(2) and/or Section 3(9)
of the Securities Act of 1933 and contain a restrictive legend in accordance
with Rule 144.




On July
24, 2007 we issued 3,000,000 shares of our common stock at $0.011 per share to
Yock Investments for a total value of $33,000 to pay for consulting services
rendered. The shares were issued in reliance on Section 4(2) and/or Section 3(9)
of the Securities Act of 1933 and contain a restrictive legend in accordance
with Rule 144.




On July
23, 2007 we issued 1,000,000 shares of our common stock at $0.012 per share to
Michael Bloch for a total value of $12,000 to pay for interest. The shares were
issued in reliance on Section 4(2) and/or Section 3(9) of the Securities Act of
1933 and contain a restrictive legend in accordance with Rule 144.




On July
5, 2007 we issued 2,000,000 shares of our common stock at $0.01 per share to MC
Equity Consultants for a total value of $20,000 to pay for consulting services
rendered. The shares were issued in reliance on Section 4(2) and/or Section 3(9)
of the Securities Act of 1933 and contain a restrictive legend in accordance
with Rule 144.




On June
29, 2007 we issued 31,000,000 shares of our common stock at $0.012 per share to
various consultants for a total value of $372,000 to pay for consulting services
rendered. The shares were issued in reliance on Section 4(2) and/or Section 3(9)
of the Securities Act of 1933 and contain a restrictive legend in accordance
with Rule 144.




15


On June
26, 2007 we issued 1,094,930 shares of our common stock at $0.01 per share to
Dominic Antonini for a total value of $10,949 to pay an accounts payable
balance. The shares were issued in reliance on Section 4(2) and/or Section 3(9)
of the Securities Act of 1933 and contain a restrictive legend in accordance
with Rule 144.




On May
24, 2007 we issued 3,000,000 shares of our common stock at $0.01 per share to
BACE for a total value of $30,000 to pay for consulting services rendered. The
shares were issued in reliance on Section 4(2) and/or Section 3(9) of the
Securities Act of 1933 and contain a restrictive legend in accordance with Rule
144.




On May
23, 2007 we issued 4,500,000 shares of our common stock at $0.011 per share to
Dan Plenzo for a total value of $49,500 to pay for consulting services rendered.
The shares were issued in reliance on Section 4(2) and/or Section 3(9) of the
Securities Act of 1933 and contain a restrictive legend in accordance with Rule
144.





ITEM
6.SELECTED
FINANCIAL DATA





We are a
smaller reporting company as defined by Rule 12b-2 of the Securities Exchange
Act of 1934 and are not required to provide information under this
item.





ITEM
7.MANAGEMENT’S
DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF
OPERATIONS.





The
following presentation of management's discussion and analysis of our financial
condition and results of operations should be read in conjunction with our
consolidated financial statements, the accompanying notes thereto and other
financial information appearing elsewhere in this report. This section and other
parts of this report contain forward-looking statements that involve risks and
uncertainties.  Our actual results may differ significantly from the
results discussed in the forward-looking statements.




Plan
of Operations - Overview




Our
current business objective for the next twelve (12) months is to investigate
and, if such investigation warrants, acquire a target company or business
seeking the perceived advantages of being a publicly held corporation. Our
principal business objective will be to achieve long-term growth potential
through a combination with a business rather than immediate, short-term
earnings. We will not restrict our potential candidate target companies to any
specific business, industry or geographical location and, thus, may acquire any
type of business.




We do not
currently engage in any business activities that provide us with positive cash
flows. As such, the costs of investigating and analyzing business combinations
for the next approximately twelve (12) months and beyond will be paid with our
current cash and other current assets on hand and through funds raised through
other sources, which may not be available on favorable terms, if at
all.  Such costs include filing of Exchange Act reports, and costs
relating to consummating an acquisition.




We may
consider a business which has recently commenced operations, is a developing
company in need of additional funds for expansion into new products or markets,
is seeking to develop a new product or service, or is an established business
which may be experiencing financial or operating difficulties and is in need of
additional capital. In the alternative, a business combination may involve the
acquisition of, or merger with, a company which does not need substantial
additional capital, but which desires to establish a public trading market for
its shares, while avoiding, among other things, the time delays, significant
expense, and loss of voting control which may occur in a public
offering.




16


Any
target business that is selected may be a financially unstable company or an
entity in its early stages of development or growth, including entities without
established records of sales or earnings. In that event, we will be subject to
numerous risks inherent in the business and operations of financially unstable
and early stage or potential emerging growth companies. In addition, we may
effect a business combination with an entity in an industry characterized by a
high level of risk, and, although our management will endeavor to evaluate the
risks inherent in a particular target business, there can be no assurance that
we will properly ascertain or assess all significant risks.




Our
management anticipates that it will likely be able to effect only one business
combination, due primarily to our limited financing, and the dilution of
interest for present and prospective stockholders, which is likely to occur as a
result of our management's plan to offer a controlling interest to a target
business in order to achieve a tax free reorganization. This lack of
diversification should be considered a substantial risk in investing in us,
because it will not permit us to offset potential losses from one venture
against gains from another.




We
anticipate that the selection of a business combination will be complex and
extremely risky. Because of general economic conditions, rapid technological
advances being made in some industries and shortages of available capital, our
management believes that there are numerous firms seeking even the limited
additional capital which we will have and/or the perceived benefits of becoming
a publicly traded corporation. Such perceived benefits of becoming a publicly
traded corporation include, among other things, facilitating or improving the
terms on which additional equity financing may be obtained, providing liquidity
for the principals of and investors in a business, creating a means for
providing incentive stock options or similar benefits to key employees, and
offering greater flexibility in structuring acquisitions, joint ventures and the
like through the issuance of stock. Potentially available business combinations
may occur in many different industries and at various stages of development, all
of which will make the task of comparative investigation and analysis of such
business opportunities extremely difficult and complex.





RESULTS
OF OPERATIONS





FISCAL
YEAR ENDED MARCH 31, 2008 COMPARED TO FISCAL YEAR ENDED MARCH 31,
2007





Revenues




Revenues
were $-0- for the fiscal year ended March 31, 2008.  Revenues for
March 31, 2007 in the amount of $3,776,639 was reclassified upon the
sale of our operating subsidiary.  This decrease was due to our ceasing
operations in December 2007.




Operating
Expenses




Operating
expenses excluding cost of revenues for the fiscal year ended March 31, 2008
were $255,063 compared to $3,616,618 for the year ended March 31, 2007.




(Loss)
From Continuing Operations




Loss from
continuing operations for the year ended March 31, 2008 was $255,063 as compared
to $104,849 for the year ended March 31, 2007. The net loss is primarily
attributable to the discontinued operations from our telecommunications
business.




17


(Loss)
From Discontinued Operations




Loss from
discontinued operations was $1,430,901  for the year ended March 31,
2008 and $2,150,705  for the year ended March 31, 2007.




Net
(Loss) Applicable to Common Stock




Net loss
applicable to Common Stock was $1,746,563 for the fiscal year ended March 31,
2008 compared to a loss of $2,255,554  for the year ended March 31, 2007.
Net loss per common share for continued operations was $.02 and for discontinued
operations was $0.07 for the year ended March 31, 2008 and for continued
operations was $.01 and for discontinued operations was $0.19 for the year ended
March 31, 2007.




The
higher loss in the year ended March 31, 2008 when compared with the year ended
March 31, 2007 is primarily attributable to the discontinued operations from our
telecommunications business.





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, 2008 we had a cash and cash equivalents balance of $156,734
consisting of $3,609 in cash and $153,125 in marketable
securities.




In order
to facilitate working cash flow, we factored approximately 99% of accounts
receivables for customer billing with an outside agency, thereby receiving 75%
of the aggregate net face value of the assigned accounts at the time of
placement with the factor. We ceased factoring invoices on December 20, 2007 and
do not maintain a line of credit or term loan with any commercial bank or other
financial institution.  The balance of our corporate credit card was
eliminated with the sale of our I-Element, Inc. subsidiary on December 20,
2007.  To date, our capital needs have been principally met through
the receipt of proceeds from factoring customer receivables and the sale of
equity and debt securities.




In
January 2006 we closed a private placement offering for an aggregate sale price
of $1,579,375, of which up to 10% is subject to deduction for fees in connection
with the private placement, and warrants for the purchase of an aggregate total
of 1,410,156 shares at a strike price of $1.60 per share, adjusted for our
reverse stock split effective January 11, 2008. The proceeds of the private
placement offering improved our cash balance.  All of the warrants
expired unexercised on December 30, 2007.




We
currently require additional funds to maintain operations since we do not have
revenues.  We plan to generate these addition funds by acquiring an
operating business and seeking additional debt and/or equity
investors.




The
Company has 17 notes payable at March 31, 2008 in the aggregate principal and
interest amount of $1,230,097 owed to 7 note holders. As of March 31, 2008 we
were current in all obligations except for past due total payments of $460,094
on 10 notes.   No default has been declared. The following is a more
detailed discussion of the 17 notes.




On
January 19, 2005, IElement issued eight (8) promissory notes to Kramerica and
certain members of Mr. Zweig's immediate family and others in the aggregate
amount of $376,956 (the "Notes") with no interest. In particular, the Notes are
payable to Heather Walther ($20,000), Kramerica, Inc. (aggregate of $120,000),
Mary Francis Strait Trust ($55,611), Peter Walther ($30,000), Richard Zweig
($20,000), Richard Zweig IRA ($27,500) and Strait Grandchildren Trust
($103,845). Upon issuance, the Notes were payable in 36 monthly installments
with the first payment commencing six months after the closing of the merger and
were secured by substantially all of the assets of the Company. We did not make
any payments on the Notes.




18


On March
25, 2006 each of the eight (8) Notes were cancelled and we issued new
convertible promissory notes to the same individuals in the same principal
amount of $376,956, again with no interest thereon. The first payment on each of
the new convertible promissory Notes was due in September 2006 with a total of
36 monthly installments through August 2009. The Lender has the right to convert
all or a portion of the outstanding balance, at any time until the Notes are
paid in full, into share of our common stock at a conversion price of $0.035 per
share. Any past due balance on the old Notes was forgiven at the time of
cancellation of the old notes and issuance of the new convertible promissory
Notes.




On
October 6, 2006 we reached agreements with the holders of these eight Notes to
extend the first payment date until April 1, 2007. We did not make any payments
on the notes.




Four of
the eight Note holders received a total of 5,400,000 shares of the Company’s
common stock on June 19, 2007 in exchange for extension of the principal
repayment terms.. This amount was recorded as interest expense.
 
 In
January 2008, six of these Notes were sold by the note holder.  In
particular, the $50,000 note to Kramerica, the $55,611 note to Mary Francis
Straight, the $20,000 note to Heather Walther, the $30,000 note to Peter
Walther, the $20,000 note to Richard Zweig and the $27,500 note to Richard Zweig
IRA were sold to third parties.  On January 23, 2008, we converted the
six notes to 3,173,612 shares of the Company’s common stock.  The two
remaining notes are the $70,000 note to Kramerica and the $103,845 note to
Straight Grandchildren Trust.  Both of these notes are now owned by
Kramerica.
  In
addition to these notes, the Company also has another promissory note payable to
Kramerica in the principle amount of $25,000. This note was issued on August 24,
2006 and bears interest at an annual rate of ten percent. The current principle
and interest balance on this note as of March 31, 2008 was
$28,320.




On August
8, 2005, IElement issued four promissory notes in the aggregate principal amount
of $183,097 to Timothy Dean Smith ($53,930), Susan Walton ($30,000), Jeremy Dean
Smith ($54,603) and Dolphin Capital ($44,564), with no interest. Upon issuance
the notes were payable in 36 monthly installments with the first payment due in
February, 2006. We did not make any payments on these notes.




On March
25, 2006 each of the four notes were cancelled and IElement issued new
convertible promissory notes to the same individuals in the same principal
amount of $183,097, again with no interest thereon. The first payment on each of
the new convertible promissory notes was due in September 2006 with a total of
36 monthly installments through August 2009. The Lenders had the right to
convert all or a portion of the outstanding balance, at any time until the notes
were paid in full, into IElement's common stock at a conversion price of $0.035
per share. Any past due balance on the old notes was forgiven at the time of
cancellation of the old notes and issuance of the new convertible promissory
notes. These four notes were each converted to common stock at a price of $0.035
per share on November 13, 2006.




One of
the remaining notes is held by Duane Morris in the principle amount of $34,631.
The Duane Morris note was issued in exchange for a settlement of disputed
attorneys fees on August 16, 2005 and was originally agreed to be paid in nine
monthly installments beginning on September 30, 2005 and ending May 30, 2006. As
of March 31, 2008we are past due on our payments on the Duane Morris note but intend to
resume payments in the coming months. This note bears no interest.




On June
8, 2006 we issued a note payable in the amount of $100,000 to Rhino Limited
which bears a ten percent interest rate. It matured when we secured funding from
exercise of outstanding warrants.  Those warrants expired unexercised
on December 30, 2007.  The current principle and interest balance on
this note as of March 31, 2008 was $118,295.




On June
19, 2006 we issued a note payable in the amount of $20,000 to Veronica Kristi
Prenn. It bore a ten percent interest rate and matured on December 19,
2006.   The current principle and interest balance on this note
as of December 31, 2007 was $23,096.  On January 17, 2008 this note
was converted to shares of the Company’s common stock.




On August
4, 2006 we issued a note payable to Walton Hansen in the amount of $24,808. It
bore a ten percent interest rate and matured when we secured funding from
exercise of outstanding warrants. On October 9, 2007, this note was converted
into shares of our common stock.




On
September 5, 2006 we issued a note payable to William Goatley in the amount of
$60,000. It bore a ten percent interest rate and matured on December 5, 2006.
The current principle and interest balance on this note as of December 31, 2007
was $67,972. On January 17, 2008 this note was converted into shares of our
common stock.




19


On March
16, 2007 we issued a note payable to Michael Bloch in the amount of $110,000. It
bears a ten percent interest rate and matured on June 16, 2007.  On
July 20, 2007 the maturity on this note was extended to October 31, 2007 in
exchange for 62,500 shares of the Company’s common stock.  On October
31, 2007 the maturity on this note was extended to November 30, 2007 in exchange
for $1,500.  The current principle and interest balance on this note
as of March 31, 2008 was $110,961. This note is secured by substantially all of
our assets.  We are currently renegotiating the terms of this
note.




