UNITED STATES 
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-Q

xQUARTERLY REPORT UNDER SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 
For the quarterly period ended August 31, 2008

OR

 ̈TRANSITION REPORT UNDER SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 
For the transition period from ___________ to _____________

Commission file number: 000-25335

INTELLIGENT LIVING CORP.(Exact name of small business issuer as specified in its charter)

Nevada(State or other jurisdiction of incorporation or organization)

88-0409024(I.R.S. Employer Identification Number)

SUITE 221, 2323 QUEBEC STREET
Vancouver, BC
V5T 4S7(Address including zip code of principal executive offices)

Issuers telephone number: (604) 876-7494

Check whether the issuer (1) filed all reports required to be filed by Section 13 or 15(d) of the Exchange Act during the past 12 months (or for such shorter period that the issuer was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days.     Yes þ No  ̈



Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer or a smaller reporting company.



|Large accelerated filer |  ̈ |                                               | Accelerated filer         |  ̈
|----------------------- | - | --------------------------------------------- | ------------------------- | -
|Non-accelerated filer   |  ̈ | (Do not check if a smaller reporting company) | 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  ̈ No þ



As of August 31, 2008, the registrant had outstanding 487,990,256 shares of its $.001 par value Common Stock.



Transitional Small Business Disclosure Format: Yes ̈  No þ



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INTELLIGENT LIVING CORP.

FORM 10Q

For the Quarterly period ended August 31, 2008



TABLE OF CONTENTS





Page



PART  I  FINANCIAL  INFORMATION

3



ITEM  1  Unaudited  Consolidated  Financial Statements



Consolidated Balance Sheets as of August 31, 2008 (Unaudited) and May 31, 2008

3



Consolidated Statements of Operations for the Three Months ended  August 31, 2008

and  2007  (Unaudited)

4



Consolidated Statements of Cash Flows for the Three Months ended August 31, 2008

and  2007 (Unaudited)

5



Condensed Notes to Consolidated Interim Financial Statements

6



ITEM 2  Management's Discussion and Analysis of Financial Condition and Results of

Continuing and Future Plan of Operation

19



ITEM 3  Quantitative and Qualitative Disclosures About Market Risk

23



ITEM 4T  Controls and Procedures

25



PART II  OTHER  INFORMATION

25



ITEM 1  Legal Proceedings

25



ITEM 1A  Risk Factors

25



ITEM 2  Unregistered Sales of Equity Securities and Use of Proceeds

25



ITEM 3  Defaults Upon Senior Securities

25



ITEM 4  Submission of Matters to a Vote of Security Holders

25



ITEM 5  Other Information

25



ITEM 6  Exhibits

25



SIGNATURE PAGE

26





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PART  I.  FINANCIAL  INFORMATION

ITEM 1 - FINANCIAL STATEMENTS



|INTELLIGENT LIVING CORP.               
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|CONSOLIDATED BALANCE SHEETS            
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|LIABILITIES AND STOCKHOLDERS' (DEFICIT)
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See accompanying condensed notes to the financial statements.



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|INTELLIGENT LIVING CORP.                                    
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|CONSOLIDATED STATEMENTS OF OPERATIONS AND COMPREHENSIVE LOSS
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|GAIN (Loss) from operations                                 
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|Other income (expense)                                      
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|GAIN (LOSS) FROM CONTINUING OPERATIONS                      
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|GAIN (LOSS) FROM DISCONTINUED OPERATIONS                    
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|NET LOSS BEFORE INCOME TAX                                  
|INCOME TAX EXPENSE                                          
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|NET LOSS                                                    
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|OTHER COMPREHENSIVE INCOME                                  
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|Comprehensive gain (loss)                                   







See accompanying condensed notes to the financial statements





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|INTELLIGENT LIVING CORP.                    
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|CONSOLIDATED STATEMENTS OF CASH FLOW        
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|CASH FLOWS FROM OPERATING ACTIVITIES:       
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|CASH FLOWS FROM INVESTING ACTIVITIES:       
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|CASH FLOWS FROM FINANCING ACTIVITIES:       
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|Net increase (decrease)  in cash            
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|Cash, beginning of period                   
|Cash, end of period                         
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|SUPPLEMENTAL DISCLOSURES:                   
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|NON-CASH INVESTING AND FINANCING ACTIVITIES:
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See accompanying condensed notes to the financial statements





5



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INTELLIGENT LIVING CORP. AND SUBSIDIARIES

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

August 31, 2008

(Unaudited)



NOTE 1  BASIS OF PRESENTATION



Intelligent Living Corp (ILC, the Company, we, us) formerly Elgrande International Inc., through its wholly owned subsidiary MCM Integrated Technologies, Ltd. (MCM), specializes in designing, supplying, installing, upgrading and servicing home automation  solutions, energy use monitoring and conservation systems and commercial real estate presentation center solutions including: structured wiring, security and access control systems, internet access, lighting, HVAC and environmental controls, energy use monitoring and reduction systems and distributed audio/video systems. The Company offers both wired and wireless technology for single and multi unit new construction and existing buildings, using both traditional component and Windows Media Center/Vista based systems.



On August 24, 2006, we entered into a preliminary non-binding Letter of Intent (Letter of Intent) with MCM Integrated Technologies Ltd. (MCM), a Vancouver based company wholly owned by Murat Erbatur, one of our directors.  The Letter of Intent provided for the acquisition of all of the assets and ongoing contracts of MCM for a price based on an independent third party evaluation of the fair market value of the acquired assets including current assets, liabilities and future value based on the pro forma three year business plan of MCM. On December 8, 2006 ILC acquired all of the outstanding capital stock of MCM for $280,695, which included 10,000,000 shares of common stock of ILC valued at $150,000 and $130,695 in the form of a note payable. With this acquisition, ILC became a leading home automation provider in southwestern BC and the greater Phoenix area.



Prior to the acquisition of MCM the Company was engaged in the import and distribution of home décor products for the North American market. This activity was pursued through its wholly owned subsidiary Cardinal Points Trading Corp. In July 2006, as a result of a breach of the Companys exclusivity agreement with its principal supplier by its principal supplier and other production related issues the board of directors began an evaluation of alternative business models and opportunities. In December 2006 the Company discontinued its activity in the home décor sector and began a process to dispose of assets and obligations related to the home décor import and distribution business. This process continued through the quarter ended August 31, 2008. Liquidation of the Companys home décor inventory has been slower than expected principally as a result of the slowdown of the US economy competition from suppliers of similar product to the US home décor wholesale market.



MCM has been supplying custom IT solutions since 1994 and home automation and energy management solutions since 2003. The Company has offices and demonstration suites in Phoenix and Vancouver and is active with single family homes and multi-unit town homes and condominium projects in southwest BC, Calgary Alberta, the greater Phoenix area and Istanbul Turkey.



Following the acquisition of MCM in December 2006, the Company has expanded its service offerings to include home comfort and energy efficiency solutions integrated with and controlled by home automation applications. In response to the downturn in the US housing market the Company has increased its focus on the western Canadian housing market, expanded its marketing and project base into Calgary Alberta and initiated technology cooperation with leading marketing and home security groups in the Republic of Turkey for market development in Turkey and the Middle East.



