MAIL STOP 3720
August 1, 2006
Mr. Ivan Zweig
Chief Executive Officer
IElement Corporation
17194 Preston Road
Suite 102, PMB 341
Dallas, TX 75248
Re: IElement Corporation
Amendment No. 4 to Registration Statement on Form SB-2
Filed July 24, 2006
File No. 333-131451
Form 10-KSB/A for the year ended March 31, 2006
Filed July 21, 2006
File No. 0-29331
Dear Mr. Zweig:
We have reviewed your amended filings and have the following
comments. Where indicated, we think you should revise your
documents
in response to these comments. If you disagree, we will consider
your explanation as to why our comment is inapplicable or a
revision
is unnecessary. Please be as detailed as necessary in your
explanation. In some of our comments, we may ask you to provide
us
with supplemental information so we may better understand your
disclosure. After reviewing this information, we may or may not
raise additional comments.
Form SB-2
Summary Balance Sheet Information, page 2
1. Please mark the December 31, 2004 balance sheet information as
"restated."
Risk Factors, page 3
2. Item 8A to your amended Form 10-KSB filed on July 21, 2006
states
that your CEO and CFO concluded your disclosure controls and
procedures were not effective. Please provide a risk factor
disclosing the nature of the material weakness that resulted in
your
ineffective disclosure controls and procedures. Include
disclosure
both in the risk factor and in an amended Form 10-KSB about when
the
material weakness was identified, by whom it was identified, when
the
material weakness first began, and the impact it has had on your
financial results. In the amended Form 10-KSB, replace the vague
discussion of your "process of designing and implementing and
continuing to enhance controls to aid in the correct preparation,
review, presentation and disclosures of our Consolidated Financial
Statements" with disclosure of the specific steps that the company
has taken to remediate the material weakness, and indicate whether
the company believes that the material weakness still exists at
the
end of the period covered by the report. Include similar
disclosure
in your MD&A in both the registration statement and Form 10-KSB
about
the material weakness and any potential material impact on your
financial condition.
Gain (Loss) From Operations, page 17
3. We note your presentation of EBITDA, a non-GAAP financial
measure.
Regulation G and Item 10 of Regulation S-B require registrants to
disclose the following:
* The most directly comparable GAAP financial measure; and
* A quantitative reconciliation of the non-GAAP financial measure
to
the most directly comparable GAAP financial measure. This
reconciliation requirement applies to historical financial
information and, to the extent available without unreasonable
effort,
to prospective financial information.
Also note that registrants must present the comparable GAAP
measure
with equal or greater prominence and must disclose why the non-
GAAP
financial measures are useful to investors. Please revise to
provide
the require information.
Security Ownership of Certain Beneficial Owners and Management,
page
31
4. As directors of the company, Messrs. Stovall and Willey should
be
included in the table. See Item 402(b) of Regulation S-B. Please
also confirm the number and percentage of shares held by your
officers and directors as a group. The current amount appears to
reflect shares owned by Messrs. Brault and Weger. In providing
this
revised disclosure, update the table to the most recent
practicable
date.
Financial Statements
Consolidated Statement of Operations, page F-3
5. It appears that the caption "cost of sales" excludes
depreciation
and amortization for property and equipment directly attributed to
the generation of revenue. If so, revise your presentation to
comply
with SAB 11:B, as applicable, by identifying the amount of
applicable
depreciation that is excluded from the caption "cost of sales."
Consolidated Statements of Cash Flows (Restated)
6. Please remove the total adjustments line item.
Form 10-KSB/A for the fiscal period ended March 31, 2006
7. Please comply with the comments above in future filings.
Item 8A. Controls and Procedures
8. You state that "[o]ther than indicated above, there were no
changes in the Company`s internal control over financial reporting
that occurred during the last fiscal quarter that have materially
affected, or are reasonably likely to materially affect, the
Company`s internal control over financial reporting." Revise to
state clearly, if correct, that there were changes in your
internal
control over financial reporting that occurred during this quarter
that have materially affected, or are reasonably likely to
materially
affect, your internal control over financial reporting.
9. We note the disclosure in the last paragraph of this section
regarding the "inherent limitations" on the effectiveness of
systems
of disclosure controls and procedures and that controls may become
inadequate due to changes in conditions or deterioration in
compliance. This disclosure is confusing to the extent that it
may
imply your disclosure controls and procedures might not operate
effectively even under circumstances where your disclosure
controls
and procedures should reasonably be expected to operate
effectively.
It also may imply that you will not comply with policies and
procedures relating to financial reporting, including conducting
periodic evaluations of your disclosure controls and procedures,
or
that you may comply to a lesser extent. If true, this would
appear
to be inconsistent with the regulatory requirement to establish
and
maintain effective disclosure controls and procedures. As such,
please revise to remove this entire paragraph or revise to clarify
this disclosure. Also comply with this comment in future filings.
As appropriate, please amend your registration statement and
Form 10-KSB in response to these comments. You may wish to
provide
us with marked copies of the amendments to expedite our review.
Please furnish a cover letter with your amendments that keys your
responses to our comments and provides any requested supplemental
information. Detailed cover letters greatly facilitate our
review.
Please understand that we may have additional comments after
reviewing your amendments and responses to our comments.
You may contact Michael Henderson, Staff Accountant, at
(202)
551-3364 or Kyle Moffatt, Accountant Branch Chief, at (202) 551-
3836
if you have questions regarding comments on the financial
statements
and related matters. Please contact William Bennett at (202) 551-
3389 or me at (202) 551-3810 with any other questions.
Sincerely,
Michele M. Anderson
Legal Branch Chief
cc: Laura Anthony, Esq.
Fax: (561) 514-0832
Mr. Ivan Zweig
IElement Corporation
August 1, 2006
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