On May
18, 2007 we issued a note payable to Secure Acquisition Financial Entity L.P.
(SAFE) in the amount of $200,000 in exchange for $200,000 cash and a note
receivable from Micro-Data Systems, Inc. in the amount of
$50,000.  The note payable bears an 18 percent annual interest rate
and the note receivable bears a 20 percent annual interest rate.  The
note was assumed by GDBC, Inc. on January 31, 2008.  The current
principle and interest balance on this note payable as of March 31, 2008 was
$222,364.  We are currently renegotiating the terms of this
note.




During
July of 2007 we issued 10 notes payable to various entities in the aggregate
amount of $170,000.  All 10 of these notes bore a ten percent interest
rate and were convertible into shares of our common stock at a rate of $0.16 per
share.  The current principle and interest balance on these notes as
of December 31, 2007 was $177,581.  On January 17, 2008 all 10 of
these notes were converted to shares of the Company’s common stock.




On August
23, 2007 we issued a note payable to Ivan Zweig in the amount of $41,943 that
bears a ten percent interest rate.  The current principle and interest
balance on this note as of March 31, 2008 was $44,482.  This note is
now owned by Kramerica.




On
September 17, 2007 we issued a note payable to Ivan Zweig in the amount of
$76,000 that bears a ten percent interest rate.  The current principle
and interest balance on this note as of March 31, 2008 was $80,102. This note is
now owned by Kramerica.




On
September 20, 2007 we issued two notes payable to Kramerica in the amounts of
$15,000 and $34,113, respectively.  They each bear a ten percent
interest rate.  The current principle and interest balances due on
these notes as of March 31, 2008 were $15,797 and $35,927,
respectively.




On
October 1, 2007 we issued a note payable to Kramerica in the amount of $44,000
that bears a ten percent interest rate.  The current principle and
interest balance on this note as of March 31, 2008 was $46,194.




On
November 8, 2007 we issued a note payable to Kramerica in the amount of $16,187
that bears a ten percent interest rate.  The current principle and
interest balance on this note as of March 31, 2008 was $16,826.




On
November 9, 2007 we issued a note payable to Kramerica in the amount of $17,900
that bears a ten percent interest rate.  The current principle and
interest balance on this note as of March 31, 2008 was $18,601.




On
December 12, 2007 we issued a note payable to Newsgrade Corporation in the
amount of $200,000 that bears a ten percent interest rate.  The
current principle and interest balance on this note as of March 31, 2008 was
$155,287.




On
January 18, 2008 we issued a secured note payable to GDBC, Inc. in the amount of
$5,340 that bears a ten percent interest rate and is due on January 18,
2009.  The current principle and interest balance on this note as of
March 31, 2008 was $5,473. This note is secured by the assets of the
company.




20




On
January 28, 2008 we issued a secured note payable to William M. Goatley
Revocable Trust in the amount of $120,000 that bears a ten percent interest rate
and is due on January 28, 2009.  The current principle and interest
balance on this note as of March 31, 2008 was $122,992. This note is secured by
the assets of the company.




Our total
debt servicing requirements on the 17 outstanding promissory notes over the next
12 months will be approximately $1,109,569.  However, we are currently
negotiating further conversions.




21


OFF-BALANCE
SHEET ARRANGEMENTS





As of
March 31, 2008, 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 were engaged in such
relationships.





CRITICAL
ACCOUNTING POLICY AND ESTIMATES





Our
Management's Discussion and Analysis of Financial Condition and Results of
Operations section discusses our condensed consolidated financial statements,
which have been prepared in accordance with accounting principles generally
accepted in the United States of America as promulgated by the Public Company
Accounting Oversight Board. The preparation of these financial statements
requires management to make estimates and assumptions that affect the reported
amounts of assets and liabilities at the date of the financial statements and
the reported amount of revenues and expenses during the reporting period. On an
ongoing basis, management evaluates its estimates and judgments, including those
related to revenue recognition, accrued expenses, financing operations, and
contingencies and litigation. Management bases its estimates and judgments on
historical experience and on various other factors that are believed to be
reasonable under the circumstances, the results of which form the basis for
making judgments about the carrying value of assets and liabilities that are not
readily apparent from other sources. Actual results may differ from these
estimates under different assumptions and conditions. The most significant
accounting estimates inherent in the preparation of our financial statements
include estimates as to the appropriate carrying value of certain assets and
liabilities which are not readily apparent from other sources. These accounting
policies are described at relevant sections in this discussion and analysis and
in the condensed consolidated financial statements included in this Annual
Report.




ITEM
7A.QUANTITATIVE AND
QUALITATIVE DISCLOSURES ABOUT MARKET RISK.





We are a smaller reporting company as
defined by Rule 12b-2 of the Securities Exchange Act of 1934 and are not
required to provide information under this item.










22




ITEM
8.FINANCIAL
STATEMENTS AND SUPPLEMENTARY DATA.











IELEMENT
CORPORATION AND SUBSIDIARY






CONSOLIDATED
FINANCIAL STATEMENTS


FOR
THE YEARS ENDED MARCH 31, 2008 AND 2007




F-1





IELEMENT
CORPORATION AND SUBSIDIARY


INDEX TO CONSOLIDATED FINANCIAL
STATEMENTS


FOR
THE YEARS ENDED MARCH 31, 2008 AND 2007






TABLE OF
CONTENTS






Consolidated
Audited Financial Statements:




PAGE(S)Report of
      Independent Registered Public Accounting Firm
              F-3Consolidated Balance
      Sheets as of March 31, 2008 and 2007
              F-4Consolidated
      Statements of Operations for the Years Ended March 31, 2008and
      2007
              F-5Consolidated
      Statements of Changes in Stockholders' (Deficit) for the Years Ended March
      31, 2008 and 2007
              F-6 -
      F-7Consolidated
      Statements of Cash Flows for the Years Ended March
      31, 2008 and 2007
              F-8 -
      F-9Notes to
      Consolidated Financial Statements
              F-10 -
      F-28




F-2




BAGELL,
JOSEPHS, LEVINE & COMPANY, L.L.C.


Certified
Public Accountants





406
Lippincott Drive, Ste. J


Marlton,
NJ 08053-4148


(856)
346-2828 Fax (856) 396-0022





REPORT
OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM





To the
Board of Directors and Stockholders


IElement
Corporation


Lyndeborough,
New Hampshire 03082




We have
audited the accompanying consolidated balance sheets of IElement Corporation
(the "Company") as of March 31, 2008 and 2007 and the related consolidated
statements of operations, stockholders’ (deficit) and cash flows for each of the
years in the two-year period ended March 31, 2008. IElement Corporation’s
management is responsible for these consolidated financial
statements.  Our responsibility is to express an opinion on these
consolidated financial statements based on our audits.




We
conducted our audits in accordance with the 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. The Company
is not required to have, nor were we engaged to perform, an audit of its
internal control over financial reporting. Our audit included consideration of
internal control over financial reporting as a basis for designing audit
procedures that are appropriate in the circumstances, but not for the purpose of
expressing an opinion on the effectiveness of the Company’s internal control
over financial reporting. Accordingly, we express no such opinion. An audit also
includes examining, on a test basis, evidence supporting the amounts and
disclosures in the financial statements, assessing the accounting principles
used and significant estimates made by management, as well as evaluating the
overall financial statement presentation. We believe that our audits provide a
reasonable basis for our opinion.




In our
opinion, the consolidated financial statements referred to above present fairly,
in all material respects, the financial position of IElement Corporation as of
March 31, 2008 and 2007 and the results of its operations and cash flows for
each of the years in the two-year period ended March 31, 2008 in conformity with
accounting principles generally accepted in the United States of
America.




The
accompanying consolidated financial statements have been prepared assuming that
the Company will continue as a going concern. As discussed in Note 9 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 plans in regard to these matters are also
described in Note 9. The consolidated financial statements do not include any
adjustments that might result from the outcome of this uncertainty.







/s/
BAGELL, JOSEPHS, LEVINE & COMPANY, L.L.C.


BAGELL,
JOSEPHS, LEVINE & COMPANY, L.L.C.


Marlton,
New Jersey 08053





June 27,
2008




F-3




IELEMENT
      CORPORATION AND SUBSIDIARYCONSOLIDATED
      BALANCE SHEETSMarch
      31, 2008 and 2007




ASSETSMarch
      31,
              
              
              March
      31,2008
              
              
              2007(Reclassified)CURRENT
      ASSETS:Cash
      and cash equivalents
              
              $
              156,734
              
              
              $
              -Assets
      held for sale
              
              
              -
              
              
              
              1,123,997TOTAL
      ASSETS
              
              $
              156,734
              
              
              $
              1,123,997LIABILITIES AND
      STOCKHOLDERS' (DEFICIT)CURRENT
      LIABILITIES:Current
      portion - notes payable
              
              $
              1,109,569
              
              
              $
              511,499Accounts
      payable and accrued expenses
              
              
              51,578
              
              
              
              -Liabilities
      held for sale
              
              
              -
              
              
              
              1,967,201Total
      current liabilities
              
              
              1,161,147
              
              
              
              2,478,700LONG-TERM
      LIABILITIES:Notes
      payable, net of current portion
              
              
              120,528
              
              
              
              255,935Total
      long-term liabilities
              
              
              120,528
              
              
              
              255,935Total
      Liabilities
              
              
              1,281,675
              
              
              
              2,734,635STOCKHOLDERS'
      (DEFICIT)Preferred
      stock, $.001 Par Value, 12,500,000 and 200,000,000 shares
      authorizedat
      March 31, 2008 and 2007, respectively; -0- shares issued and
      outstandingat
      March 31, 2008 and 2007, respectively.
              
              
              -
              
              
              
              -Common
      stock, $.001 Par Value, 125,000,000 and 2,000,000,000 shares
      authorizedat
      March 31, 2008 and 2007, respectively; 27,799,501 and 14,400,957
      sharesissues
      and outstanding at March 31, 2008 and 2007, respectively.
              
              
              27,800
              
              
              
              14,401Additional
      paid-in capital
              
              
              5,075,028
              
              
              
              3,768,367Additional
      paid-in capital - warrants
              
              
              177,757
              
              
              
              177,757Unearned
      compensation expense
              
              
              -
              
              
              
              (12,200
              )Subscription
      receivable
              
              
              -
              
              
              
              (900,000
              )Accumulated
      deficit
              
              
              (6,405,526
              )
              
              
              (4,658,963
              )Total
      Stockholders' (Deficit)
              
              
              (1,124,941
              )
              
              
              (1,610,638
              )TOTAL
      LIABILITIES AND STOCKHOLDERS' (DEFICIT)
              
              $
              156,734
              
              
              $
              1,123,997








F-4




IELEMENT
      CORPORATION AND SUBSIDIARYCONSOLIDATED
      STATEMENTS OF OPERATIONSFOR
      THE YEARS ENDED MARCH 31, 2008 AND 2007
  Year EndedMarch
      31,
              
              
              March
      31,2008
              
              
              2007(Reclassified)OPERATING
      REVENUE:Income
      from continuing operations
              
              $
              -
              
              
              $
              -OPERATING
      EXPENSESGeneral
      and administrative
              
              
              255,063
              
              
              
              104,849Total
      Operating Expenses
              
              
              255,603
              
              
              
              104,849(LOSS)
      FROM CONTINUING OPERATIONS
              
              
              (255,603
              )
              
              
              (104,849
              )OTHER
      INCOME (EXPENSE)Gain
      (Loss) on short-term investment
              
              
              (37,162
              )
              
              
              -Interest
      income
              
              
              -
              
              
              
              -Interest
      expense
              
              
              (22,897
              )
              
              
              -Total
      Other Income (Expense)
              
              
              (60,059
              )
              
              
              -(LOSS)
      FROM CONTINUING OPERATIONS BEFOREPROVISION
      FOR INCOME TAXES
              
              
              (315,662
              )
              
              
              (104,849
              )Provision
      for Income Taxes
              
              
              -
              
              
              
              -(LOSS)
      FROM CONTINUING OPERATIONS
              
              
              (315,662
              )
              
              
              (104,849
              )(LOSS)
      FROM DISCONTINUED OPERATIONS(Loss)
      from discontinued operations
              
              
              (1,430,901
              )
              
              
              (2,150,705
              )NET
      (LOSS) APPLICABLE TO COMMON SHARES
              
              $
              (1,746,563
              )
              
              $
              (2,255,554
              )NET
      (LOSS) PER BASIC AND DILUTED COMMON SHARESContinuing
      operations: basic and diluted
              
              $
              (0.02
              )
              
              $
              (0.01
              )Discontinued
      operations: basic and diluted
              
              $
              (0.07
              )
              
              $
              (0.19
              )TOTAL
      NET (LOSS) PER BASIC AND DILUTED COMMON SHARES
              
              $
              (0.09
              )
              
              $
              (0.20
              )WEIGHTED
      AVERAGE NUMBER OF COMMONSHARES
      OUTSTANDING
              
              
              19,224,007
              
              
              
              11,397,445


F-5




IELEMENT
      CORPORATION AND SUBSIDIARYCONSOLIDATED
      STATEMENT OF CHANGES IN STOCKHOLDERS' (DEFICIT)
(CONTINUED)FOR
      THE YEARS ENDED MARCH 31, 2008 AND 2007






AdditionalAdditional
              
              
              Paid
      - In
              
              
              
              
              
              UnearnedCommon Stock
              
              
              Paid
      - In
              
              
              Capital-
              
              
              Accumulated
              
              
              Compensation
              
              
              SubscriptionShares
              
              
              Amount
              
              
              Capital
              
              
              Warrants
              
              
              Deficit
              
              
              Expense
              
              
              Receivable
              
              
              TotalBalance
      March 31, 2006
              
              
              9,939,566
              
              
              $
              9,940
              
              
              $
              1,210,507
              
              
              $
              177,757
              
              
              $
              (2,403,409
              )
              
              $
              (12,200
              )
              
              $
              -
              
              
              $
              (1,017,405
              )Issuance
      of 297,896 pre-split shares at$0.06
      per sharefor
      conversion of accountspayable
              
              
              18,619
              
              
              
              19
              
              
              
              17,855
              
              
              
              -
              
              
              
              -
              
              
              
              -
              
              
              
              -
              
              
              
              17,874Issuance
      of 14,518,730 pre-split shares at$0.04
      per sharefor
      services rendered
              
              
              907,421
              
              
              
              907
              
              
              
              579,843
              
              
              
              -
              
              
              
              -
              
              
              
              -
              
              
              
              -
              
              
              
              580,750Employees
      earned 18.75% of the17,100,000
      stock optionsgranted
      on 8/29/06
              
              
              -
              
              
              
              -
              
              
              
              133,893
              
              
              
              -
              
              
              
              -
              
              
              
              -
              
              
              
              -
              
              
              
              133,893Issuance
      of 622,000 pre-split shares at$0.04
      per sharefor
      services rendered
              
              
              38,875
              
              
              