Results from ongoing operations reported for the 3 months ended August 31, 2008 and 2007 relate to sales, marketing and support of home automation and energy efficiency products and services. Results from discontinued operations relate to the Companys phase out activities in the home décor sector and include the costs of liquidating inventory, reducing staff and closing office and warehouse space, renting temporary warehouse space for remaining home décor inventory and office equipment, legal, professional and staff time related to eliminating and reducing liabilities associated with discontinued operations,



6



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INTELLIGENT LIVING CORP. AND SUBSIDIARIES

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

August 31, 2008

(Unaudited)



accretion of beneficial conversion and financing fee discount and interest charges associated with historical financings related to home décor inventory support..



On July 4, 2007 Elgrande International, Inc. merged with its wholly owned subsidiary Intelligent Living Corp. As a result of the merger, the Articles of the surviving entity were amended and the name of the surviving entity became Intelligent Living Corp. On August 28, 2007 the Company filed notice of late filing of the Companys 10KSB annual report and, as a consequence of the NASDAQ OTCBB rules regarding late filing of annual and quarterly reports, the Company was delisted and becomes eligible for relisting on August 29, 2008 subject the filing and approval by FINRA of Form 15C2-11.



On February 29, 2008 the Company filed a preliminary Schedule 14C  Information Statement outlining proposed amendments to the Companys Articles of Incorporation including a one for five hundred reverse split of the Companys common stock, adjustment of the Companys authorized capital to eight hundred million common shares and  five million preferred shares. The proposed amendments were approved by a majority of shareholders on February 29, 2008.



On August 20, 2008 the Company received clearance from the SEC for filing a Definitive Information Statement for proposed amendments to the Companys Articles of Incorporation. On August 22, 2008 the Company received correspondence from the Securities and Exchange Commission (SEC) advising that they had no further comments on the Companys annual report on Form 10-KSB/A for fiscal year ended May 31, 2005 filed July 18, 2005. As at August 31, 2008 there are no outstanding comments on the Companys SEC filings. On August 25, 2008 the Company filed a Definitive Information Statement on Schedule 14C and on August 26, 2008 provided a copy of the Information Statement to shareholders of record of the Companys common stock, par value $0.001 per share, on the record date as determined by the Companys board of directors to be the close of business on July 10, 2008. On August 29, 2008 the Company became eligible for relisting on the NASD Over the Counter Bulletin Board (OTCBB) exchange through the filing of Form 15C2-11. The Company plans to file for such relisting as soon as possible.



The foregoing unaudited interim financial statements have been prepared in accordance with generally accepted accounting principles for interim financial information and with the instructions to Form 10-Q and Regulation S-B as promulgated by the Securities and Exchange Commission. Accordingly, these financial statements do not include all of the disclosures required by generally accepted accounting principles for complete financial statements.  These unaudited interim financial statements should be read in conjunction with the audited financial statements for the period ended May 31, 2008. In the opinion of management, the unaudited interim financial statements furnished herein include all adjustments, all of which are of a normal recurring nature, necessary for a fair statement of the results for the interim period presented.



The preparation of financial statements in accordance with generally accepted accounting principles requires the use of estimates and assumptions that affect the reported amounts of assets and liabilities, disclosure of contingent assets and liabilities known to exist as of the date the financial statements are published, and the reported amounts of revenues and expenses during the reporting period. Uncertainties with respect to such estimates and assumptions are inherent in the preparation of the Company's financial statements; accordingly, it is possible that the actual results could differ from these estimates and assumptions that could have a material effect on the reported amounts of the Company's financial position and results of operations.





7



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INTELLIGENT LIVING CORP. AND SUBSIDIARIES

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

August 31, 2008

(Unaudited)



The accompanying financial statements have been prepared on a going concern basis, which contemplates the realization of assets and satisfaction of liabilities in the normal course of business. The Company has suffered material recurring losses from operations since inception. At August 31, 2008, the Company has a working capital deficit of approximately $1,961,978, an accumulated deficit of approximately $13,850,098 and negative cash flows from consolidated operations. These factors raise substantial doubt about the Company's ability to continue as a going concern.



Continuation of the Company is dependent on achieving sufficiently profitable operations and obtaining additional financing. Management has and is continuing to raise additional capital from various sources. There can be no assurances that the Company will be successful in raising additional capital. The financial statements do not include any adjustment relating to the recoverability and classification of assets and liabilities that might be necessary should the Company be unable to continue as a going concern.

Comprehensive Income

In June 1997, the Financial Accounting Standards Board issued Statement of Financial Accounting Standards No. 130, Reporting Comprehensive Income (hereinafter SFAS No. 130).  SFAS No. 130 established standards for reporting and displaying comprehensive income, its components and accumulated balances.  SFAS No. 130 is effective for periods beginning after December 15, 1997.  The Company has adopted this accounting standard and for the quarter ending August 31, 2008 reported a comprehensive loss of $49,192 resulting from the conversion of Canadian dollar subsidiaries into US dollars. For the quarter ending August 31, 2008 the accumulated comprehensive gain due to the conversion of Canadian dollar subsidiaries into US dollars was $12,565.



NOTE 2 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES



Revenue and Cost Recognition

The Company recognizes revenue for product sales and services when products are shipped and title passes to customers and or when services are provided. Cost of sales consists of the purchase price of products sold, inbound and outbound shipping charges, and packaging supplies.



Services are provided at billing rates that a mark-up over the cost of labor and supporting infrastructure. Services are billed as progress payments linked to pre-agreed work schedules, on fixed price schedules or as hourly charges.



Cost of sales consists of the purchase price of products sold, inbound and outbound shipping charges and packaging supplies.



In November 2001, the Emerging Issues Task Force reached a consensus on Issue 01-9, Accounting for Consideration Given by a Vendor to a Customer.  EITF 01-9 addresses the recognition, measurement and income statement classification for sales incentives offered to customers.  Sales incentives include discounts, coupons, free products and generally any other offers that entitle a customer to receive a reduction in the price of a product.  Under EITF 01-9, the reduction in the selling price of the product resulting from any sales incentives should be classified as a reduction of revenue.  The Company adopted EITF 01-9 in fiscal 2002.  The Company does not offer sales incentives to its customers.





8



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INTELLIGENT LIVING CORP. AND SUBSIDIARIES

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

August 31, 2008

(Unaudited)



Accounts Receivable

The Company carries its accounts receivable at net realizable value.  The Company is in the process of developing a policy for recognizing doubtful accounts.  A receivable is considered past due if the Company does not receive payment within 30 days. The Company estimates bad debts utilizing the allowance method, based upon past experience and current market conditions.  At August 31, 2008 and 2007, there was no allowance for doubtful accounts.



Inventories

In November 2004, the Financial Accounting Standards Board (FASB) issued Statement of Financial Accounting Standards No. 151, Inventory Costs an amendment of ARB No. 43, Chapter 4. This statement amends the guidance in ARB No. 43, Chapter 4, Inventory Pricing, to clarify the accounting for abnormal amounts of idle facility expense, freight, handling costs, and wasted material (spoilage). Paragraph 5 of ARB 43, Chapter 4, previously stated that . . . under some circumstances, items such as idle facility expense, excessive spoilage, double freight, and re-handling costs may be so abnormal as to require treatment as current period charges. . . . This statement requires that those items be recognized as current-period charges regardless of whether they meet the criterion of  so abnormal. In addition, this statement requires that allocation of fixed production overheads to the costs of conversion be based on the normal capacity of the production facilities. This statement is effective for inventory costs incurred during fiscal years beginning after June 15, 2005.