              39
              
              
              
              24,841
              
              
              
              -
              
              
              
              -
              
              
              
              -
              
              
              
              -
              
              
              
              24,880Issuance
      of 5,231,343 pre-split shares at$0.035
      per sharefor
      conversion of notes payable
              
              
              326,959
              
              
              
              327
              
              
              
              182,770
              
              
              
              -
              
              
              
              -
              
              
              
              -
              
              
              
              -
              
              
              
              183,097Issuance
      of 170,000 pre-split shares at$0.03
      per sharefor
      services rendered
              
              
              10,625
              
              
              
              11
              
              
              
              5,089
              
              
              
              -
              
              
              
              -
              
              
              
              -
              
              
              
              -
              
              
              
              5,100Issuance
      of 3,250,000 pre-split shares at$0.04
      per sharefor
      services rendered
              
              
              203,125
              
              
              
              203
              
              
              
              129,797
              
              
              
              -
              
              
              
              -
              
              
              
              -
              
              
              
              -
              
              
              
              130,000Issuance
      of 750,000 pre-split shares at$0.028
      per sharefor
      conversion of accountspayable
              
              
              46,875
              
              
              
              47
              
              
              
              20,953
              
              
              
              -
              
              
              
              -
              
              
              
              -
              
              
              
              -
              
              
              
              21,000Issuance
      of 600,000 pre-split shares at$0.03
      per sharefor
      services rendered
              
              
              37,500
              
              
              
              37
              
              
              
              17,963
              
              
              
              -
              
              
              
              -
              
              
              
              -
              
              
              
              -
              
              
              
              18,000Issuance
      of 200,000 pre-split shares at$0.037
      per sharefor
      services rendered
              
              
              12,500
              
              
              
              12
              
              
              
              7,388
              
              
              
              -
              
              
              
              -
              
              
              
              -
              
              
              
              -
              
              
              
              7,400Issuance
      of 5,000,000 pre-split shares at$0.04
      per sharefor
      services rendered
              
              
              312,500
              
              
              
              312
              
              
              
              199,688
              
              
              
              -
              
              
              
              -
              
              
              
              -
              
              
              
              -
              
              
              
              200,000Issuance
      of 30,000,000 pre-split shares at$0.03
      per sharein
      exchange for a subscriptionreceivable
              
              
              1,875,000
              
              
              
              1,875
              
              
              
              898,125
              
              
              
              -
              
              
              
              -
              
              
              
              -
              
              
              
              (900,000
              )
              
              
              -Employees
      earned 6.25% of thestock
      optionsgranted
      on 8/29/06 & 9/11/06
              
              
              -
              
              
              
              -
              
              
              
              44,841
              
              
              
              -
              
              
              
              -
              
              
              
              -
              
              
              
              -
              
              
              
              44,841Issuance
      of 500,000 pre-split shares at$0.023
      per sharefor
      conversion of accountspayable
              
              
              31,250
              
              
              
              31
              
              
              
              11,043
              
              
              
              -
              
              
              
              -
              
              
              
              -
              
              
              
              -
              
              
              
              11,074Issuance
      of 3,850,000 pre-split shares at$0.026
      per sharefor
      services rendered
              
              
              240,625
              
              
              
              241
              
              
              
              99,859
              
              
              
              -
              
              
              
              -
              
              
              
              -
              
              
              
              -
              
              
              
              100,100Issuance
      of 1,500,000 pre-split shares at$0.025
      per sharefor
      services rendered
              
              
              93,750
              
              
              
              94
              
              
              
              37,406
              
              
              
              -
              
              
              
              -
              
              
              
              -
              
              
              
              -
              
              
              
              37,500Issuane
      of 600,000 pre-split shares at$0.029
      per sharefor
      services rendered
              
              
              37,500
              
              
              
              38
              
              
              
              17,362
              
              
              
              -
              
              
              
              -
              
              
              
              -
              
              
              
              -
              
              
              
              17,400Issuance
      of 1,000,000 pre-split shares at$0.021
      per sharefor
      conversion of accountspayable
              
              
              62,500
              
              
              
              62
              
              
              
              20,938
              
              
              
              -
              
              
              
              -
              
              
              
              -
              
              
              
              -
              
              
              
              21,000Issuance
      of 1,387,500 pre-split shares at$0.01
      per sharefor
      exercise of employee stockoptions
              
              
              86,719
              
              
              
              87
              
              
              
              13,789
              
              
              
              -
              
              
              
              -
              
              
              
              -
              
              
              
              -
              
              
              
              13,876Issuance
      of 1,000,000 pre-split shares at$0.025
      per sharefor
      services rendered
              
              
              62,500
              
              
              
              62
              
              
              
              24,938
              
              
              
              -
              
              
              
              -
              
              
              
              -
              
              
              
              -
              
              
              
              25,000Issuance
      of 904,790 pre-split shares at$0.025
      per sharefor
      conversion of accountspayable
              
              
              56,549
              
              
              
              57
              
              
              
              22,563
              
              
              
              -
              
              
              
              -
              
              
              
              -
              
              
              
              -
              
              
              
              22,620Employees
      earned 6.25 % of thestock
      optionsgranted
      on 8/29/06 and 9/11/06
              
              
              -
              
              
              
              -
              
              
              
              46,916
              
              
              
              -
              
              
              
              -
              
              
              
              -
              
              
              
              -
              
              
              
              46,916Net
      loss for the year endedMarch
      31, 2007
              
              
              -
              
              
              
              -
              
              
              
              -
              
              
              
              -
              
              
              
              (2,255,554
              )
              
              
              -
              
              
              
              -
              
              
              
              (2,255,554
              )Balance
      March 31, 2007
              
              
              14,400,957
              
              
              $
              14,401
              
              
              $
              3,768,367
              
              
              $
              177,757
              
              
              $
              (4,658,963
              )
              
              $
              (12,200
              )
              
              $
              (900,000
              )
              
              $
              (1,610,638
              )


The
accompanying notes are an integral part of these consolidated financial
statements.


F-6




IELEMENT
      CORPORATION AND SUBSIDIARYCONSOLIDATED
      STATEMENT OF CHANGES IN STOCKHOLDERS' (DEFICIT)
(CONTINUED)FOR
      THE YEARS ENDED MARCH 31, 2008 AND 2007






AdditionalAdditional
              
              
              Paid
      - In
              
              
              
              
              
              UnearnedCommon Stock
              
              
              Paid
      - In
              
              
              Capital-
              
              
              Accumulated
              
              
              Compensation
              
              
              SubscriptionShares
              
              
              Amount
              
              
              Capital
              
              
              Warrants
              
              
              Deficit
              
              
              Expense
              
              
              Receivable
              
              
              TotalBalance
      March 31, 2007
              
              
              14,400,957
              
              
              $
              14,401
              
              
              $
              3,768,367
              
              
              $
              177,757
              
              
              $
              (4,658,963
              )
              
              $
              (12,200
              )
              
              $
              (900,000
              )
              
              $
              (1,610,638
              )Issuance
      of 4,500,000 pre-split sharesat
      $0.011 per sharefor
      services rendered
              
              
              281,250
              
              
              
              281
              
              
              
              49,219
              
              
              
              -
              
              
              
              -
              
              
              
              -
              
              
              
              -
              
              
              
              49,500Issuance
      of 3,000,000 pre-split sharesat
      $0.01 per sharefor
      services rendered
              
              
              187,500
              
              
              
              188
              
              
              
              29,812
              
              
              
              -
              
              
              
              -
              
              
              
              -
              
              
              
              -
              
              
              
              30,000Issuance
      of 1,500,000 pre-split sharesat
      $0.01 per sharefor
      exercise of employee stockoptions
              
              
              93,750
              
              
              
              94
              
              
              
              14,906
              
              
              
              -
              
              
              
              -
              
              
              
              -
              
              
              
              -
              
              
              
              15,000Issuance
      of 5,400,000 pre-split sharesat
      $0.011 per share for extensionof
      promissory notes
              
              
              337,500
              
              
              
              338
              
              
              
              59,062
              
              
              
              -
              
              
              
              -
              
              
              
              -
              
              
              
              -
              
              
              
              59,400Issuance
      of 3,094,930 pre-split sharesat
      $0.01 per sharefor
      conversion of accountspayable
              
              
              193,433
              
              
              
              193
              
              
              
              30,756
              
              
              
              -
              
              
              
              -
              
              
              
              -
              
              
              
              -
              
              
              
              30,949Employees
      earned 6.25% of thestock
      optionsgranted
      on 8/29/06 & 9/11/06
              
              
              -
              
              
              
              -
              
              
              
              47,156
              
              
              
              -
              
              
              
              -
              
              
              
              -
              
              
              
              -
              
              
              
              47,156Issuance
      of 31,000,000 pre-split sharesat
      $0.012 per sharefor
      services rendered
              
              
              1,937,500
              
              
              
              1,938
              
              
              
              370,062
              
              
              
              -
              
              
              
              -
              
              
              
              -
              
              
              
              -
              
              
              
              372,000Issuance
      of 6,000,000 pre-split shares at$0.011
      per sharefor
      services rendered
              
              
              375,000
              
              
              
              375
              
              
              
              65,625
              
              
              
              -
              
              
              
              -
              
              
              
              -
              
              
              
              -
              
              
              
              66,000Issuance
      of 2,000,000 pre-split shares at$0.01
      per sharefor
      services rendered
              
              
              125,000
              
              
              
              125
              
              
              
              19,875
              
              
              
              -
              
              
              
              -
              
              
              
              -
              
              
              
              -
              
              
              
              20,000Issuance
      of 1,000,000 pre-split shares at$0.012
      per share for extensionof
      promissory notes
              
              
              62,500
              
              
              
              63
              
              
              
              11,937
              
              
              
              -
              
              
              
              -
              
              
              
              -
              
              
              
              -
              
              
              
              12,000Issuance
      of 25,000 pre-split shares at$0.01
      per sharefor
      exercise of employee stockoptions
              
              
              1,563
              
              
              
              2
              
              
              
              248
              
              
              
              -
              
              
              
              -
              
              
              
              -
              
              
              
              -
              
              
              
              250Cancellation
      of 24,000,000 pre-split sharespreviously
      issued at $0.012 per sharefor
      services rendered
              
              
              (1,500,000
              )
              
              
              (1,500
              )
              
              
              (286,500
              )
              
              
              -
              
              
              
              -
              
              
              
              -
              
              
              
              -
              
              
              
              (288,000
              )Issuance
      of 7,000,000 pre-split shares at$0.009
      per sharefor
      severance
              
              
              437,500
              
              
              
              437
              
              
              
              62,563
              
              
              
              -
              
              
              
              -
              
              
              
              -
              
              
              
              -
              
              
              
              63,000Employees
      earned 6.25% of thestock
      optionsgranted
      on 8/29/06 and 9/11/06
              
              
              -
              
              
              
              -
              
              
              
              47,036
              
              
              
              -
              
              
              
              -
              
              
              
              -
              
              
              
              -
              
              
              
              47,036Issuance
      of 3,500,000 pre-split shares at$0.002
      per sharefor
      cash
              
              
              218,750
              
              
              
              219
              
              
              
              6,781
              
              
              
              -
              
              
              
              -
              
              
              
              -
              
              
              
              -
              
              
              
              7,000Issuance
      of 6,944,500 pre-split shares at$0.004
      per sharefor
      conversion of notes payable
              
              
              434,031
              
              
              
              434
              
              
              
              27,344
              
              
              
              -
              
              
              
              -
              
              
              
              -
              
              
              
              -
              
              
              
              27,778Issuance
      of 11,875,183 pre-split shares at$0.003
      per sharefor
      services rendered
              
              
              742,199
              
              
              
              742
              
              
              
              34,893
              
              
              
              -
              
              
              
              -
              
              
              
              -
              
              
              
              -
              
              
              
              35,635Issuance
      of 5,000,000 pre-split shares at$0.005
      per sharefor
      conversion of accountspayable
              
              
              312,500
              
              
              
              312
              
              
              
              24,688
              
              
              
              -
              
              
              
              -
              
              
              
              -
              
              
              
              -
              
              
              
              25,000Issuance
      of 2,596,943 pre-split shares at$0.004
      per sharefor
      conversion of accountspayable
              
              
              162,309
              
              
              
              162
              
              
              
              10,226
              
              
              
              -
              
              
              
              -
              
              
              
              -
              
              
              
              -
              
              
              
              10,388Issuance
      of 2,000,000 pre-split shares at$0.005
      per sharefor
      services rendered
              
              
              125,000
              
              
              
              125
              
              
              
              9,875
              
              
              
              -
              
              
              
              -
              
              
              
              -
              
              
              
              -
              
              
              
              10,000Issuance
      of 20,000,000 pre-split shares at$0.0048
      per sharefor
      services rendered
              
              
              1,250,000
              
              
              
              1,250
              
              
              
              94,750
              
              
              
              -
              
              
              
              -
              
              
              
              -
              
              
              
              -
              
              
              
              96,000Issuance
      of 3,000,000 pre-split shares at$0.004
      per sharefor
      services rendered
              
              
              187,500
              
              
              
              187
              
              
              
              11,813
              
              
              
              -
              
              
              
              -
              
              
              
              -
              
              
              
              -
              
              
              
              12,000Employees
      earned 6.25% of thestock
      optionsgranted
      on 8/29/06 and 9/11/06
              
              
              -
              
              
              
              -
              
              
              
              45,416
              
              
              
              -
              
              
              
              -
              
              
              
              -
              
              
              
              -
              
              
              
              45,416Issuance
      of 62,500 post-split shares at$0.15
      per sharefor
      services rendered
              
              
              62,500
              
              
              
              62
              
              
              
              9,313
              
              
              
              -
              
              
              
              -
              
              
              
              -
              
              
              
              -
              
              
              
              9,375Issuance
      of 4,197,647 post-split shares at$0.064
      per share for conversion ofnotes
      payable on January 17, 2008
              
              
              4,197,647
              
              
              
              4,198
              
              
              
              264,451
              
              
              
              -
              
              
              
              -
              
              
              
              -
              
              
              
              -
              
              
              
              268,649Issuance
      of 3,173,612 post-split shares at$0.064
      per share for conversion ofnotes
      payable on January 17, 2008
              
              
              3,173,612
              
              
              
              3,174
              
              
              
              199,938
              
              
              
              -
              
              
              
              -
              
              
              
              -
              
              
              
              -
              
              
              
              203,112Expense
      unearned compensation
              
              
              -
              
              
              
              -
              
              
              
              -
              
              
              
              -
              
              
              
              -
              
              
              
              12,200
              
              
              
              -
              
              
              
              12,200Write-off
      of subscription receivable
              
              
              -
              
              
              
              -
              
              
              
              -
              
              
              
              -
              
              
              
              -
              
              
              
              -
              
              
              
              900,000
              
              
              
              900,000Employees
      earned 6.25% of thestock
      optionsgranted
      on 8/29/06 and 9/11/06
              
              
              -
              
              
              
              -
              
              
              
              45,416
              
              
              
              -
              
              
              
              -
              
              
              
              -
              
              
              
              -
              
              
              
              45,416Net
      loss for the year endedMarch
      31, 2008
              
              
              -
              
              
              
              -
              
              
              
              -
              
              
              
              -
              
              
              
              (1,746,563
              )
              
              
              -
              
              
              
              -
              
              
              
              (1,746,563
              )Balance
      March 31, 2008
              
              
              27,799,501
              
              
              $
              27,800
              
              
              $
              5,075,028
              
              
              $
              177,757
              
              
              $
              (6,405,526
              )
              
              $
              -
              
              
              $
              -
              
              
              $
              (1,124,941
              )




The
accompanying notes are an integral part of these consolidated financial
statements.


F-7




IELEMENT
      CORPORATION AND SUBSIDIARYCONSOLIDATED
      STATEMENTS OF CASH FLOWSFOR
      THE YEARS ENDED MARCH 31, 2008 AND 2007






Year EndedMarch
      31,
              
              
              March
      31,2008
              
              
              2007(Reclassified)CASH
      FLOWS FROM OPERATING ACTIVITIESNet
      (loss) from continuing operations
              
              $
              (315,662
              )
              
              $
              (104,849
              )Adjustments
      to reconcile net loss to net cash(used
      in) operating activities:Stock
      issued for services
              
              
              9,375
              
              
              
              -Stock
      based employee compensation
              
              
              45,416
              
              
              
              -Loss
      on short-term investment
              
              
              (37,162
              )
              
              
              -Changes
      in assets and liabilitiesIncrease
      (Decrease) in accounts payable and accrued expenses
              
              
              37,898
              
              
              
              -Increase
      in accrued interest payable
              
              
              28,318
              
              
              
              -Net
      cash (used in) operating activities of continuing
    operations
              
              
              (231,817
              )
              
              
              (104,849
              )Net
      loss from discontinued operations
              
              
              (1,430,901
              )
              
              
              (2,150,705
              )Net
      effect on cash flow from disposal of subsidiary
              
              
              (81,988
              )
              
              
              1,494,936Total
      cash provided by (used in) operating activities of discontinued
      operations
              
              
              (1,512,889
              )
              
              
              (655,769
              )Total
      cash provided by (used in) operating activities
              
              
              (1,744,706
              )
              
              
              (760,618
              )CASH
      FLOWS FROM INVESTING ACTIVITIESCash
      received from sale of marketable securities
              
              
              15,000
              
              
              
              -Total
      cash provided by (used in) investing activities from continuing
      operations
              
              
              15,000
              
              
              
              -Adjustments
      to reconcile total cash provided by investing activitiesfrom
      discontinued operations
              
              
              (76,395
              )
              
              
              (107,164
              )Total
      cash provided by (used in) investing activities
              
              
              (61,395
              )
              
              
              (107,164
              )






The accompanying notes are
an integral part of these consolidated financial statements.


F-8




IELEMENT
      CORPORATION AND SUBSIDIARYCONSOLIDATED
      STATEMENTS OF CASH FLOWS (CONTINUED)FOR
      THE YEARS ENDED MARCH 31, 2008 AND 2007
   Year EndedMarch
      31,
                
                
                March
      31,2008
                
                
                2007CASH
      FLOWS FROM FINANCING ACTIVITESPayments
      of notes payable
                
                $
                (50,000
                )
                
                $
                -Proceeds
      from notes payable
                
                
                125,340
                
                
                
                -Payments
      of accrued interest
                
                
                (3,648
                )
                
                
                -Total
      cash provided by financing activities from continuing
      operations
                
                
                71,692
                
                
                
                -Adjustments
      to reconcile total cash provided by financing activitiesfrom
      discontinued operations
                
                
                1,725,791
                
                
                
                313,684Total
      cash provided by financing activities
                
                
                1,797,483
                
                
                
                313,684NET
      (DECREASE) IN CASHAND
      CASH EQUIVALENTS
                
                
                (8,618
                )
                
                
                (554,098
                )CASH
      AND CASH EQUIVALENTS -BEGINNING
      OF YEAR - CONTINUING OPERATIONS
                
                
                -
                
                
                
                -CASH
      AND CASH EQUIVALENTS -BEGINNING
      OF YEAR - DISCONTINUED OPERATIONS
                
                
                165,352
                
                
                
                719,450CASH
      AND CASH EQUIVALENTS - END OF YEAR -CONTINUING
      OPERATIONS
                
                $
                156,734
                
                
                $
                165,352SUPPLEMENTAL
      DISCLOSURE OF CASH FLOWINFORMATION:CASH
      PAID DURING THE YEAR FOR:Interest
      expense
                
                $
                19,522
                
                
                $
                -SUPPLEMENTAL
      DISCLOSURE OF NONCASHACTIVITIES:Accounts
      payable converted to equity
                
                $
                66,337
                
                
                $
                72,568Common
      stock issued for subscription receivable
                
                $
                -
                
                
                $
                900,000Notes
      payable and accrued interest converted to equity
                
                $
                499,539
                
                
                $
                183,097Stock
      issued for extension of due dates on promissory notes
                
                $
                71,400
                
                
                $
                -Stock
      issued for services
                
                $
                490,760
                
                
                $
                1,167,129Stock
      based compensation
                
                $
                185,024
                
                
                $
                225,650






The accompanying notes are
an integral part of these consolidated financial statements.


F-9




IELEMENT
CORPORATION AND SUBSIDIARY
 NOTES
TO CONSOLIDATED FINANCIAL STATEMENTS
 FOR
THE YEARS ENDED MARCH 31, 2008 AND 2007





NOTE 1- ORGANIZATION
AND BASIS OF PRESENTATION





We are
the product of a series of mergers and acquisitions that began in
1996.





By way of
background, Northline Industrial Corporation was incorporated in Texas on
December 28, 1988 ("NIC"). NIC was
inactive until March 1996 whereupon it adopted a business plan providing for
reincorporation in Nevada and the establishment of a charter cargo airline under
the name "Air
Epicurean". Consistent therewith, on July 19, 1996 NIC formed Air
Epicurean, Inc. as a Nevada wholly-owned corporate subsidiary.





Air
Epicurean, Inc. is the original predecessor to the issuer and is now known as
IElement Corporation. In December 1996, NIC abandoned its previously adopted
business plan to establish air carrier operations and initiated a search for a
suitable merger candidate.





On March
5, 1997, NIC merged with and into Air Epicurean, Inc., the surviving
corporation. Effective May 8, 1997, Air Epicurean changed its name to Ikon
Ventures, Inc. ("Ikon"). Ikon remained
inactive until August 2001 whereupon it acquired in a share-for-share exchange
Sutton Online, Inc., a Delaware corporation. On October 31, 2001, Ikon changed
its name to Sutton Trading Solutions, Inc.





On April
23, 2003, Sutton Trading Solutions, Inc. changed its name to Global Diversified
Acquisition Corp. ("GDAC") to reflect
that its principal activity was to seek a business combination with one or more
as yet unidentified privately held businesses.





On March
25, 2004, pursuant to an Agreement and Plan of Merger, 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 effectuated by the issuance of shares such that the
former MKSS shareholders owned approximately 90% of the outstanding GDAC stock
after the transaction. GDAC then changed its name to MailKey Corporation ("MailKey").





MK Secure
Solutions Ltd. was established as a messaging security and Management company.
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 were 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.




F-10




IELEMENT
CORPORATION AND SUBSIDIARY
 NOTES
TO CONSOLIDATED FINANCIAL STATEMENTS - CONTINUED
 FOR
THE YEARS ENDED MARCH 31, 2008 AND 2007


NOTE 1- ORGANIZATION
AND BASIS OF PRESENTATION – (CONTINUED)





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.





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 businesses ("SMBs").
IElement provides broadband data, voice and wireless services by offering
integrated T-1 lines as well as Layer 2 Private Network solutions that provide
SMBs with dedicated Internet access services, customizable business solutions
for voice, data, wireless and Internet, and secure communications channels
between the SMB 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 stipulates that MailKey and
IElement 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 $80,000 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. On January 19, 2005, upon
the consummation of the acquisition, IElement issued eight (8) promissory notes
to, Kramerica, certain members of Mr. Zweig's immediate family and others in the
aggregate amount of $376,956 (the "Notes") with no interest. Upon issuance, the
Notes were payable in 36 monthly installments with the first payment commencing
six months after the closing of the merger and were secured by substantially all
of the assets of IElement. IElement did not make any payments on the Notes. On
March 25, 2006 each of the Notes were cancelled and IElement issued new
convertible promissory notes to the same individuals in the same principal
amount of $376,956, again with no interest thereon. The first payment on each
of




F-11


IELEMENT
CORPORATION AND SUBSIDIARY
 NOTES
TO CONSOLIDATED FINANCIAL STATEMENTS - CONTINUED
 FOR
THE YEARS ENDED MARCH 31, 2008 AND 2007




NOTE 1- ORGANIZATION
AND BASIS OF PRESENTATION – (CONTINUED)





the new
convertible promissory notes was due in September 2006 with a total of 36
monthly installments through August 2009. The Lender has the right to convert
all or a portion of the outstanding balance, at any time until the notes are
paid in full, into IElement's common stock at a conversion price of $0.035 per
share. Any past due balance on the old Notes was forgiven at the time of
cancellation of the old Notes and issuance of the new convertible promissory
notes. The new convertible promissory notes were secured by substantially all
the assets of IElement, as were the original Notes. The aggregate of the
Kramerica notes is $120,000 and was issued for services rendered prior to
issuance. The $50,000 note was originally issued on June 1, 2004 for services
prior to that date and was restated subsequent to the merger on January 19,
2005. The remaining $70,000 note was issued on January 19, 2005 for services
rendered prior to that date. On October 2, 2006, all eight holders of the
promissory notes to Mr. Zweig’s immediate family extended the payment terms so
that the first of the 36 monthly payments is now due on April 1, 2007 and the
last is due on March 1, 2010. No principle payments have been made on any of the
notes and no interest is currently accruing.





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.




The
Company received consent to amend the Articles of Incorporation to increase the
number of shares of common stock authorized to be issued from 100,000,000 shares
to 2,000,000,000 shares, and consented to the authorization of 200,000,000
shares of Blank Check Preferred Stock. There are no current plans to designate
any Blank Check Preferred Stock.





On August
1, 2005, the Company filed an Information Statement in the definitive form on
schedule 14C with the SEC to change its name from MailKey Corporation to
IElement Corporation. Concurrent with this name change, the Company received a
new stock trading symbol (IELM.OB) on the NASD Over-the-Counter Electronic
Bulletin Board.





On August
8, 2005, Tim Dean-Smith and Susan Walton resigned their positions on the Board
of Directors (the “Board”) of the Company. Tim Dean-Smith also resigned from his
position as Chief Financial Officer of the Company. The resignations of Mr.
Dean-Smith and Ms. Walton were consistent with the expectations of the parties
pursuant to the consummation of the merger between IElement and the Company on
January 19, 2005, and do not arise from any disagreement on any matter relating
to the Company’s operations, policies or practices, nor regarding the general
direction of the Company. Neither Mr. Dean-Smith nor Ms. Walton served on any
subcommittees of the Board. Ivan Zweig, the current Chairman of the Board and
Chief Executive Officer was appointed as the Chief Financial Officer of the
Company until a new Chief Financial Officer is found.





In March
2006, Ivan Zweig, as the only Director, appointed Lance Stovall and Ken Willey
to the Board of Directors until the next annual meeting, when all three
Directors were up for re-election.





On
December 6, 2006 the Board of Directors unanimously appointed Charles Carlson to
the Board of Directors until the next annual meeting after the annual meeting
scheduled for December 15, 2006.





On
December 15, 2006, Ivan Zweig, Lance Stovall and Ken Willey were re-elected to
the Board of Directors at the Company’s annual meeting. Charles Carlson also
continued to serve on the Board of Directors until the next annual meeting but
was not up for re-election at this time.








F-12




IELEMENT
CORPORATION AND SUBSIDIARY
 NOTES
TO CONSOLIDATED FINANCIAL STATEMENTS - CONTINUED
 FOR
THE YEARS ENDED MARCH 31, 2008 AND 2007
  NOTE 1- ORGANIZATION
AND BASIS OF PRESENTATION – (CONTINUED)




On June
19, 2007, we reached agreement with the eight Note holders to extend the payment
terms so that the first of 36 monthly payments on each of the notes was due on
April 1, 2008. Four of the eight Note holders received on June 19, 2007 a total
of 5,400,000 shares of our common stock  in exchange for extension of
the principle repayment terms. On January 23, 2008 six of the eight Notes were
converted into 3,173,612 shares of our common stock.  The total
aggregate principle balance of the remaining two notes as of March 31, 2008 was
$173,845.




On June
27, 2007 Ken Willey resigned from his position on the Board of
Directors.  His resignation did not arise from any disagreement on any
matter relating to the Company’s operations, policies or practices, nor
regarding the general direction of the Company.





On August
7, 2007 the Board of Directors unanimously appointed Art Eckert to the Board of
Directors until the next annual meeting.  On September 13, 2007 the
Board removed Art Eckert from the Board.  Mr. Eckert was removed as a
result of the termination of negotiations with Micro Data Systems regarding a
potential merger transaction. Mr. Eckert was previously appointed to the Board
of Directors as an advisor to Micro Data Systems and to assist in the due
diligence process.





On
December 20, 2007 the Company sold its main operating subsidiary, I-Element,
Inc., along with certain assets and liabilities related to the that
telecommunications business, to Ivan Zweig.  In conjunction with this
transaction, Mr. Zweig released the Company from any and all liability under his
employment agreement as well as the consulting agreement with Kramerica Capital
Corporation, both dated January 1, 2007, and resigned all officer and director
positions he held with the Company.  In addition, Mr. Zweig agreed to
cancel all of his outstanding warrants and options to purchase the Company’s
stock.  Mr. Zweig and I-Element, Inc. also agreed to indemnify the
Company from liabilities arising prior to December 20, 2007.





On
December 20, 2007, we entered into a Stock Purchase Agreement with Newsgrade
Corporation (“Newsgrade”), pursuant
to which we agreed to purchase from Newsgrade one (1) million shares of common
stock of The Retirement Solutions.com, Inc. (“TRS”).  As
consideration for the purchase, we agreed to pay to Newsgrade at closing
$200,000 in the form of a Convertible Promissory Note (the “Convertible Note”)
due and payable one year from issuance with 10% interest and convertible into
shares of our common stock.