Inventory at August 31, 2008 consisted of a variety of home automation equipment, inventory at August 31, 2007 consisted of a variety of home automation equipment and home décor products. Home décor inventories are recorded using the specific identification method and valued at the lower of recorded cost or market value. Home automation inventory consisting of manufactured products is recorded using the first in first out method and valued at the lower of recorded cost or market value. On May 31, 2008 the Company began recognizing a reserve for potential inventory obsolescence. The recorded cost of inventory was $158,002 at August 31, 2008, and $154,226 at August 31, 2007. A reserve of $99,079 was recorded at August 31, 2008 to cover the full recorded cost of home décor product. There were no reserves recorded for home automation inventory for the period ended August 31, 2007.



|Inventory                      | Recorded Cost
August 31,
|------------------------------ | ------------------------
|2008                           | 2007                    
|Home automation equipment      | $58,923                 
|Home décor products            | $99,079                 
|Total Recorded Cost            | $158,002                
|                               | Reserve                 
|Home automation equipment      | -                       
|Home décor products            | $99,079                 
|Total Inventory net of reserve | $58,923                 



Foreign currency translation

The Company has adopted Financial Accounting Standard No. 52.  Monetary assets and liabilities denominated in foreign currencies are translated into United States dollars at rates of exchange in effect at the balance sheet date.  Gains or losses are included in income for the year, except gains or losses relating to long-term debt, which are deferred and amortized over the remaining term of the debt.  Non-monetary assets, liabilities and items recorded in income arising from transactions denominated in foreign currencies are translated at rates of exchange in effect at the date of the transaction.





9



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INTELLIGENT LIVING CORP. AND SUBSIDIARIES

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

August 31, 2008

(Unaudited)



MCM Integrated Technologies, Ltd. and Cardinal Points Trading, Corp. use the Canadian Dollar as their functional currency. Transactions denominated in currencies other than the entitys functional currency are translated into the entitys functional currency at the exchange rate ruling on the date of the transaction. Monetary assets and liabilities denominated in foreign currencies are retranslated at the exchange rate ruling on the balance sheet date. Currency translation differences are recognized in the statement of income for the period.



On consolidation, the results of operations and cash flows whose functional currency is other than the US dollar are translated into US dollars at the average exchange rate for the period and their assets and liabilities are translated into US dollars at the exchange rate ruling on the balance sheet date. Currency translation differences are recognized within other comprehensive income as a separate component of shareholders equity. In the event that such an operation is sold, the cumulative currency translation differences that are attributable to the operation are reclassified to income.



Goodwill

Goodwill is calculated as the excess of the fair value of consideration paid over the fair value of tangible and intangible assets acquired and liabilities assumed. Goodwill will be tested for impairment annually according to FAS 142. An impairment test would also be performed in any period in which events or changes in circumstances indicate that the carrying amount may not be recoverable. An impairment would be recognized at that time, to the extent that the carrying amount exceeds the undiscounted future net cash flows expected from its use. The Company recorded goodwill in the amount of $241,676 related to the acquisition of MCM Integrated Technologies, Ltd. Management reviewed Goodwill and found that there was no impairment for the period ended August 31, 2008 and no expense has been recognized



Earnings per Share

The Company has adopted Statement of Financial Accounting Standards Statement No. 128, Earnings Per Share.  Basic loss per share is computed using the weighted average number of common shares outstanding.  Diluted net loss per share is the same as basic net loss per share, as the inclusion of common stock equivalents would be antidilutive.



|                                                                      |  | For the Three Months Ended
August 31,
|--------------------------------------------------------------------- |  | -------------------------------------
|(in thousands)                                                        |  | 2008                                 
|Gain (Loss) from continuing operations                                |  | $                                    
|Gain (Loss) from discontinued operations                              |  | (62.9)                               
|Net gain (loss) income                                                |  | $                                    
|                                                                      |  |                                      
|Weighted average shares outstanding:                                  |  |                                      
|                                                                      |  |                                      
|basic and dilutive                                                    |  | 487,990,246                          
|Effect of dilutive securities:                                        |  |                                      
|stock options                                                         |  |                                     
|Convertible note                                                      |  |                                     
|diluted                                                               |  | 487,990,246                          
|                                                                      |  |                                      
|Gain (Loss) per share from continuing operations: basic and diluted   |  | $                                    
|Gain (Loss) per share from discontinued operations: basic and diluted |  | $                                    
|Net (loss) income per share: basic and diluted                        |  | $                                    



10



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INTELLIGENT LIVING CORP. AND SUBSIDIARIES

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

August 31, 2008

(Unaudited)



The following potential common shares have been excluded from the computation of diluted net income per share for the quarter ended August 31, 2008 because their inclusion would have been antidilutive:



|                                 |  | For the Quarter Ended
August 31, 2008 | 
|-------------------------------- |  | ------------------------------------- | 
|Convertible note related parties |  | 14,321,255,673                        | 



Impairment of long-lived assets

We assess the impairment of goodwill and indefinite life intangibles on an annual basis. The potential impairment of finite life intangibles is assessed whenever events or a change in circumstances indicate the carrying value may not be recoverable. Factors we consider important which could trigger an impairment review include the following:



·

significant underperformance relative to historical or expected projected future operating results;

·

significant changes in the manner of our use of the acquired assets or the strategy for our overall business;

·

significant negative industry or economic trends;

·

significant decline in our stock price for a sustained period of time; and

·

our market capitalization relative to net book value.



When we determine that the carrying value of goodwill and indefinite life intangibles may not be recoverable based upon the existence of one or more of the above indicators of impairment, we measure any potential impairment based on a projected discounted cash flow method using a discount rate determined by our management to be commensurate with the risk inherent in our current business model.

Costs Associated with Exit or Disposal Activities

In June 2002, the Financial Accounting Standards Board issued Statement of Financial Accounting Standards No. 146, Accounting for Costs Associated with Exit or Disposal Activities (hereinafter SFAS No. 146).  SFAS No. 146 addresses significant issues regarding the recognition, measurement, and reporting of costs associated with exit and disposal activities, including restructuring activities.  SFAS No. 146 also addresses recognition of certain costs related to terminating a contract that is not a capital lease, costs to consolidate facilities or relocate employees, and termination benefits provided to employees that are involuntarily terminated under the terms of a one-time benefit arrangement that is not an ongoing benefit arrangement or an individual deferred-compensation contract.  SFAS No. 146 was issued in June 2002 and is effective for activities after December 31, 2002.  There has been no impact on the Companys financial position or results of operations from adopting SFAS No. 146.



Segment Reporting

SFAS No. 131, Disclosure about Segments of an Enterprise and Related Information, establishes standards for the reporting by business enterprises of information about operating segments, products and services, geographic areas and major customers. The method for determining what information to report is based on the way that management organizes the operating segments within ILC for making operational decisions and assessments of financial performance.

ILCs chief executive officer (CEO) is considered to be the chief operating decision-maker. The CEO reviews financial information presented on a consolidated basis for purposes of making operating decisions and assessing financial performance. ILC has determined that it operates in a single operating segment, specifically, marketing home automation products, technology and services.



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INTELLIGENT LIVING CORP. AND SUBSIDIARIES

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

August 31, 2008

(Unaudited)



Recent Accounting Pronouncements



In December 2007, the FASB issued SFAS No. 141 (revised 2007), Business Combinations (SFAS No. 141R). SFAS No. 141R is a revision to SFAS No. 141 and includes substantial changes to the acquisition method used to account for business combinations (formerly the purchase accounting method), including broadening the definition of a business, as well as revisions to accounting methods for contingent consideration and other contingencies related to the acquired business, accounting for transaction costs, and accounting for adjustments to provisional amounts recorded in connection with acquisitions. SFAS No.141R retains the fundamental requirement of SFAS No. 141 that the acquisition method of accounting be used for all business combinations and for an acquirer to be identified for each business combination. SFAS No. 141R is effective for periods beginning on or after December 15, 2008, and will apply to all business combinations occurring after the effective date. SFAS No. 141R is not expected to have an impact on the Company's results of operations, financial condition or liquidity.