On
December 20, 2007 and December 24, 2007, our Board of the Directors appointed
Susan Pursel and Paul Lengemann to the Board of Directors,
respectively.  Also effective December 20, 2007 Susan Pursel was
appointed as our Chairman, Chief Executive Officer, President, Secretary and
Treasurer.  That same day, Lance Stovall resigned from the Board of
Directors.





Susan
Pursel and Paul Lengemann are currently our sole officers and
directors.  Ms. Pursel and Mr. Lengemann shall serve until the next
annual meeting.  Ms. Pursel is a minority stockholder of Newsgrade and
former President of StockDataNews.com, Inc., a wholly owned subsidiary of
Newsgrade. Mr. Lengemann was President of Stockdiagnostics.com, Inc., a wholly
owned subsidiary of Newsgrade between 2002 and 2004.





On
December 27, 2007 the Board of Directors approved a reverse stock split whereby
each 16 shares of its old common stock was exchanged for one new share of its
common stock.  The split took effect on January 11, 2008 and the stock
symbol was changed from IELM to IELE at that time.




NOTE 2-  SUMMARY
OF SIGNIFICANT ACCOUNTING POLICIES




Basis of
Consolidation





The
consolidated financial statements include the financial position and results of
IElement. All significant inter-company accounts and transactions have been
eliminated in consolidation.




F-13




IELEMENT
CORPORATION AND SUBSIDIARY
 NOTES
TO CONSOLIDATED FINANCIAL STATEMENTS - CONTINUED
 FOR
THE YEARS ENDED MARCH 31, 2008 AND 2007




NOTE 2-  SUMMARY
OF SIGNIFICANT ACCOUNTING POLICIES – (CONTINUED)





Reclassification of Accounts
in the Financial Statements




On
December 20, 2007 the Company sold its main operating subsidiary, I-Element,
Inc., along with certain assets and liabilities related to that
telecommunications business.  The consolidated financial statements
for the years ended March 31, 2008 and 2007 reflect the reclassification of
these operations to below the line as discontinued operations in accordance with
the provisions of FASB 144, “Accounting for the Impairment or Disposal of Long
Lived Assets”.




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.





The cash
and cash equivalents balance as of March 31, 2008 consisted of $3,609 in cash
and $153,125 in marketable securities.




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. In determining when to recognize revenue the
Company relies on Staff Accounting Bulletin Topic 13. The Company uses four
criteria in determining when revenue is realized or realizable and earned.
First, the Company must have persuasive evidence of the existing of an
arrangement. The Company utilizes written contracts with its customers to meet
this criterion. Second, delivery must have occurred or services must have been
rendered. The Company defers revenue from the date invoiced, usually 35-40 days
before services are rendered, to the month services are deemed completely
rendered, thereby satisfying this criterion. Third, the price must be fixed and
determinable. The Company delivers invoices to every customer stating the exact
amount due for services, thereby satisfying this criterion. Fourth, the company
determines credibility of its customers and collectibility of its invoices by
evaluating its ongoing history and relationship with each customer, the fact
that each customer is dependant upon the Company to provide its telephone and
internet services and, in many cases, the fact that the customer has a security
or service deposit with the Company in the amount of one month's service
charges. When the Company cannot determine that a particular customer is
credible and a particular invoice is collectible, the company will not record
this invoice as revenue until the payment is collected from that customer. Thus,
the Company meets the fourth criterion that collectibility be reasonably
assured.





For the
year ended March 31, 2008, the Company did not recognize any revenue earned
after the sale of its subsidiary, I-Element, Inc., on December 20,
2007.




F-14




IELEMENT
CORPORATION AND SUBSIDIARY
 NOTES
TO CONSOLIDATED FINANCIAL STATEMENTS - CONTINUED
 FOR
THE YEARS ENDED MARCH 31, 2008 AND 2007




NOTE 2-  SUMMARY
OF SIGNIFICANT ACCOUNTING POLICIES – (CONTINUED)




Accounts
Receivable





The
Company factored 99% of its billings with an outside agency. The Company
invoiced its customers on the 28th of the
month for services to be rendered approximately 35 days subsequent to the
billing date. The Company received 75% of the aggregate net face value of the
assigned accounts at the time of placement with the factor.  On December
20, 2007 the Company ceased factoring its receivables.  All
outstanding accounts receivable were sold at that time as part of the sale of
the Company’s subsidiary, I-Element, Inc.





Deferred
Revenue





Deferred
revenue consists of customers billed in advance of revenue being
earned.




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 $0 and $0 has been recorded
March 31, 2008 and 2007, respectively.





Bad debt
expense for the years ended March 31, 2008 and 2007 was $52,975 and $82,643,
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 years ended March 31, 2008 and 2007 were $231 and $85,011,
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 years ended March 31, 2008 or
2007.




Fair Value of Financial
Instruments





The
carrying amount reported on the balance sheet 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.






F-15




IELEMENT
CORPORATION AND SUBSIDIARY
 NOTES
TO CONSOLIDATED FINANCIAL STATEMENTS - CONTINUED
 FOR
THE YEARS ENDED MARCH 31, 2008 AND 2007





NOTE 2-  SUMMARY
OF SIGNIFICANT ACCOUNTING POLICIES – (CONTINUED)





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




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.





Income (Loss) Per Share of
Common Stock





Historical
net income (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 anti-dilutive for the periods presented.




The
following is a reconciliation of the computation for basic and diluted
EPS:




Year EndedMarch
      31,
              
              
              March
      31,2008
              
              
              2007Net
      Income (Loss)
              
              $
              (1,746,563
              )
              
              $
              (2,255,554
              )Weighted
      average common shares outstanding(Basic)
              
              
              19,224,007
              
              
              
              11,397,445Weighted
      average common stock equivalents
              
              
              -
              
              
              
              -Stock
      options
              
              
              -
              
              
              
              -Warrants
              
              
              -
              
              
              
              -Weighted
      average common shares outstanding(Diluted)
              
              
              19,224,007
              
              
              
              11,397,445


A total
of 12,500 options were issued during the year ended March 31, 2008.  A
total of 1,212,393 options and warrants were outstanding as of March 31,
2008.  Including the options and warrants outstanding for the years
ended March 31, 2008 and 2007 would have been anti-dilutive.




F-16




IELEMENT
CORPORATION AND SUBSIDIARY
 NOTES
TO CONSOLIDATED FINANCIAL STATEMENTS - CONTINUED
 FOR
THE YEARS ENDED MARCH 31, 2008 AND 2007




NOTE 2-  SUMMARY
OF SIGNIFICANT ACCOUNTING POLICIES – (CONTINUED)




Stock-Based
Compensation




Effective
April 1, 2006, the Company adopted the provisions of Financial Accounting
Standards Board Statement of Financial Accounting Standard ("SFAS") No. 123(R),
"Share-Based Payments," which establishes the accounting for employee
stock-based awards. Under the provisions of SFAS No.123(R), stock-based
compensation is measured at the grant date, based on the calculated fair value
of the award, and is recognized as an expense over the requisite employee
service period (generally the vesting period of the grant). The Company adopted
SFAS No. 123(R) using the modified prospective method and, as a result, periods
prior to March 31, 2006 have not been restated. The Company recognized
stock-based compensation for awards issued under the Company's stock option
plans in other income/expenses included in the Condensed Consolidated Statement
of Operations. Additionally, no modifications were made to outstanding stock
options prior to the adoption of SFAS No. 123(R), and no cumulative adjustments
were recorded in the Company's financial statements.




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.





SFAS No.
123(R) requires disclosure of pro-forma information for periods prior to
adoption. The pro-forma disclosures are based on the fair value of awards at the
grant date, amortized to expense over the service period. The following table
illustrates the effect on net income and earnings per share as if the Company
had applied fair value recognition provisions of SFAS No. 123, “Accounting for
Stock-Based Compensation”, for the period prior to the adoption of SFAS No.
123(R), and the actual effect on net income and earning per share for the period
after the adoption of SFAS No. 123(R).




Year EndedMarch
      31,
                
                
                March
      31,2008
                
                
                2007Net
      (loss), as reported
                
                $
                (1,746,563
                )
                
                $
                (2,255,554
                )Add:
      Stock-based employee compensation expenseincluded
      in reported net (loss), net of related tax effects
                
                
                185,024
                
                
                
                225,650Deduct:
      Total stock-based employee compensationexpense
      determined under fair value based methodfor
      all awards, net of related tax effects
                
                
                (185,024
                )
                
                
                (225,650
                )Net
      (loss), pro forma
                
                $
                (1,746,563
                )
                
                $
                (2,255,554
                )(Loss)
      per share:Basic,
      as reported
                
                $
                (0.09
                )
                
                $
                (0.20
                )Basic,
      pro forma
                
                $
                (0.09
                )
                
                $
                (0.20
                )Diluted,
      as reported
                
                $
                (0.09
                )
                
                $
                (0.20
                )Diluted,
      pro forma
                
                $
                (0.09
                )
                
                $
                (0.20
                )


F-17




IELEMENT
CORPORATION AND SUBSIDIARY
 NOTES
TO CONSOLIDATED FINANCIAL STATEMENTS - CONTINUED
 FOR
THE YEARS ENDED MARCH 31, 2008 AND 2007




NOTE 2-  SUMMARY
OF SIGNIFICANT ACCOUNTING POLICIES – (CONTINUED)




Stock-Based Compensation –
(Continued)





For the
purposes of the above table, the fair value of each option granted is estimated
as of the grant date using the Black-Scholes option-pricing model with the
following assumptions:




Year EndedMarch
      31,
                
                
                March
      31,2008
                
                
                2007Dividend
      yield
                
                
                0.0
                %
                
                
                0.0
                %Expected
      volatility
                
                
                0.62
                
                
                
                0.62Risk-free
      interest rate
                
                
                5.0
                %
                
                
                5.0
                %Expected
      life in years
                
                
                10
                
                
                
                10




Stock-based
compensation for the years ended March 31, 2008 and 2007 were $185,024 and
$225,650 respectively.




On August
29, 2006, the Company issued 17,100,000 stock options to its employees. The
options have an exercise price of $0.01 and vest over 40 months. They have a
fair value of $714,096 using the Black-Scholes pricing model.





On
September 11, 2006, the Company issued 100,000 stock options to its employees.
The options have an exercise price of $0.01 and vest over 48 months. They have a
fair value of $3,360 using the Black-Scholes pricing model.




On
December 6, 2006, the Company issued 250,000 stock options to its directors. The
options have an exercise price of $0.01 and vest over 12 months. They have a
fair value of $6,000 using the Black-Scholes pricing model.




On
January 2, 2007, the Company issued 500,000 stock options to its employees. The
options have an exercise price of $0.01 and vest over 48 months. They have a
fair value of $9,200 using the Black-Scholes pricing model.





On April
1, 2007, the Company issued 12,500 stock options to its employees. The options
have an exercise price of $0.16 and vest over 48 months.  They have a
fair value of $1,920 using the Black-Scholes pricing model.






F-18




IELEMENT
CORPORATION AND SUBSIDIARY
 NOTES
TO CONSOLIDATED FINANCIAL STATEMENTS - CONTINUED
 FOR
THE YEARS ENDED MARCH 31, 2008 AND 2007


NOTE 2-  SUMMARY
OF SIGNIFICANT ACCOUNTING POLICIES – (CONTINUED)




Stock-Based Compensation –
(Continued)





The
following summarizes the stock option activity for the year ended March 31,
2008:




Weighted
                
                
                WeightedAverage
                
                
                AverageExercise
                
                
                ContractualShares
                
                
                Price
                
                
                Term
      (Years)Outstanding,
      March 31, 2007 (Restated)
                
                
                3,002,236
                
                
                
                0.067
                
                
                
                4.39Options
      granted
                
                
                12,500
                
                
                
                0.16Options
      reinstated
                
                
                -Options
      exercised
                
                
                95,312
                
                
                
                0.16Options
      forfeited or expired
                
                
                1,707,031
                
                
                
                1.35Outstanding,
      March 31, 2008
                
                
                1,212,393
                
                
                
                0.774
                
                
                
                5.16Options
      exercisable, March 31, 2008
                
                
                669,737
                
                
                
                1.272
                
                
                
                3.20Options
      available for grant at end of year
                
                
                1,456,250


At the
annual shareholder meeting on December 15, 2006, the shareholders approved the
Company’s 2006 Employee Stock Option Plan. The plan authorizes 2,562,500 shares,
as adjusted for the reverse stock split effective January 11, 2008, to be
optioned and sold. All employees are covered by the plan, although some
employees have not been granted options or shares under the plan. All options
that have been granted under the plan through March 31, 2007 vest over the term
for which they are meant as compensation. Options that have been issued to
Directors vest monthly over one year. Options that have been issued to employees
vest quarterly over four years. All options that have been issued under the plan
have a strike price of $0.16 per share, as adjusted for the reverse stock split
effective January 11, 2008.





Recent Accounting
Pronouncements





In
May 2005, the FASB issued SFAS No. 154, “Accounting Changes and Error
Corrections.” SFAS No. 154 replaces Accounting Principles Board (“APB”)
Opinion No. 20, “Accounting Changes” and SFAS No. 3, “Reporting
Accounting Changes in Interim Financial Statements.” SFAS No. 154 requires
retrospective application to prior periods’ financial statements of a voluntary
change in accounting principle unless it is impracticable. APB No. 20
previously required that most voluntary changes in accounting principle be
recognized by including the cumulative effect of changing to the new accounting
principle in net income in the period of the change. SFAS No. 154 is
effective for accounting changes and corrections of errors made in fiscal years
beginning after December 15, 2005. The adoption of SFAS No. 154 did
not have a material impact on the Company’s financial position or results of
operations.








F-19




IELEMENT
CORPORATION AND SUBSIDIARY
 NOTES
TO CONSOLIDATED FINANCIAL STATEMENTS - CONTINUED
 FOR
THE YEARS ENDED MARCH 31, 2008 AND 2007


NOTE 2-  SUMMARY
OF SIGNIFICANT ACCOUNTING POLICIES – (CONTINUED)





Recent Accounting
Pronouncements – (Continued)





In
February 2006, the FASB issued SFAS No. 155, “Accounting for Certain
Hybrid Financial Instruments, an amendment of FASB Statements No. 133 and
140.” SFAS No. 155 resolves issues addressed in SFAS No. 133
Implementation Issue No. D1, “Application of Statement 133 to Beneficial
Interests in Securitized Financial Assets,” and permits fair value remeasurement
for any hybrid financial instrument that contains an embedded derivative that
otherwise would require bifurcation, clarifies which interest-only strips and
principal-only strips are not subject to the requirements of SFAS No. 133,
establishes a requirement to evaluate interests in securitized financial assets
to identify interests that are freestanding derivatives or that are hybrid
financial instruments that contain an embedded derivative requiring bifurcation,
clarifies that concentrations of credit risk in the form of subordination are
not embedded derivatives and amends SFAS No. 140 to eliminate the
prohibition on a qualifying special-purpose entity from holding a derivative
financial instrument that pertains to a beneficial interest other than another
derivative financial instrument. SFAS No. 155 is effective for all
financial instruments acquired or issued after the beginning of the first fiscal
year that begins after September 15, 2006. The Company is currently
evaluating the effect the adoption of SFAS No. 155 will have on its
financial position or results of operations.




In
March 2006, the FASB issued SFAS No. 156, “Accounting for Servicing of
Financial Assets, an amendment of FASB Statement No. 140.” SFAS
No. 156 requires an entity to recognize a servicing asset or liability each
time it undertakes an obligation to service a financial asset by entering into a
servicing contract under a transfer of the servicer’s financial assets that
meets the requirements for sale accounting, a transfer of the servicer’s
financial assets to a qualified special-purpose entity in a guaranteed mortgage
securitization in which the transferor retains all of the resulting securities
and classifies them as either available-for-sale or trading securities in
accordance with SFAS No. 115, “Accounting for Certain Investments in Debt
and Equity Securities” and an acquisition or assumption of an obligation to
service a financial asset that does not relate to financial assets of the
servicer or its consolidated affiliates. Additionally, SFAS No. 156
requires all separately recognized servicing assets and servicing liabilities to
be initially measured at fair value, permits an entity to choose either the use
of an amortization or fair value method for subsequent measurements, permits at
initial adoption a one-time reclassification of available-for-sale securities to
trading securities by entities with recognized servicing rights and requires
separate presentation of servicing assets and liabilities subsequently measured
at fair value and additional disclosures for all separately recognized servicing
assets and liabilities. SFAS No. 156 is effective for transactions entered
into after the beginning of the first fiscal year that begins after
September 15, 2006. The Company is currently evaluating the effect the
adoption of SFAS No. 156 will have on its financial position or results of
operations.





In June
2006, the FASB issued FASB Interpretation No. 48, “Accounting for
Uncertainty in Income Taxes - an interpretation of FASB Statement No. 109”
(“FIN 48”). FIN 48 prescribes a recognition threshold and measurement attribute
for financial statement recognition and measurement of a tax position taken or
expected to be taken in a tax return, and also provides guidance on
de-recognition, classification, interest and penalties, accounting in interim
periods, disclosure, and transition. FIN 48 is effective for fiscal years
beginning after December 15, 2006. The adoption of FIN 48 is not expected
to have a material impact on the Company’s consolidated financial position and
results of operations.





In
September 2006, the FASB issued Statement of Financial Accounting Standards No.
157, Fair Value Measurements, (“FAS 157”). This Standard defines fair value,
establishes a framework for measuring fair value in generally accepted
accounting principles and expands disclosures about fair value measurements. FAS
157 is effective for financial statements issued for fiscal years beginning
after November 15, 2007 and interim periods within those fiscal years. The
adoption of FAS 157 is not expected to have a material impact on the Company’s
financial position, results of operations or cash flows.







F-20
 
  IELEMENT
CORPORATION AND SUBSIDIARY
 NOTES
TO CONSOLIDATED FINANCIAL STATEMENTS - CONTINUED
 FOR
THE YEARS ENDED MARCH 31, 2008 AND 2007


NOTE 2-  SUMMARY
OF SIGNIFICANT ACCOUNTING POLICIES – (CONTINUED)





Recent Accounting
Pronouncements – (Continued)




The FASB
also issued in September 2006 Statement of Financial Accounting Standards No.
158, Employers’ Accounting for Defined Benefit Pension and Other Postretirement
Plans — an amendment of FASB Statement No. 87, 88, 106 and 132(R), (“FAS 158”).
This Standard requires recognition of the funded status of a benefit plan in the
statement of financial position. The Standard also requires recognition in other
comprehensive income certain gains and losses that arise during the period but
are deferred under pension accounting rules, as well as modifies the timing of
reporting and adds certain disclosures. FAS 158 provides recognition and
disclosure elements to be effective as of the end of the fiscal year after
December 15, 2006 and measurement elements to be effective for fiscal years
ending after December 15, 2008. The Company has not yet analyzed the impact FAS
158 will have on its financial condition, results of operations, cash flows or
disclosures.





In
February 2007, the FASB issued SFAS No. 159, The Fair Value Option for
Financial Assets and Financial Liabilities - Including an amendment of SFAS
No. 115 (“SFAS No. 159”), which provides all
entities, including not-for-profit organizations, with an option to report
selected financial assets and liabilities at fair value. The objective of SFAS
No. 159 is to improve financial reporting by providing entities with the
opportunity to mitigate volatility in earnings caused by measuring related
assets and liabilities differently without having to apply the complex
provisions of hedge accounting. Certain specified items are eligible for the
irrevocable fair value measurement option as established by SFAS No. 159.
SFAS No. 159 is effective as of the beginning of the Company’s year
beginning after January 1, 2008. The Company is currently assessing the
impact of SFAS No. 159 on its financial position, results of operations and
cash flows.





In
December 2007, the FASB issued FAS No. 160, “Noncontrolling Interests in
Consolidated Financial Statements-an amendment of ARB No. 51” (“FAS
No. 160”). FAS No. 160 establishes accounting and reporting standards for
the noncontrolling interest in a subsidiary and for the deconsolidation of a
subsidiary. It clarifies that a noncontrolling interest in a subsidiary is an
ownership interest in the consolidated entity that should be reported as equity
in the consolidated financial statements. FAS No. 160 is effective for the
Company in its fiscal year beginning January 1, 2010. The Company does not
believe this statement will have a material impact on its financial position and
results of operations upon adoption.





In
December 2007, the FASB issued FAS No. 141 R “Business Combinations” (“FAS
No. 141R”). FAS No. 141R establishes principles and requirements for
how the acquirer of a business recognizes and measures in its financial
statements the identifiable assets acquired, the liabilities assumed, and any
noncontrolling interest in the acquiree. FAS No. 141R also provides
guidance for recognizing and measuring the goodwill acquired in the business
combination and determines what information to disclose to enable users of the
financial statements to evaluate the nature and financial effects of the
business combination. FAS No. 141R is effective for the Company’s fiscal
year beginning January 1, 2010. The Company
does not believe this statement will have a material impact on its financial
position and results of operations upon adoption.








F-21




IELEMENT
CORPORATION AND SUBSIDIARY
 NOTES
TO CONSOLIDATED FINANCIAL STATEMENTS - CONTINUED
 FOR
THE YEARS ENDED MARCH 31, 2008 AND 2007




NOTE 3- DISCONTINUED
OPERATIONS





On
December 20, 2007 the Company sold its main operating subsidiary, I-Element,
Inc., along with certain assets and liabilities related to that
telecommunications business, to Ivan Zweig.





The
summarized results of discontinued operations for the year ended March 31, 2008
and 2007 are as follows:




April
      1, 2007Through
                
                
                April
      1, 2006December
      20,
                
                
                to2007
                
                
                March
      31, 2007Revenues
                
                $
                2,411,718
                
                
                $
                3,776,639Cost
      of revenues
                
                
                1,695,492
                
                
                
                2,434,570Gross
      profit
                
                
                716,226
                
                
                
                1,342,069Operating
      expenses
                
                
                1,801,180
                
                
                
                3,511,769Operating
      loss
                
                
                (1,084,954
                )
                
                
                (2,169,700
                )Other
      income (expense)
                
                
                (345,947
                )
                
                
                18,995Provision
      for income taxes
                
                
                -
                
                
                
                -Net
      loss
                
                $
                (1,430,901
                )
                
                $
                (2,150,705
                )


The
summarized components of assets and liabilities associated with the discontinued
operations for the year ended March 31, 2008 and 2007 are as
follows:




Date
      of saleDecember
      20,
                
                
                March
      31,2007
                
                
                2007Cash
                
                $
                122,222
                
                
                $
                165,352Accounts
      receivable, net
                
                
                467,983
                
                
                
                356,028Interest
      receivable
                
                
                -
                
                
                
                18,542Other
      current assets
                
                
                4,775
                
                
                
                7,930Fixed
      assets, net
                
                
                341,547
                
                
                
                513,918Deposits
                
                
                37,751
                
                
                
                62,227Total
      assets
                
                $
                974,278
                
                
                $
                1,123,997Accounts
      payable and accrued expenses
                
                $
                934,225
                
                
                $
                1,029,911Customer
      deposits
                
                
                87,838
                
                
                
                101,742Receivable
      financing payable
                
                
                325,128
                
                
                
                313,046Commissions
      payable
                
                
                -
                
                
                
                8,723Deferred
      revenue
                
                
                579,795
                
                
                
                513,779Stockholders
      (deficit)
                
                
                (952,708
                )
                
                
                -Total
      liabilities and stockholders deficit
                
                $
                974,278
                
                
                $
                1,967,201




F-22




IELEMENT
CORPORATION AND SUBSIDIARY
 NOTES
TO CONSOLIDATED FINANCIAL STATEMENTS - CONTINUED
 FOR
THE YEARS ENDED MARCH 31, 2008 AND 2007




NOTE 4- FIXED
ASSETS





Property
and equipment as of March 31, 2008 was as follows:




March
      31,
                
                
                March
      31,2008
                
                
                2007Property
      and equipment
                
                $
                -
                
                
                $
                1,579,951Less:
      accumulated depreciation
                
                
                -
                
                
                
                (1,066,033
                )Net
      book value
                
                $
                -
                
                
                $
                513,918


There was
$233,766 and $302,418 charged to discontinued operations for depreciation
expense for the years ended March 31, 2008 and 2007, respectively.




NOTE 5- NOTES
PAYABLE





The
Company has 17 notes payable at March 31, 2008 in the aggregate principal and
interest amount of $1,230,097 owed to 7 note holders. As of March 31, 2008 we
were current in all obligations except for past due total payments of $460,094
on 10 notes.   No default has been declared. The following is a more
detailed discussion of the 17 notes.





On
January 19, 2005, IElement issued eight (8) promissory notes to Kramerica and
certain members of Mr. Zweig's immediate family and others in the aggregate
amount of $376,956 (the "Notes") with no interest. In particular, the Notes are
payable to Heather Walther ($20,000), Kramerica, Inc. (aggregate of $120,000),
Mary Francis Strait Trust ($55,611), Peter Walther ($30,000), Richard Zweig
($20,000), Richard Zweig IRA ($27,500) and Strait Grandchildren Trust
($103,845). Upon issuance, the Notes were payable in 36 monthly installments
with the first payment commencing six months after the closing of the merger and
were secured by substantially all of the assets of the Company. We did not make
any payments on the Notes.





On March
25, 2006 each of the eight (8) Notes were cancelled and we issued new
convertible promissory notes to the same individuals in the same principal
amount of $376,956, again with no interest thereon. The first payment on each of
the new convertible promissory Notes was due in September 2006 with a total of
36 monthly installments through August 2009. The Lender has the right to convert
all or a portion of the outstanding balance, at any time until the Notes are
paid in full, into share of our common stock at a conversion price of $0.035 per
share. Any past due balance on the old Notes was forgiven at the time of
cancellation of the old notes and issuance of the new convertible promissory
Notes.





On
October 6, 2006 we reached agreements with the holders of these eight Notes to
extend the first payment date until April 1, 2007. We did not make any payments
on the notes.





Four of
the eight Note holders received a total of 5,400,000 shares of the Company’s
common stock on June 19, 2007 in exchange for extension of the principle
repayment terms. This amount was recorded as interest expense.  On
January 23, 2008 six of the eight Notes were converted into 3,173,612 shares of
our common stock. The total aggregate principle balance of the remaining two
notes as of March 31, 2008 was $173,845.







F-23
 
  IELEMENT
CORPORATION AND SUBSIDIARY
 NOTES
TO CONSOLIDATED FINANCIAL STATEMENTS - CONTINUED
 FOR
THE YEARS ENDED MARCH 31, 2008 AND 2007


NOTE 5- NOTES
PAYABLE - CONTINUED





In
January 2008, six of these Notes were sold by the note holder.  In
particular, the $50,000 note to Kramerica, the $55,611 note to Mary Francis
Straight, the $20,000 note to Heather Walther, the $30,000 note to Peter
Walther, the $20,000 note to Richard Zweig and the $27,500 note to Richard Zweig
IRA were sold to third parties.  On January 23, 2008, we converted the
six notes to 3,173,612 shares of the Company’s common stock.  The two
remaining notes are the $70,000 note to Kramerica and the $103,845 note to
Straight Grandchildren Trust.  Both of these notes are now owned by
Kramerica.




In
addition to these notes, the Company also has another promissory note payable to
Kramerica in the principle amount of $25,000. This note was issued on August 24,
2006 and bears interest at an annual rate of ten percent.  The current
principle and interest balance on this note as of March 31, 2008 was
$28,320.




On August
8, 2005, IElement issued four promissory notes in the aggregate principal amount
of $183,097 to Timothy Dean Smith ($53,930), Susan Walton ($30,000), Jeremy Dean
Smith ($54,603) and Dolphin Capital ($44,564), with no interest. Upon issuance
the notes were payable in 36 monthly installments with the first payment due in
February, 2006. We did not make any payments on these notes.





On March
25, 2006 each of the four notes were cancelled and IElement issued new
convertible promissory notes to the same individuals in the same principal
amount of $183,097, again with no interest thereon. The first payment on each of
the new convertible promissory notes was due in September 2006 with a total of
36 monthly installments through August 2009. The Lenders had the right to
convert all or a portion of the outstanding balance, at any time until the notes
were paid in full, into IElement's common stock at a conversion price of $0.035
per share. Any past due balance on the old notes was forgiven at the time of
cancellation of the old notes and issuance of the new convertible promissory
notes. These four notes were each converted to common stock at a price of $0.035
per share on November 13, 2006.





One of
the remaining notes is held by Duane Morris in the principle amount of $34,631.
The Duane Morris note was issued in exchange for a settlement of disputed
attorneys fees on August 16, 2005 and was originally agreed to be paid in nine
monthly installments beginning on September 30, 2005 and ending May 30, 2006. As
of March 31, 2008we are past due
on our payments on the Duane Morris note but intend to resume payments in the
coming months. This note bears no interest.