The FASB also issued SFAS No. 160, Non-controlling Interests in Consolidated Financial Statements  an amendment of Accounting Research Bulletin No. 51, Consolidated Financial Statements in December 2007.   This statement amends ARB No. 51 to establish new standards that will govern the (1) accounting for and reporting of non-controlling interests in partially owned consolidated subsidiaries and (2) the loss of control of subsidiaries.  Non-controlling interest will be reported as part of equity in the consolidated financial statements.  Losses will be allocated to the non-controlling interest, and, if control is maintained, changes in ownership interests will be treated as equity transactions.  Upon a loss of control, any gain or loss on the interest sold will be recognized in earnings.  SFAS No. 160 is effective for periods beginning after December 15, 2008.  SFAS No. 160 is not expected to have an impact on the Company's results of operations, financial condition or liquidity.



In March 2008 the FASB also issued SFAS No. 161 Disclosures About Derivatives Instruments and Hedging Activities.  This statement requires enhanced disclosures about an entitys derivative and hedging activities and thereby improves the transparency of financial reporting.  This statement is effective for financial statements for fiscal years and interim periods beginning after November 15, 2008, with earlier application encouraged.  SFAS No. 161 is not expected to have an impact on the Company's results of operations, financial condition or liquidity.



In April 2008, the FASB issued FSP FAS No. 142-3, which amends the factors that must be considered in developing renewal or extension assumptions used to determine the useful life over which to amortize the cost of a recognized intangible asset under FAS No. 142, "Goodwill and Other Intangible Assets." The FSP requires an entity to consider its own assumptions about renewal or extension of the term of the arrangement, consistent with its expected use of the asset, and is an attempt to improve consistency between the useful life of a recognized intangible asset under FAS No. 142 and the period of expected cash flows used to measure the fair value of the asset under FAS No. 141, "Business Combinations." The FSP is effective for fiscal years beginning after December 15, 2008, and the guidance for determining the useful life of a recognized intangible asset must be applied prospectively to intangible assets acquired after the effective date. FAS No. 142-3 is not expected to have an impact on the Company's results of operations, financial condition or liquidity.



In May 2008, the FASB issued Financial Accounting Standard (FAS) No. 162, "The Hierarchy of Generally Accepted Accounting Principles." The statement is intended to improve financial reporting by identifying a consistent hierarchy for selecting accounting principles to be used in preparing financial statements that are prepared in conformance with generally accepted accounting principles. Unlike



12



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INTELLIGENT LIVING CORP. AND SUBSIDIARIES

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

August 31, 2008

(Unaudited)



Statement on Auditing Standards (SAS)No. 69, "The Meaning of Present in Conformity With GAAP," FAS No. 162 is directed to the entity rather than the auditor. The statement is effective 60 days following the SEC's approval of the Public Company Accounting Oversight Board (PCAOB) amendments to AU Section 411, "The Meaning of Present Fairly in Conformity with GAAP," and is not expected to have any impact on the Company's results of operations, financial condition or liquidity.



In May 2008, the FASB issued Financial Accounting Standard (FAS) No. 163, Accounting for Financial Guarantee Insurance Contracts. The new standard clarifies how FASB Statement No. 60, Accounting and Reporting by Insurance Enterprises, applies to financial guarantee insurance contracts issued by insurance enterprises, including the recognition and measurement of premium revenue and claim liabilities. It also requires expanded disclosures about financial guarantee insurance contracts. The Statement is effective for financial statements issued for fiscal years beginning after December 15, 2008, and all interim periods within those fiscal years, except for disclosures about the insurance enterprises risk-management activities. Disclosures about the insurance enterprises risk-management activities are effective the first period beginning after issuance of the Statement. FAS No. 163 is not expected to have an impact on the Company's results of operations, financial condition or liquidity.



In June 2008, the Financial Accounting Standards Board (FASB) issued FASB Staff Position (FSP) Emerging Issues Task Force (EITF) No. 03-6-1, "Determining Whether Instruments Granted in Share-Based Payment Transactions Are Participating Securities." Under the FSP, unvested share-based payment awards that contain rights to receive nonforfeitable dividends (whether paid or unpaid) are participating securities, and should be included in the two-class method of computing EPS. The FSP is effective for fiscal years beginning after December 15, 2008, and interim periods within those years, and is not expected to have a significant impact on the Company's results of operations, financial condition or liquidity.



NOTE 3 - COMMON STOCK



No shares were issued during the three months ended August 31, 2008.



NOTE 4  COMMON STOCK OPTIONS



Effective July 1, 2005, we adopted the provisions of Statement of Financials Accounting Standards (SFAS) No. 123 (Revised 2004), Shared-Based Payments (SFAS No. 123(R)). Prior to adoption of SFAS No. 123(R), we provided the disclosures required under SFAS No. 123, Accounting for Stock-Based Compensation, as amended by SFAS No. 148, Accounting for Stock-Based Compensation  Transition and Disclosures.  Under this method, compensation expense was recorded only if the market price of the underlying stock on the date of grant exceeded the exercise price.



Since 1998 the Company has registered 6 stock option plans the most recent being the Intelligent Living Corp 2007 Stock Option Plan. Their purpose is to advance the business and development of the Company and its shareholders by enabling employees, officers, directors and independent contractors or consultants of the Company the opportunity to acquire a proprietary interest in the Company from the grant of options to such persons under the Plans' terms. The Plans provide that the Companys board of directors may exercise its discretion in awarding options under the Plans. The Board determines the per share option price for the stock subject to each option.





13



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INTELLIGENT LIVING CORP. AND SUBSIDIARIES

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

August 31, 2008

(Unaudited)



During the years ended May 31, 2006 through 2008 and the three months ended August 31, 2008 the Company did not issue any new common stock options. Additionally, no options were exercised, and all options previously granted expired. The following is a summary of the Companys common stock option plans:



|                                                    |  | Number of
shares |   | Weighted
Average
Exercise Price
|--------------------------------------------------- |  | ---------------- | - | -------------------------------
|Options outstanding and exercisable at May 31, 2006 |  | 55,000           | $ | 1.00                           
|Options expired                                     |  | 55,000           | $ | 1.00                           
|Options granted                                     |  | -                |   | -                              
|Options outstanding and exercisable at May 31, 2007 |  | -                | $ | -                              
|Options expired                                     |  | -                |   | -                              
|Options granted                                     |  | -                |   | -                              
|Options outstanding and exercisable at May 31, 2008 |  | -                | $ | -                              
|Options expired                                     |  | -                |   | -                              
|Options granted                                     |  | -                |   | -                              
|Options outstanding and exercisable at Aug 31, 2008 |  | -                | $ | -                              