On June
8, 2006 we issued a note payable in the amount of $100,000 to Rhino Limited
which bears a ten percent interest rate. It matured when we secured funding from
exercise of outstanding warrants.  Those warrants expired unexercised
on December 30, 2007.  The current principle and interest balance on
this note as of March 31, 2008 was $118,295.





On June
19, 2006 we issued a note payable in the amount of $20,000 to Veronica Kristi
Prenn. It bore a ten percent interest rate and matured on December 19,
2006.   The current principle and interest balance on this note
as of December 31, 2007 was $23,096.  On January 17, 2008 this note
was converted to shares of the Company’s common stock.




On August
4, 2006 we issued a note payable to Walton Hansen in the amount of $24,808. It
bore a ten percent interest rate and matured when we secured funding from
exercise of outstanding warrants. On October 9, 2007, this note was converted
into shares of our common stock.





On
September 5, 2006 we issued a note payable to William Goatley in the amount of
$60,000. It bore a ten percent interest rate and matured on December 5, 2006.
The current principle and interest balance on this note as of December 31, 2007
was $67,972. On January 17, 2008 this note was converted into shares of our
common stock.




F-24
 
  IELEMENT
CORPORATION AND SUBSIDIARY
 NOTES
TO CONSOLIDATED FINANCIAL STATEMENTS - CONTINUED
 FOR
THE YEARS ENDED MARCH 31, 2008 AND 2007





NOTE 5- NOTES
PAYABLE – CONTINUED




On March
16, 2007 we issued a note payable to Michael Bloch in the amount of $110,000. It
bears a ten percent interest rate and matured on June 16, 2007.  On
July 20, 2007 the maturity on this note was extended to October 31, 2007 in
exchange for 62,500 shares of the Company’s common stock.  On October
31, 2007 the maturity on this note was extended to November 30, 2007 in exchange
for $1,500.  The current principle and interest balance on this note
as of March 31, 2008 was $110,961. This note is secured by substantially all of
our assets.  We are currently renegotiating the terms of this
note.





On May
18, 2007 we issued a note payable to Secure Acquisition Financial Entity L.P.
(SAFE) in the amount of $200,000 in exchange for $200,000 cash and a note
receivable from Micro-Data Systems, Inc. in the amount of
$50,000.  The note payable bears an 18 percent annual interest rate
and the note receivable bears a 20 percent annual interest rate.  The
note was assumed by GDBC, Inc. on January 31, 2008.  The current
principle and interest balance on this note payable as of March 31, 2008 was
$222,364.  We are currently renegotiating the terms of this
note.





During
July of 2007 we issued 10 notes payable to various entities in the aggregate
amount of $170,000.  All 10 of these notes bore a ten percent interest
rate and were convertible into shares of our common stock at a rate of $0.16 per
share.  The current principle and interest balance on these notes as
of December 31, 2007 was $177,581.  On January 17, 2008 all 10 of
these notes were converted to shares of the Company’s common stock.





On August
23, 2007 we issued a note payable to Ivan Zweig in the amount of $41,943 that
bears a ten percent interest rate.  The current principle and interest
balance on this note as of March 31, 2008 was $44,482.  This note is
now owned by Kramerica.





On
September 17, 2007 we issued a note payable to Ivan Zweig in the amount of
$76,000 that bears a ten percent interest rate.  The current principle
and interest balance on this note as of March 31, 2008 was $80,102. This note is
now owned by Kramerica.





On
September 20, 2007 we issued two notes payable to Kramerica in the amounts of
$15,000 and $34,113, respectively.  They each bear a ten percent
interest rate.  The current principle and interest balances due on
these notes as of March 31, 2008 were $15,797 and $35,927,
respectively.





On
October 1, 2007 we issued a note payable to Kramerica in the amount of $44,000
that bears a ten percent interest rate.  The current principle and
interest balance on this note as of March 31, 2008 was $46,194.





On
November 8, 2007 we issued a note payable to Kramerica in the amount of $16,187
that bears a ten percent interest rate.  The current principle and
interest balance on this note as of March 31, 2008 was $16,826.





On
November 9, 2007 we issued a note payable to Kramerica in the amount of $17,900
that bears a ten percent interest rate.  The current principle and
interest balance on this note as of March 31, 2008 was $18,601.





On
December 12, 2007 we issued a note payable to Newsgrade Corporation in the
amount of $200,000 that bears a ten percent interest rate.  The
current principle and interest balance on this note as of March 31, 2008 was
$155,287.





On
January 18, 2008 we issued a secured note payable to GDBC, Inc. in the
amount of $5,340 that bears a ten percent interest rate and is due on January
18, 2009.  The current principle and interest balance on this note as
of March 31, 2008 was $5,473. This note is secured by the assets of the
company





On
January 28, 2008 we issued a secured note payable to William M. Goatley
Revocable Trust in the amount of $120,000 that bears a ten percent interest rate
and is due on January 28, 2009.  The current principle and interest
balance on this note as of March 31, 2008 was $122,992. This note is secured by
the assets of the company




F-25




IELEMENT
CORPORATION AND SUBSIDIARY
 NOTES
TO CONSOLIDATED FINANCIAL STATEMENTS - CONTINUED
 FOR
THE YEARS ENDED MARCH 31, 2008 AND 2007




NOTE 5- NOTES
PAYABLE –CONTINUED





Our total
debt servicing requirements on the 17 outstanding promissory notes over the next
12 months will be approximately $1,109,569.  However, we are currently
negotiating further conversions.





The notes
payable balances at March 31, 2008 and 2007 were as follows:




March
      31,
                
                
                March
      31,2008
                
                
                2007Total
      notes payable
                
                
                $
                1,230,097
                
                
                $
                767,434Less:
      current maturities
                
                
                
                (1,109,569
                )
                
                
                (511,499
                )Long-term
      notes payable
                
                $
                120,528
                
                
                $
                255,935The
      amount of principal maturities of the notes payable for the next three
      yearsending
      March 31 and in the aggregate is as follows:2009
                
                $
                1,109,5692010
                
                
                62,5802011
                
                
                57,948$
                1,230,097


NOTE 6- OPERATING
LEASES





The
Company leased office space under a lease that commenced in June of
2005.  The lease was payable on a month-to-month basis. Monthly
payments under the current lease were $3,284.   As of December
20, 2007 the Company sold its I-Element, Inc. subsidiary and this lease was
included in the sale.





Rental
payments charged to expense for the twelve months ended March 31, 2008 were
$34,437 and $37,346, respectively.  As of March 31, 2008 the Company
no longer had any operating leases.




NOTE 7- STOCKHOLDERS’
(DEFICIT)




Common
Stock





As of
March 31, 2008, the Company has 125,000,000 shares of common stock authorized at
a par value of $0.001 and 27,799,501 shares issued and outstanding, as adjusted
for the reverse stock split effective on January 11, 2008.





THE
FOLLOWING DETAILS THE STOCK TRANSACTIONS FOR THE YEAR ENDED MARCH 31, 2008, AS
ADJUSTED FOR THE REVERSE STOCK SPLIT EFFECTIVE JANUARY 11, 2008:





The
Company revoked 1,500,000 shares of common stock that had previously been issued
for services rendered in the amount of $288,000.





The
Company issued 5,710,949 shares of common stock for services rendered valued at
$763,510.





The
Company issued 400,000 shares of common stock for the extension of maturity
dates on notes payable.  Those shares were valued at $71,400 and
recorded as interest expense.





The
Company issued 95,313 shares of common stock upon the exercise of employee stock
options valued at $15,250.




F-26




IELEMENT
CORPORATION AND SUBSIDIARY
 NOTES
TO CONSOLIDATED FINANCIAL STATEMENTS - CONTINUED
 FOR
THE YEARS ENDED MARCH 31, 2008 AND 2007
  NOTE 7- STOCKHOLDERS’
(DEFICIT) – CONTINUED





Common
Stock –(Continued)





The
Company issued 668,242 shares of common stock to retire accounts payable in the
amount of $66,337.





The
Company issued 218,750 shares of common stock for $7,000 in cash.





The
Company issued 7,805,290 shares of common stock to retire notes payable in the
principle amount of $499,539.





THE
FOLLOWING DETAILS THE STOCK TRANSACTIONS FOR THE YEAR ENDED MARCH 31, 2007, AS
ADJUSTED FOR THE REVERSE STOCK SPLIT EFFECTIVE JANUARY 11, 2008:





The
Company issued 215,793 shares of common stock to retire accounts payable with a
fair value of $93,568.





The
Company issued 1,956,920 shares of common stock as payment for services rendered
with a fair value of $1,146,130.





The
Company issued 326,959 shares of common stock to convert notes payable with a
fair value of $183,097.





The
Company issued 1,875,000 shares of common stock in exchange for a note
receivable, which was recorded as a stock subscription receivable of $900,000.
Interest on the note receivable was 8% per annum.





The
Company issued 86,719 shares of common stock upon exercise of stock options for
cash of $13,876.





Blank Check Preferred
Stock





The
company also has 12,500,000 shares of Blank Check Preferred Stock authorized, as
adjusted for the reverse stock split effective on January 11, 2008. There are no
current plans to issue any Blank Check Preferred Stock.




NOTE 8- 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-27
 
  IELEMENT
CORPORATION AND SUBSIDIARY
 NOTES
TO CONSOLIDATED FINANCIAL STATEMENTS - CONTINUED
 FOR
THE YEARS ENDED MARCH 31, 2008 AND 2007


NOTE 8- PROVISION
FOR INCOME TAXES - CONTINUED





At March
31, 2008 and 2007, deferred tax assets consist of the
following:


March
      31,
                
                
                March
      31,2008
                
                
                2007Net
      deferred tax assets
                
                $
                -
                
                
                $
                1,397,689Less:
      valuation allowance
                
                
                -
                
                
                
                (1,397,689
                )$
                -
                
                
                $
                -
 At March
31, 2008, the Company had deficits accumulated in the approximate amount of
$6,405,526, however, due to the transfer of its operating subsidiary, the
Company will not have any taxable net operating losses to carry-forward to
future years.  In prior years, the Company established a valuation
allowance 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 9- GOING
CONCERN





As shown
in the accompanying consolidated financial statements, the Company has sustained
net operating losses for the year ended March 31, 2008 and 2007. 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.





Management
believes that the sale of the I-Element, Inc. subsidiary on December 20, 2007
will substantially reduce the cash requirements and allow the Company to
continue as a going concern.





The
consolidated financial statements do not include any adjustments relating to the
recoverability or classification of recorded assets andliabilities that might
result should the Company be unable to continue as a going concern.












F-28


ITEM
9.CHANGES IN AND
DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND FINANCIAL
DISCLOSURE.





NONE





ITEM
9A.CONTROLS AND
PROCEDURES





The term
“disclosure controls and procedures” is defined in Rules 13(a)-15e and 15(d) -
15(e) of the Securities Exchange Act of 1934, as amended (the Exchange Act). Our
Chief Executive Officer and Chief Financial Officer have evaluated the
effectiveness of our disclosure controls and procedures as of March 31, 2008.
She has concluded, as of March 31, 2008 that our disclosures were ineffective to
ensure that:
 
 (1)
Information required to be disclosed by the Company in reports that it files or
submits under the act is recorded, processed, summarized and reported, within
the time periods specified in the Commissions' rules and forms, and
 
 (2)
Controls and procedures are designed by the Company to ensure that information
required to be disclosed by us in the reports we file or submit under the Act is
accumulated and communicated to the issuer's management including the Chief
Executive Officer and the Chief Financial Officer or persons performing similar
functions, as appropriate to allow timely decisions regarding financial
disclosure.
 
 This term
refers to the controls and procedures of a Company that are designed to ensure
that information required to be disclosed by a Company in the reports that it
files under the Exchange Act is recorded, processed, summarized and reported
within the required time periods. Our Chief Executive Officer and Chief
Financial Officer has evaluated the effectiveness of our disclosure controls and
procedures as of the end of the period covered by this annual
report.
 
 Bagell,
Josephs, Levine and Company, L.L.C., our independent registered public
accounting firm, has advised management and the board of directors that it has
identified the following material weaknesses in our internal
controls:
  A
material weakness exists as of March 31, 2008 with regard to insufficient
personnel in the accounting and financial reporting function due to the size of
our company which prevents the ability to employ sufficient resources to have
adequate segregation of duties within the internal control
system.  This material weakness affects management's ability to
effectively review and analyze elements of the financial statement closing
process and prepare consolidated financial statements in accordance with U.S.
GAAP.
  In
addition, a material weakness exists as of March 31, 2008, in controls over
closing procedures due to a number of adjustments made at the end of the year
period. There were deficiencies in the analysis and reconciliation of general
ledger accounts which were indicative of a material weakness on controls over
closing procedures, including (a) the fair value and sale of investments were
not appropriately reported, (b) the recognition of expenses in appropriate
periods, and (c) the accounting and reporting of capital
transactions.
 
 There
have been no other changes in our internal controls over financial reporting
that occurred during the period covered by this Report on Form 10-K that have
materially affected, or are reasonably likely to materially affect, our internal
controls over financial reporting.





ITEM
9B.OTHER
INFORMATION





None


PART
III





ITEM
10.DIRECTORS,
EXECUTIVE OFFICERS AND CORPORATE GOVERNANCE.





The
following table furnishes the information concerning our directors and officers
as of July 7, 2008. The directors are elected every year and serve until their
successors are elected and qualify.




Name
            Age
            PositionSusan
      Pursel
            51
            CEO,
      ChairmanPaul
      Lengemann
            63
            Director





Susan Pursel (age 51) has
been our Chairman and Chief Executive Officer since December 20,
2007.  She has been President of StockDataNews.com, Inc., from July of
2005 through December of 2007; Vice President of StockDiagnostics.com Inc., from
July of 2004 through June of 2005.




23


Paul Lengemann (age 63) was
appointed to the Board of Directors on December 24, 2007.  He is the
President and founder of FXLive, Inc, a privately held company.  Mr.
Lengemann was President of Stockdiagnostics.com, Inc. from May 2002 through May
2004 and was President and CEO of Walsung, Inc. from 2000 to 2001.  In
addition, he has been a free lance writer for the Seminole
Chronicle.





Compliance
With Section 16(a) Of The Exchange Act





Section
16(a) of the Securities Exchange Act of 1934, as amended, requires the
registrant's officers and directors, and persons who own more than 10% of a
registered class of the registrant's equity securities, to file reports of
ownership and changes in ownership of equity securities of the Registrant with
the Securities and Exchange Commission. Officers, directors and greater-than 10%
shareholders are required by the Securities and Exchange Commission regulation
to furnish the registrant with copies of all Section 16(a) forms that they
file.