During the years ended May 31, 2007 and 2008 and the three months ended August 31, 2008 the Company did not issue any new common stock warrants. Additionally, no warrants were exercised, and all warrants previously granted expired in June 2008. The following is a summary of the Company's common stock warrants:



|                                                     |  | Number of
shares
Outstanding | Weighted
average
remaining
contractual
life |   | Weighted
Average
Exercise
Price
|---------------------------------------------------- |  | ---------------------------- | ------------------------------------------- | - | -------------------------------
|Warrants outstanding and exercisable at May 31, 2006 |  | 5,333,333                    | 2                                           | $ | 0.03                           
|Warrants expired                                     |  | -                            |                                             |   | -                              
|Warrants granted                                     |  | -                            |                                             |   | -                              
|Warrants outstanding and exercisable at May 31, 2007 |  | 5,333,333                    | 1                                           | $ | 0.03                           
|Warrants expired                                     |  | -                            |                                             |   | -                              
|Warrants granted                                     |  | -                            |                                             |   | -                              
|Warrants outstanding and exercisable at May 31, 2008 |  | 5,333,333                    | 0                                           | $ | 0.03                           
|Warrants expired                                     |  | 5,333,333                    |                                             |   | -                              
|Warrants granted                                     |  | -                            |                                             |   | -                              
|Warrants outstanding and exercisable at Aug 31, 2008 |  | -                            |                                             |   | -                              





14



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INTELLIGENT LIVING CORP. AND SUBSIDIARIES

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

August 31, 2008

(Unaudited)



NOTE 5  RELATED PARTIES (NOTES AND DEBENTURES PAYABLE RELATED PARTY)



On August 24, 2006, we entered into a preliminary non-binding Letter of Intent (Letter of Intent) with MCM Integrated Technologies Ltd. (MCM), a Vancouver based company wholly owned by Murat Erbatur, one of our directors.  The Letter of Intent provided for the acquisition of all of the assets and ongoing contracts of MCM for a price based on an independent third party evaluation of the fair market value of the acquired assets including current assets, liabilities and future value based on the pro forma three year business plan of MCM. On December 8, 2006 ILC acquired all of the outstanding capital stock of MCM for $280,695, which included 10,000,000 shares of ILC valued at $150,000 and $130,695 in the form of a note payable.



During the year ended May 31, 2007, one of the Companys officers loaned the Company $210,697 which was uncollateralized, due on demand and did not bear interest. The Company repaid $47,931 to its officer in cash during the year ended May 31, 2007.



During the year ended May 31, 2008, the Companys officers loaned the Company $58,484 which was uncollateralized and due on demand. The Company repaid $8,041 to its officers in cash and $4,093 of accrued interest in cash during the year ended May 31, 2008. The Company paid $45,000 of accrued interest in restricted common shares to related parties during the year ended May 31, 2008. During the three months ended August 31, 2008 the Companys officers loaned the Company $13,910, which was uncollateralized and due on demand, and $26,773 of accrued interest and $300,000 of principal was re-classified to a $326,773 third party debenture. Total outstanding related party debt [principal plus accrued and imputed interest] for the period ended August 31, 2008 and 2007 was respectively $1,588,692 and $1,630,710.



The Company had convertible and non-convertible short-term loans, subscription deposits (shares to be issued) outstanding to corporate officers and related parties at August 31, 2008. These are unsecured, bear interest at rates of 0% to 8% per annum and are due on demand. On June 3, 2008 an existing debenture was combined with accrued liabilities into a new 6% convertible debenture maturing on June 1, 2010. Accrued and imputed interest to August 31, 2008 was $230,404



The following table summarizes the position of notes, debentures and amounts due to related parties at August 31, 2008:



|Related Parties                            |   | Principal
Outstanding
on Aug 31,
2008 | Interest
Accrued to
Aug 31,
2008
|------------------------------------------ | - | ------------------------------------- | --------------------------------
|Convertible short-term notes               | $ | 558,224                               | 131,338                         
|Non-convertible short-term note            |   | 237,594                               | -                               
|Debenture                                  |   | 273,225                               | 6,636                           
|Subscription deposit [shares to be issued] |   | 289,245                               | 92,4301                         
|Total                                      | $ | 1,358,288                             | 230,404                         



Note 1: Accrued interest reflected as Imputed interest in Equity summary





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INTELLIGENT LIVING CORP. AND SUBSIDIARIES

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

August 31, 2008

(Unaudited)



NOTE 6  NOTES AND DEBENTURES PAYABLE



Short-term Notes

During the twelve months ended May 31, 2007, the Companys officers loaned the Company $210,697 in the form of an unsecured non-interest bearing short-term note to fund continuing operations and to facilitate the acquisition of MCM Integrated Technologies Ltd. (see note 7).



During the twelve months ended May 31, 2008, the Companys officers loaned the Company $58,484 in the form of an unsecured short-term note to fund continuing operations During the three months ended August 31, 2008, the Company received $811 from its officers (see note 5) and $15,045 from a third party in the form of an unsecured short-term notes to fund continuing operations. As at August 31, 2008 the following notes were due on demand or within the coming 12 months:



|Notes and Debentures     |   | Principal
Amount at
Aug 31, 2008 | Weighted
Average
Interest Rate |   | Accrued and
Imputed Interest at
Aug 31,2008
|------------------------ | - | -------------------------------- | ------------------------------ | - | -------------------------------------------
|Related Party short term | $ | 1,085,063                        | 8.7%                           | $ | 230,404                                    
|Third Party short term   |   | 101,593                          | 6.5%                           |   | 30,792                                     
|Total                    | $ | 1,186,656                        | 8.5%                           | $ | 261,196                                    



Loans and Debentures



In February 2008 the Company negotiated payment of accrued liabilities totaling $460,000 in the form of a debenture bearing an interest rate of 6% maturing on June 1, 2010. The debenture is convertible into shares of common stock at a conversion price for each share of common stock equal to the lowest closing bid price per share of the common stock for the 5 trading days immediately preceding the date of conversion.



In June 2008 the Company negotiated the rollover and re-classification of mature debentures and accrued interest totaling $599,998 into two new debentures: a third party debenture in the amount of $326,773 and

a related party debenture in the amount of $273,225. The debentures are due in June 2010 and are convertible into shares of common stock at a conversion price for each share of common stock equal to the lowest closing bid price per share of the common stock for the 20 trading days immediately preceding the date of conversion. The Company determined that there was no beneficial conversion feature associated with these debentures.



Future principal payments on notes and debentures payable in the years ending May 31, 2009 through 2013 are as follows:

|Fiscal
Year | Principal  | Discount as
applicable to
debenture portion
of principal | Balance
Sheet
|----------- | ---------- | -------------------------------------------------------- | -------------
|2009        | $900,958   | 3,187                                                    | $897,411     
|2010        | $1,059,997 |                                                          | $1,059,997   
|2011        | $453,480   | 100,560                                                  | $352,920     
|2012        | -          |                                                          |              
|2013        | -          |                                                          |              
|Total       | $2,414,075 | 103,747                                                  | $2,310,328   



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INTELLIGENT LIVING CORP. AND SUBSIDIARIES

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

August 31, 2008

(Unaudited)



The following table summarizes the outstanding principal, debt discount and accretion of preferred financing fees associated with the $555,000 and $50,000 debentures at August 31, 2008



|Note
Payable | Due     | Conversions
at Aug 31,
2008 | Balance at
end of
period | Remaining
debt
discount | Remaining
deferred
financing | Discounted
Value | Accrued
interest
|------------ | ------- | --------------------------- | ------------------------ | ----------------------- | ---------------------------- | ---------------- | ----------------
|$555,000     | FY 2011 | 101,520                     | 453,480                  | 76,978                  | 23,582                       | $352,920         | $80,936         
|$50,000      | FY 2009 | 7,000                       | 43,000                   | 3,187                   | -                            | $39,813          | $11,192         



NOTE 7  DISCONTINUED OPERATIONS



At August 31, 2008, assets and liabilities from discontinued operations consisted of:



|Description                                                    |  | August 31, 2008
|-------------------------------------------------------------- |  | ---------------
|                                                               |  |                
|Inventory net of reserve                                       |  | $              
|Accounts receivable remaining from discontinued operations     |  | 4,435          
|Total assets net of reserve related to discontinued operations |  | 4,435          
|                                                               |  |                
|Accounts Payable Trade                                         |  | 323,439        
|Total liabilities related to discontinued operations           |  | $              



At August 31, 2008 the Company believed that the probability of disposing of residual inventory at or above cost and collecting receivables was good but the timing to achieve liquidation is uncertain due to uncertainty in the consumer demand for the Companys discontinued inventory and the diminished state of the North American home décor market. On May 31, 2008 the Company recorded a reserve against 100 percent of the booked cost of home décor inventory. The above accounts payable are substantially in dispute and the Company believes they will not be paid in full. However, to be conservative the Company has retained these payables at their full value. As the inventory is disposed, receivables collected, and payables reduced the Company will record a gain (loss) in the period of activity.



During the three month period ending August 31, 2008, the Company sold home décor inventory with a book value of $171 for $443 and recognized other income of $272. The loss from discontinued operations, recorded for the three month period ended August 31, 2008, includes the costs of liquidating inventory, reducing staff and closing office and warehouse space, renting temporary warehouse space for remaining home décor inventory and office equipment, legal, professional and staff time related to eliminating and reducing liabilities associated with discontinued operations, accretion of beneficial conversion and financing fee discount and interest charges associated with historical financings related to home décor inventory support.





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INTELLIGENT LIVING CORP. AND SUBSIDIARIES

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

August 31, 2008

(Unaudited)



NOTE 8 - SUBSEQUENT EVENTS



The Companys Articles of Incorporation were amended effective September 29, 2008. On September 30, 2008 the Company initiated the steps required to file Form 15C2-11.



NOTE 9  CHANGES IN PRESENTATION OF COMPARATIVE STATEMENTS



The presentation of certain amounts for previous periods has been reclassified to conform to the presentation adopted for the current period.



NOTE 10  INVESTMENTS



The Company has recorded an investment in a private company under long term assets. This investment is recorded at cost, was reviewed by the Companys management and found to be un-impaired.











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INTELLIGENT LIVING CORP..

FORM 10-Q

For the Quarterly period ended August 31, 2008



ITEM 2.  MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF CONTINUING AND FUTURE PLAN OF OPERATION



Cautionary Statement Regarding Forward-Looking Statements



This  quarterly  report  contains  forward-looking  statements  as that term is defined  in  the  Private  Securities  Litigation  Reform  Act  of 1995.  These statements relate to future events or our future financial performance.  Some discussions in this report may contain forward-looking statements that involve risk and uncertainty. A number  of  important  factors  could  cause our actual results  to  differ  materially  from  those  expressed  in any forward-looking statements  made  by  us in this report. Forward-looking statements  are  often identified  by  words  like:  "believe",  "expect",  "estimate",  "anticipate", "intend", "project" and  similar  expressions  or words which, by their nature, refer to future events.



In some cases, you can also identify forward-looking  statements by terminology such as "may", "will", "should", "plans", "predicts", "potential" or "continue" or  the  negative  of  these  terms  or  other  comparable  terminology.  These statements   are  only  predictions  and  involve  known  and  unknown   risks, uncertainties  and  other  factors that may cause our actual results, levels of activity, performance or achievements  to  be  materially  different  from  any future  results,  levels  of activity, performance or achievements expressed or implied by these forward-looking statements.



Although we believe that the  expectations  reflected  in  the  forward-looking statements  are  reasonable,  we  cannot  guarantee  future results, levels  of activity or achievements. Except as required by applicable  law,  including the securities  laws  of the United States, we do not intend to update any  of  the forward-looking statements to conform these statements to actual results.



OVERVIEW



Intelligent Living Corp (ILC, the Company, we, us) formerly Elgrande International Inc., through its wholly owned subsidiary MCM Integrated Technologies, Ltd. (MCM), specializes in designing, supplying, installing, upgrading and servicing home automation  solutions, energy use monitoring and conservation systems and commercial real estate presentation center solutions including: structured wiring, security and access control systems, internet access, lighting, HVAC and environmental controls, energy use monitoring and reduction systems and distributed audio/video systems. The Company offers both wired and wireless technology for single and multi unit new construction and existing buildings, using both traditional component and Windows Media Center/Vista based systems.



On August 24, 2006, we entered into a preliminary non-binding Letter of Intent (Letter of Intent) with MCM Integrated Technologies Ltd. (MCM), a Vancouver based company wholly owned by Murat Erbatur, one of our directors.  The Letter of Intent provided for the acquisition of all of the assets and ongoing contracts of MCM for a price based on an independent third party evaluation of the fair market value of the acquired assets including current assets, liabilities and future value based on the pro forma three year business plan of MCM. On December 8, 2006 ILC acquired all of the outstanding capital stock of MCM for $280,695, which included 10,000,000 shares of common stock of ILC valued at $150,000 and $130,695 in the form of a note payable. With this acquisition, ILC became a leading home automation provider in southwestern BC and the greater Phoenix area.



Prior to the acquisition of MCM the Company was engaged in the import and distribution of home décor products for the North American market. This activity was pursued through its wholly owned subsidiary Cardinal Points Trading Corp. In July 2006, as a result of a breach of the Companys exclusivity agreement with its principal supplier by its principal supplier and other production related issues the board of directors began an evaluation of alternative business models and opportunities. In December 2006 the Company discontinued its activity in the home décor sector and began a process to dispose of assets and obligations related to the home décor import and distribution business. This process continued through the quarter ended August 31, 2008. Liquidation of the Companys home décor inventory has been slower than expected principally as a result of the slowdown of the US economy competition from suppliers of similar product to the US home décor wholesale market.



19



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MCM has been supplying custom IT solutions since 1994 and home automation and energy management solutions since 2003. The Company has offices and demonstration suites in Phoenix and Vancouver and is active with single family homes and multi-unit town homes and condominium projects in southwest BC, Calgary Alberta, the greater Phoenix area and Istanbul Turkey.



Following the acquisition of MCM in December 2006, the Company has expanded its service offerings to include home comfort and energy efficiency solutions integrated with and controlled by home automation applications. In response to the downturn in the US housing market the Company has increased its focus on the western Canadian housing market, expanded its marketing and project base into Calgary Alberta and initiated technology cooperation with leading marketing and home security groups in the Republic of Turkey for market development in Turkey and the Middle East.



Results from ongoing operations reported for the 3 months ended August 31, 2008 and 2007 relate to sales, marketing and support of home automation and energy efficiency products and services. Results from discontinued operations relate to the Companys phase out activities in the home décor sector and include the costs of liquidating inventory, reducing staff and closing office and warehouse space, renting temporary warehouse space for remaining home décor inventory and office equipment, legal, professional and staff time related to eliminating and reducing liabilities associated with discontinued operations, accretion of beneficial conversion and financing fee discount and interest charges associated with historical financings related to home décor inventory support.



On July 4, 2007 Elgrande International, Inc. merged with its wholly owned subsidiary Intelligent Living Corp. As a result of the merger, the Articles of the surviving entity were amended and the name of the surviving entity became Intelligent Living Corp. On August 28, 2007 the Company filed notice of late filing of the Companys 10KSB annual report and, as a consequence of the NASDAQ OTCBB rules regarding late filing of annual and quarterly reports, the Company was delisted and becomes eligible for relisting on August 29, 2008 subject the filing and approval by FINRA of Form 15C2-11.