ITEM
11.EXECUTIVE
COMPENSATION





(a)
Compensation.





The
following table sets forth compensation awarded to, earned by or paid to our
Chief Executive Officer and the four other most highly compensated executive
officers with compensation in excess of $100,000 for the years ended March 31,
2008 and 2007 (collectively, the "Named Executive Officers").





SUMMARY
      COMPENSATION TABLEName
      and
              principal
      position
            Year
            Salary
            Bonus
            Stock
              Awards
            Option
      Awards
            Non-Equity
      Incentive Plan Compensation
            Nonqualified
      Deferred Compensation Earnings
            All
      Other Compensation
            TotalSusan
      Pursel,
            2008
            $30,000
            0
            $67,500
            0
            0
            0
            0
            $97,500CEO
      and Chairman
            2007
            0
            0
            0
            0
            0
            0
            0
            0Ivan
      Zweig,
            2008
            $203,260
            0
            0
            0
            0
            0
            0
            $203,260CEO
      and Chairman until Dec. 20, 2007
            2007
            $300,000
            $15,000
            0
            0
            0
            0
            0
            $315,000Alex
      Ponnath,
            2008
            0
            0
            0
            0
            0
            0
            0
            0CTO
      until July 20,
              2007
            2007
            132,000
            5,500
            0
            2,200,000
            0
            0
            0
            $2,337,500






24




OUTSTANDING
      EQUITY AWARDS AT MARCH 31, 2008OPTION
      AWARDS
            STOCK
      AWARDSName
            Number
      of Securities Underlying Unexercised Options
              (#)
              Exercisable
            Number
      of Securities Underlying Unexercised Options
              (#)
              Unexercisable
            Equity
      Incentive Plan Awards: Number of Securities Underlying Unexercised
      Unearned Options
              (#)
            Option
      Exercise Price
              ($)
            Option
      Expiration
              Date
            Number
              of
      Shares
              or
      Units
              of
      Stock
              That
      Have
              Not
              Vested
              (#)
            Market
              Value
      of
              Shares
      or
              Units
      of
              Stock
              That
      Have
              Not
              Vested
              ($)
            Equity
              Incentive
      Plan Awards:
              Number
      of
              Unearned
              Shares,
              Units
      or
              Other
      Rights
              That
      Have
              Not
      Vested
              (#)
            Equity
      Incentive
              Plan
              Awards:
      Market or Payout
              Value
      of Unearned Shares, Units
              or
      Other
              Rights
      That Have Not Vested
              (#)Susan
      Pursel
            NoneIvan
      Zweig
            NoneAlex
      Ponnath
            None





EMPLOYMENT
CONTRACTS





We do not
have an employment contract with any executive officer.





We have
made no Long Term Compensation payouts (LTIP or other).





DIRECTOR
COMPENSATION





DIRECTOR
      COMPENSATIONName
            Fees
              Earned
      or
              Paid
      in
              Cash
            Stock
              Awards
            Option
              Awards
            Non-Equity
              Incentive
              Plan
              Compensation
            Change
      in
              Pension
              Value
      and
              Nonqualified
              Deferred
              Compensation
              Earnings
            All
              Other
              Compensation
            TotalSusan
      Pursel
            0
            13,000,000
            0
            0
            0
            0Paul
      Lengemann
            0
            1,000,000
            0
            0
            0
            0





We
approved the issuance of 13,000,000 shares of common stock to Ms. Pursel in
exchange for her agreement to serve on the Board of Directors and also for
accepting the position as Chairman, CEO and President of the
Company.  We have also approved the issuance of 1,000,000 shares of
common stock to Mr. Lengemann in exchange for his agreement to serve on the
Board of Directors.




25


ITEM
12.SECURITY
OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT AND RELATED STOCKHOLDER
MATTERS





The
following table sets forth certain information regarding the beneficial
ownership of Common Stock as of July 7, 2008, for each person, other than
directors and executive officers, who is known by us to own beneficially five
percent (5%) or more of its outstanding Common Stock.





Security
Ownership of five percent (5%) Shareholders





Security
      Ownership of five percent (5%) ShareholdersTitle
      of class
            Name
      and address of
              beneficial
      owner
            Amount
      and nature of
              beneficial
      ownership
            Percent
      of classNONE





Security
Ownership of Management





The
following table sets forth certain information regarding the beneficial
ownership of Common Stock as of May 30, 2008, for the following: (1) each of the
Company's directors and executive officers and (2) its directors and executive
officers as a group.




Security
      Ownership of ManagementTitle
      of Class
            Name
      of Beneficial
              Owner
            Amount
      and nature of
              Beneficial
      Ownership
            Percent
      of Class(1)Common
            Susan
      Pursel
            1,552,500
            4.68Common
            Paul
      Lengemann
            62,500
            0.225Directors
      and executive officers as a group(2)
            875,000
            3.148





(1)Based
on an aggregate of 33,149,501 common shares outstanding as of May 31,
2008.





ITEM
13.CERTAIN
RELATIONSHIPS AND RELATED TRANSACTIONS, AND DIRECTOR INDEPENDENCE





None of
our directors or executive officers or their respective immediate family members
or affiliates are indebted to us. As of the date of this report, there is no
material proceeding to which any of our directors, executive officers or
affiliates is a party or has a material interest adverse to us.




On
December 20, 2007 we sold our main operating subsidiary, I-Element, along with
certain assets and liabilities related to that telecommunications business,
to Ivan Zweig.  In conjunction with this transaction, Mr. Zweig
released us from any and all liability under his employment agreement as well as
a consulting agreement with Kramerica, both dated January 1, 2007, and he
resigned all officer and director positions he held with us.  In
addition, Mr. Zweig agreed to cancel all of his outstanding warrants and options
to purchase our capital stock.  Mr. Zweig and I-Element also agreed to
indemnify us from liabilities arising prior to December 20,
2007.   Mr. Zweig is the sole shareholder of
Kramerica.




26


Since
December 1998, Mr. Zweig has served as the Chief Executive Officer and director
of Integrated Communications Consultants Corp., a company that provided to us,
through December 20, 2007, resold telecom services for approximately $81,000 a
month.




On
December 20, 2007, we entered into a Stock Purchase Agreement with Newsgrade
Corporation, pursuant to which we agreed to purchase from Newsgrade one (1)
million shares of common stock of The Retirement Solutions.com,
Inc..  As consideration for the purchase, we agreed to pay to
Newsgrade at closing $200,000 in the form of a Convertible Promissory
Note due and payable one year from issuance with 10% interest and
convertible into shares of our common stock.




Susan  Pursel
is a minority stockholder of Newsgrade and former President of
StockDataNews.com, Inc., a wholly owned subsidiary of Newsgrade.  Paul
Lengemann was President of Stockdiagnostics.com, Inc., a wholly owned subsidiary
of Newsgrade between 2002 and 2004.




On
January 19, 2005, we issued eight (8) promissory notes to Kramerica and certain
members of Mr. Zweig's immediate family and others in the aggregate amount of
$376,956 (the "Notes") with no
interest. In particular, the Notes are payable to Heather Walther ($20,000),
Kramerica, Inc. (aggregate of $120,000), Mary Francis Strait Trust ($55,611),
Peter Walther ($30,000), Richard Zweig ($20,000), Richard Zweig IRA ($27,500)
and Strait Grandchildren Trust ($103,845). Upon issuance, the Notes were payable
in 36 monthly installments with the first payment commencing six months after
the closing of the merger and were secured by substantially all of the assets of
the Company. We did not make any payments on the Notes.




On March
25, 2006 each of the eight (8) Notes were cancelled and we issued new
convertible promissory notes to the same individuals in the same principal
amount of $376,956, again with no interest thereon. The first payment on each of
the new convertible promissory Notes was due in September 2006 with a total of
36 monthly installments through August 2009. The Lender has the right to convert
all or a portion of the outstanding balance, at any time until the Notes are
paid in full, into share of our common stock at a conversion price of $0.035 per
share. Any past due balance on the old Notes was forgiven at the time of
cancellation of the old notes and issuance of the new convertible promissory
Notes.




On
October 6, 2006 we reached agreements with the holders of these eight Notes to
extend the first payment date until April 1, 2007. We did not make any payments
on the notes.




Four of
the eight Note holders received a total of 5,400,000 shares of our common stock
on June 19, 2007 in exchange for extension of the principle repayment terms.
This amount was recorded as interest expense.  On January 23, 2008 six
of the eight notes were converted into 3,173,612 shares of our common stock. The
total aggregate principle balance of  the remaining
two  notes as of March 31, 2008 was $173,845.
 
 In January 2008, six of these Notes
were sold by the note holders.  In particular, the $50,000 note to
Kramerica, the $55,611 note to Mary Francis Straight, the $20,000 note to
Heather Walther, the $30,000 note to Peter Walther, the $20,000 note to Richard
Zweig and the $27,500 note to Richard Zweig IRA were sold their note to third
parties.  On January 23, 2008, we converted the six notes to 3,173,612
shares of our common stock.  The two remaining notes are the $70,000
note to Kramerica and the $103,845 note to Straight Grandchildren
Trust.  Both of these notes are now owned by Kramerica.
 
 In addition to these notes, we also
have another promissory note payable to Kramerica in the principle amount of
$25,000. This note was issued on August 24, 2006 and bears interest at an annual
rate of ten percent. The current principle and interest balance on this note as
of March 31, 2008 was $28,320.




27







ITEM
14.PRINCIPAL
ACCOUNTING FEES AND SERVICES





Audit Fees





We were
billed $47,000 for the fiscal year ended March 31, 2008 and $42,000 for the
fiscal year ended March 31, 2007 for professional services rendered by the
principal accountant for the audit of our annual financial statements, the
review of our quarterly financial statements, and other services performed in
connection with our statutory and regulatory filings.




Audit
Related Fees




There
were $0 in audit related fees for the fiscal year ended March 31, 2008 and $0 in
audit related fees for the fiscal year ended March 31, 2007. Audit related fees
include fees for assurance and related services rendered by the principal
accountant related to the audit or review of our financial statements, not
included in the foregoing paragraph.




Tax
Fees




Tax fees
were $0 for the fiscal year ended March 31, 2008 and $0 for the fiscal year
ended March 31, 2007.




All
Other Fees




There
were no other professional services rendered by our principal accountant during
the last two fiscal years that were not included in the above
paragraphs.




Preapproval
Policy




Our Board
of Directors reviews and approves audit and permissible non-audit services
performed by its independent accountants, as well as the fees charged for such
services. In its review of non-audit service fees and its appointment of Bagell,
Josephs & Levine, CPA's as the Company's independent accountants, the Board
of Directors considered whether the provision of such services is compatible
with maintaining independence.





PART
IV





ITEM
15.EXHIBITS,
FINANCIAL STATEMENT SCHEDULES





(a) Financial Statements and Schedules.
The following financial statements and schedules for the Company as of March 31,
2008 are filed as part of this report.





(1)      Financial
statements of the Company and its subsidiaries.





(2)      Financial
Statement Schedules:





All
schedules are omitted because they are not applicable or the required
information is shown in the financial statements or notes thereto.




28




(A)
EXHIBITS.





The
following Exhibits are incorporated herein by reference or are filed with this
report as indicated below.




Exhibit
      No.
            Description
      of Exhibits2.1
            Agreement
      and Plan of Merger, dated February 20, 2004, by and among Global
      Diversified Acquisition Corp., G.D. Acquisition Corp., MK Secure Solutions
      Limited and Westvale Consulting Limited.*2.2
            First
      Amendment to Agreement and Plan of Merger, dated March 23, 2004,by and
      among Global Diversified Acquisition Corp., G.D. Acquisition Corp., MK
      Secure Solutions Limited and Westvale Consulting Limited.
  *2.3
            Agreement
      and Plan of Merger, dated November 9, 2004, by and among Mailkey
      Corporation, Mailkey Acquisition Corp., IElement, Inc. and Ivan Zweig.
      *2.4
            First
      Amendment and Waiver to Agreement and Plan of Merger, dated December 30,
      2004, by and among Mailkey Corporation, Mailkey Acquisition Corp.,
      IElement, Inc. and Ivan Zweig. *3(i).1
            Articles
      of Incorporation. *3(i).2
            Amendment
      to Articles of Incorporation*3(i).3
            Amendment
      to Articles of Incorporation*3(i).4
            Amendment
      to Articles of Incorporation*3(i).5
            Certificate
      of Correction*3(i).6
            Amended
      Articles of Incorporation of Mailey Corporation dated August 1, 2005.
      *3(ii)
            Restated
      By-Laws of IElement*10.1
            Employment
      Agreement with Ivan Zweig dated April 20, 2007****10.2
            Form
      of Warrant*10.3
            Form
      of Amended and Restated Convertible Secured Promissory Notes dated March
      25, 2006*10.4
            Integrated
      Communications Consultants Corporation Master Services Agreement by and
      between Integrated Communications Consultants Corporation and IElement,
      Inc. dated April 30, 2003. *10.5
            Lease
      Agreement between IElement, Inc. and 13714 Gamma, Ltd dated June 9, 2005.
      *10.6
            Form
      of Vista Capital warrant*10.7
            Consulting
      Agreement with Kramerica, Inc. ****10.8
            Stock
      Purchase Agreement with Ivan Zweig effective December 20,
      2007*****10.9
            Form
      of Release of Employment Agreement*****10.10
            Form
      of Release of Consulting Agreement*****10.11
            Form
      of Indemnity Agreement*****10.12
            Stock
      Purchase Agreement with Newsgrade Corporation dated Dec. 20,
      2007*****10.13
            Form
      of Convertible Promissory Note*****21.0
            List
      of Subsidiaries**23.1
            Consent
      of Certified Public Accountants31.1
            Certification
      pursuant to Sarbanes-Oxley Sec. 30232.1
            Certification
      pursuant to 18 U.S.C. Sect. 1350





*
Previously filed with Amendment No. 2 to Registration Statement on Form SB-2
filed on June 6, 2006.





**
Previously filed with Amendment No. 3 to Registration Statement on Form SB-2
filed on July 18, 2006.





***
Previously filed with Form 8-K on December 8, 2006.





****
Previously filed with Form 8-K on April 20, 2007.





*****
Previously filed with Form 8-K on December 28, 2007




29


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
              
              
              By:
      /s/ Susan Pursel
              Name:  Susan
      Pursel
              Title:Chief
      Executive Officer, Chief Financial Officer, Director
              Date:  July
      9, 2008






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:







IElement
      Corporation
              
              
              By:
      /s/ Paul Lengemann
              Name:
      Paul Lengemann
              Title:
      Director
              Date:  July
      9, 2008






30