On February 29, 2008 the Company filed a preliminary Schedule 14C  Information Statement outlining proposed amendments to the Companys Articles of Incorporation including a one for five hundred reverse split of the Companys common stock, adjustment of the Companys authorized capital to eight hundred million common shares and  five million preferred shares. The proposed amendments were approved by a majority of shareholders on February 29, 2008.



On August 20, 2008 the Company received clearance from the SEC for filing a Definitive Information Statement for proposed amendments to the Companys Articles of Incorporation. On August 22, 2008 the Company received correspondence from the Securities and Exchange Commission (SEC) advising that they had no further comments on the Companys annual report on Form 10-KSB/A for fiscal year ended May 31, 2005 filed July 18, 2005. As at August 31, 2008 there are no outstanding comments on the Companys SEC filings. On August 25, 2008 the Company filed a Definitive Information Statement on Schedule 14C and on August 26, 2008 provided a copy of the Information Statement to shareholders of record of the Companys common stock, par value $0.001 per share, on the record date as determined by the Companys board of directors to be the close of business on July 10, 2008. On August 29, 2008 the Company became eligible for relisting on the NASD Over the Counter Bulletin Board (OTCBB) exchange through the filing of Form 15C2-11.



Foreign currency translation

MCM Integrated Technologies, Ltd. and Cardinal Points Trading, Corp. use the Canadian Dollar as their functional currency. Transactions denominated in currencies other than the entitys functional currency are translated into the entitys functional currency at the exchange rate ruling on the date of the transaction. Monetary assets and liabilities denominated in foreign currencies are retranslated at the exchange rate ruling on the balance sheet date. Currency translation differences are recognized in the statement of income for the period.



On consolidation, the results of operations and cash flows whose functional currency is other than the US dollar are translated into US dollars at the average exchange rate for the period and their assets and liabilities are translated into



20



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US dollars at the exchange rate ruling on the balance sheet date. Currency translation differences are recognized within other comprehensive income as a separate component of shareholders equity. In the event that such an operation is sold, the cumulative currency translation differences that are attributable to the operation are reclassified to income.



Transactions with related parties

During Q3 2007, the Company purchased MCM Integrated Technologies, Ltd. a company owned by a Director of ILC, Inc. for an aggregate amount of less than $0.3 million. Prior to the acquisition, the board commissioned an independent fairness opinion on the transaction and the transaction was authorized by the board of directors, with the director involved in the transaction abstaining from voting on the approval resolution. It is believed that these transactions represent fair value for the assets and liabilities purchased.



RESULTS OF OPERATIONS  for the three months ended August 31, 2008 and August 31, 2007



For the 3 months ended August 31, 2008, revenues from continuing operations were $60,104 compared to $100,905 in the same period ending last year. These revenues are a result of the sale of smart home products and services offered through the Companys subsidiary MCM.



For the 3 months ended August 31, 2008, gross profit was $37,335 compared to $48,212 in the same period in the prior year. Gross margin (gross profit as a percent of revenue) was 62%, compared to 48% for the same period in the prior year.



Operating expenses for the 3 months ending August 31, 2008 were $41,839 versus $50,109 for the same period in the prior year.



The Company recorded an operating loss from continuing operations of ($4,505) for the period ending August 31, 2008. compared to a loss on operations of ($1,897) for the same period in the prior year.



Total other expenses for the three month period ending August 31, 2008 were $5,994. Total other expenses were $5,700 for the comparable period in the prior year. The net loss from continuing operations for the three month period ending August 31, 2008 was ($10,499) compared to a net loss of ($7,596) in the comparable period in the prior year.



During the 3 months ended August 31, 2008 the Company incurred expenses associated with its discontinued wholesale business. Expenses were partially offset by a gain on the sale of discontinued inventory. The net loss from discontinued operations was ($62,937) compared to a net loss of ($109,868) for the comparable period in the prior year.



The total net loss for the 3 months ended August 31, 2008 was ($73,436) compared to a total net loss of ($117,465) for the corresponding period in the prior year. The total net loss decreased 37% compared to the corresponding period in the prior year. A gain of $12,565 was realized as a result of foreign currency translation and the resulting comprehensive loss the period ending August 31, 2008 was $(60,871) compared to a loss of ($995) as a result of foreign currency translation and a comprehensive loss of ($118,459) for the corresponding period in the prior year. The comprehensive loss decreased 49% compared to the corresponding period in the prior year.



LIQUIDITY AND CAPITAL RESOURCES



Liquidity

As of August 31, 2008, our principal sources of liquidity included cash and cash equivalents, and operating cash flow from our operating subsidiaries, and loans from related parties.  At August 31, 2008, cash and cash equivalents totaled $4,486 compared to $8,758 at August 31, 2007.







21



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Our business is in transition and our liquidity must be considered in light of the risks, expenses and difficulties frequently encountered by companies in this stage of development. The decisions to discontinue operations in the wholesale home décor sector and acquire the assets and ongoing business of ILC have directly impacted year to date sales and liquidity. Risk factors relevant to these events and decisions include, but are not limited to: the Companys ability to secure ongoing product supply, foreign exchange fluctuations, continued acceptance of the Companys products and services, changes in technology and consumer adoption of technology, the strength of the housing market and the strength of the consumer economy in general, and cannot be quantified at this time.



Internal and External Sources of Capital

We have limited assets to sell in order to create short or long term liquidity. Therefore we are dependent on external sources for funding until such time as the Company completes its re-organization and develops positive net cash flow to maintain liquidity. Until such time as we have positive cash flow on a monthly basis, the dependence on external capital will remain.



There are no guarantees that we will be able to raise external capital in sufficient amounts or on terms acceptable to us. We have not been able to demonstrate a consistent trend of positive cash flow and profitable quarters, which would have a beneficial effect on liquidity.



Investing Activities

Investing activities for the period from inception through August 31, 2008 consisted primarily of the purchase of inventory, property and equipment and soft costs associated with the development of our areas of business activities and supporting infrastructure.



Financing Activities

Since inception, we financed operations through proceeds from the issuance of equity and debt securities and loans from shareholders and others. To date, we have raised approximately $10.5 million from the sale of common stock and have borrowed approximately $2.6 million from investors and shareholders. As at August 31, 2008, approximately $2,310,000 was recorded as debt net of subscription deposits on the Companys balance sheet.  Funds from these sources were used as working capital to fund the development of the Company.



The Company executed a securities purchase agreement dated as of December 7, 2005 (the "Purchase Agreement") with certain accredited investors under which we agreed to sell to these investors our convertible Debentures due three years from the final Closing Date under the Purchase Agreement in the aggregate principal amount of up to $600,000 bearing interest at the rate of 6% per annum and convertible into restricted shares of our Common Stock at a conversion price for each share of Common Stock equal to 75% of the lowest closing bid price per share (as reported by Bloomberg, LP) of our Common Stock for the fifteen trading days immediately preceding the date of conversion. At the close of the offering the company the company completed the sale of an aggregate of $555,000 in Debentures under the Purchase Agreement which resulted in net proceeds of $424,850. In May 2006 the Company secured additional debenture financing from an accredited investor in the amount of $50,000 under terms similar to the December 7, 2005 purchase agreement.



In February 2008 the Company negotiated payment of accrued liabilities totaling $460,000 in the form of a debenture bearing an interest rate of 6% maturing on June 1, 2010. The debenture is convertible into shares of common stock at a conversion price for each share of common stock equal to the lowest closing bid price per share of the common stock for the 5 trading days immediately preceding the date of conversion.



In June 2008 the Company negotiated the rollover, reduction of accrued liabilities and re-classification of mature debentures $599,998 into two new debentures: a third party debenture in the amount of $326,773 and a related party debenture in the amount of $273,225. The debentures are due in June 2010 and are convertible into shares of common stock at a conversion price for each share of common stock equal to the lowest closing bid price per share of the common stock for the 20 trading days immediately preceding the date of conversion. In quarter closing August 31, 2008 the Company negotiated short term loans totaling $15,856. These loans are non-interest bearing and due on demand



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FUTURE PLAN OF OPERATIONS



On December 8, 2006 the Company acquired all of the outstanding capital stock of, and entered into an Agreement and Plan of Reorganization with MCM Integrated Technologies, Ltd. (MCM).  At the time of the acquisition MCM had ongoing projects, prospects and outstanding proposals for work in the greater Phoenix area, the Okanagan area of south central British Columbia and the greater Vancouver area.  As of December 8, 2006, the Company reorganized and focused primarily in the areas of smart home technology.



Following the acquisition of MCM in December 2006, the Company has expanded its service offerings to include home comfort and energy efficiency solutions integrated with and controlled by home automation applications. In response to the downturn in the US housing market the Company has increased its focus on the western Canadian consumer, new construction and renovation markets, expanded its marketing and project base into Calgary Alberta and initiated technology cooperation with leading marketing and home security groups in the Republic of Turkey for market development in Turkey and the Middle East. The Board of Directors has plans for aggressively expanding the Companys operations through further market and service expansions, acquisitions and eventual franchising.



On December 8, 2006 the Company discontinued its activity in the home décor sector and began a process to liquidate its residual inventory of home décor products and to fully wind down its home décor business. This process continued through the quarter ending August 31, 2008.



Cash flow from ongoing MCM business combined with sale of residual home décor inventory are estimated to be sufficient to sustain the current level of operations through to the third quarter of FY 2009.



OFF BALANCE-SHEET ARRANGEMENTS



During the year ended May 31, 2008, and the three months ended August 31, 2008, the Company did not engage in any off-balance sheet arrangements as defined in Item 303(c) of the SEC's Regulation S-B.



SUBSEQUENT EVENTS



The Companys Articles of Incorporation were amended effective September 29, 2008. On September 30, 2008 the Company initiated the steps required to file Form 15C2-11.



ITEM 3. QUANTATATIVE AND QUALATIVE DISCLOSURES ABOUT MARKET RISK



Interest Rate Risk



Our exposure to market risk for changes in interest rates relates primarily to our bank credit facility because borrowings under the facility are variable rate borrowings.  At the current time all of the borrowings under our credit agreements accrue interest at the Prime Rate plus the applicable margin.  Assuming that the balance on our line of credit as of August 31, 2008, was the same throughout the entire quarter, each 1.0% increase in the prime interest rate on our variable rate borrowings would result in an increase in annual interest expense and a decrease in our cash flows and income before taxes of approximately $3,000 per year.



Foreign Currency Exchange Risks



Our home automation subsidiary (MCM) and discontinued home décor subsidiary (Cardinal Points) have operations in Canada, both have assets and liabilities in Canadian dollars and both use the Canadian Dollar as a functional currency.  Each financial period, all assets, including goodwill, and liabilities of MCM and Cardinal Points are translated into U.S. Dollars, our reporting currency, using the closing rate method. In addition, we routinely purchase goods in Canadian dollars for resale in US dollars and goods in US dollars for resale in Canadian dollars. Recently, we have purchased goods in both US dollars and Canadian dollars for resale in Euros.



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There are principally two types of foreign exchange risk: transaction risks and translation risks. Transaction risks may impact the results of operations and translation risks may impact comprehensive income.  These are discussed more fully below.



Transaction risks



Transactions in currencies other than the functional currency are translated at either an average exchange rate used for the reporting period in which the transaction took place (to approximate to the exchange rate at the date of transactions for that period) or in some cases the rate in effect at the date of the transaction.  Differences in exchange rates during the period between the date a transaction denominated in a foreign currency is consummated and the date on which it is settled or translated, are recognized in the consolidated statements of operations as foreign exchange transaction gains and losses.



MCMs and Cardinal Points cash balances consist of Canadian Dollars and U.S. Dollars. This exposes us to foreign currency exchange rate risk in the Statement of Operations. The change in exposure from period to period is related to the change in the balance of the bank accounts based on timing of event receipts and payments.  For the period ended August 31, 2008, MCM purchased approximately $10,000 of goods valued in US dollars for sales in Canadian dollars. For the period ended August 31, 2008, a 10% increase or decrease in the level of the U.S. Dollar exchange rate against the Canadian Dollar with all other variables held constant would result in a realized gain or loss of approximately $1,000.



Translation risks



The financial statements of MCM and Cardinal Points, with a functional currency of Canadian dollars, are translated into U.S. dollars using the current rate method.  Accordingly, assets and liabilities are translated at period-end exchange rates while revenue, expenses and cash flows are translated at reporting period weighted average exchange rates.  Adjustments resulting from these translations are accumulated and reported as the principal component of other comprehensive loss in stockholders equity.



The fluctuation in the exchange rates resulted in foreign currency translation gains reflected in comprehensive gain in stockholders equity of $12,565 at August 31, 2008.  Future changes in the value of the U.S. dollar to Canadian dollar could have a material impact on our financial position.



ITEM 4T. CONTROLS AND PROCEDURES.



The Company's Chief Executive Officer and Principal Financial Officer is primarily responsible for the accuracy of the financial information that is presented in this quarterly Report.  This officer has as of the close of the period covered by this Quarterly Report, evaluated the Company's disclosure controls and procedures (as defined in Rules 13a-4c and 15d-14c promulgated under the Securities Exchange Act of 1934) and determined that such controls and procedures were effective in ensuring that material information relating to the Company was made known to him during the period covered by this Quarterly Report.  In his evaluation, no changes were made to the Company's internal controls in this period that have materially affected, or are reasonably likely materially to affect, the Companys internal control over financial reporting.



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PART II. OTHER INFORMATION.



ITEM 1.  LEGAL PROCEEDINGS



We are not currently involved in any litigation, nor do we know of any threatened litigation against us that would have a material effect on our financial condition.



ITEM 1A.  RISK FACTORS



Not applicable.



ITEM 2.  UNREGISTERED SALES OF EQUITY SECURITIES AND USE OF PROCEEDS



None.



ITEM 3.  DEFAULTS UPON SENIOR SECURITIES



None.



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



None.



ITEM 5.  OTHER INFORMATION



None



ITEM 6.  EXHIBITS.



No.

Description

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----------------------------------------------------------

31

Certification of Michael Holloran Pursuant to Section 302 of the -Sarbanes-Oxley Act of 2002, filed herewith

32

Certification of Michael F. Holloran Pursuant to 18 U.S.C. Section 1350, as Adopted Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002, filed herewith





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SIGNATURES





Pursuant to the requirements  of the  Exchange Act, the  registrant caused  this

report to be signed on its behalf by the undersigned, thereunto duly authorized.







INTELLIGENT LIVING CORP.



By: /s/ Michael F. Holloran

-------------------------------------

Michael F. Holloran

President, Chief Executive Officer, and

Principal Financial Officer



Dated:  October 20, 2008











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