Occidental Development Group, Inc. - FORM 10-Q

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EXCEL - IDEA: XBRL DOCUMENT - Occidental Development Group, Inc.	Financial_Report.xls
EX-32 - CERTIFICATION - Occidental Development Group, Inc.	ex32.htm
EX-31 - CERTIFICATION - Occidental Development Group, Inc.	ex31.htm

UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549

FORM 10-Q

x QUARTERLY REPORT UNDER SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
for the quarterly period ended February 28, 2013

¨ 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 registrant as specified in its charter)

Nevada
(State or other jurisdiction of incorporation or organization)

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

101 – 618 EAST KENT AVENUE SOUTH
Vancouver, BC
V5X 0B1
(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 has submitted electronically and posted on its corporate Web site, if any, every Interactive Data File required to be submitted and posted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit and post such files).

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 April 15, 2013, the registrant had outstanding 39,333,741 shares of its $0.001 par value Common Stock.

Transitional Small Business Disclosure Format: Yes¨ No þ

INTELLIGENT LIVING CORP.

FORM 10Q

For the Quarterly Period February 28, 2013

TABLE OF CONTENTS

Page

PART I. FINANCIAL INFORMATION

ITEM 1. FINANCIAL STATEMENTS

ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION

AND RESULTS OF CONTINUING AND FUTURE PLAN OF OPERATION

ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK

ITEM 4T. CONTROLS AND PROCEDURES

PART II. OTHER INFORMATION

ITEM 1. LEGAL PROCEEDINGS

ITEM 1A. RISK FACTORS

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

ITEM 3. DEFAULTS UPON SENIOR SECURITIES

ITEM 4. MINE SAFETY DISCLOSURES.

ITEM 5. OTHER INFORMATION

ITEM 6. EXHIBITS

SIGNATURES

PART I. FINANCIAL INFORMATION

ITEM 1 - FINANCIAL STATEMENTS


INTELLIGENT LIVING CORP.
CONSOLIDATED BALANCE SHEETS
			February 28,		May, 31
			2013		2012
			(unaudited)
CURRENT ASSETS
	Cash and cash equivalents	$	9,022	$	2,685
	Accounts receivable, net		-		6,937
	Accounts receivable related party		15,448		-
	Prepaid expenses		296		3,441
	Inventory, net		1,954		1,952
	Employee expense advances		70		-
	GST/PST tax refundable		878		156
	TOTAL CURRENT ASSETS	$	27,668	$	15,171

	PROPERTY & EQUIPMENT, NET		6,525		10,263

OTHER ASSETS
	Other Assets, net		-		-
	TOTAL OTHER ASSETS		-		-
	TOTAL ASSETS	$	34,193	$	25,434

LIABILITIES AND STOCKHOLDERS' (DEFICIT)
CURRENT LIABILITIES
	Line of credit		46,796		43,437
	Accounts payable		86,957		91,290
	Accrued liabilities		132,931		278,779
	Accrued interest		311,698		273,458
	Short term notes		27,503		27,489
	Short term notes convertible, net		205,521		75,000
	Short term loans - related party		341,665		350,232
	Discontinued operations - short term note convertible		-		61,250
	TOTAL CURRENT LIABILITIES	$	1,153,071	$	1,200,935

LONG-TERM LIABILITIES
	Debentures		619,753		655,753
	TOTAL LONG TERM LIABILITIES		619,753		655,753
	TOTAL LIABILITIES		1,772,824		1,856,688

	COMMITMENTS & CONTINGENCIES		-		-

STOCKHOLDERS' (DEFICIT)
	Preferred stock, 5,000,000 shares authorized, $0.001 par value, 0 issued and outstanding		0		0
	Common stock, 800,000,000 shares authorized, $0.001 par value; 37,403,642 and 12,507,975 issued and outstanding respectively		37,431		12,508
	Additional paid in capital		13,735,937		13,495,213
	Accumulated deficit		(15,423,448)		(15,251,400)
	Accumulated other comprehensive (loss)		(88,551)		(87,575)
	TOTAL STOCKHOLDERS' (DEFICIT)	$	(1,738,631)	$	(1,831,254)
	TOTAL LIABILITIES AND STOCKHOLDERS' (DEFICIT)	$	34,193	$	25,434

See accompanying condensed notes to the interim consolidated financial statements


INTELLIGENT LIVING CORP.
CONSOLIDATED STATEMENTS OF OPERATIONS AND COMPREHENSIVE LOSS
(Unaudited)
			For the 3 month period ended				For the 9 month period ended
			February 28,		February 29,		February 28		February 29
			2013		2012		2013		2012

REVENUES
	Intelligent Home: Equipment & Services	$	35,236	$	67,488	$	69,650	$	233,098
COST OF REVENUES
	Intelligent Home: Equipment & Services		5,201		45,463		6,900		126,153
GROSS PROFIT			30,035		22,025		62,750		106,945

EXPENSES
	Selling expense		-		93		-		3,201
	Salaries		555		21,040		4,132		65,184
	Depreciation		1,286		1,043		3,849		7,040
	Office & Administrative		104,719		27,471		133,098		88,627
	TOTAL OPERATING EXPENSES		106,560		49,647		141,079		164,052

GAIN (LOSS) FROM OPERATIONS			(76,525)		(27,622)		(78,329)		(57,107)

OTHER INCOME (EXPENSE)
	Beneficial conversion and fee discount expense		(20,747)		-		(33,497)		-
	Interest income		-		-		-		81
	Interest expense		(20,438)		(21,670)		(60,222)		(63,761)
	TOTAL OTHER INCOME (EXPENSE)		(41,185)		(21,670)		(93,719)		(63,680)

INCOME (LOSS) FROM CONTINUING OPERATIONS			(117,710)		(49,292)		(172,048)		(120,787)

(LOSS) FROM DISCONTINUED OPERATIONS			-		(1,702)		-		(2,144)

CONSOLIDATED NET (LOSS) BEFORE INCOME TAX			(117,710)		(50,994)		(172,048)		(122,931)
	Income Tax Expense		-		-		-		-
NET (LOSS)			(117,710)		(50,994)		(172,048)		(122,931)

OTHER COMPREHENSIVE GAIN (LOSS)
	Foreign currency translation gain (loss)		13,727		7,983		(976)		8,737
COMPREHENSIVE (LOSS)		$	(103,983)	$	(43,011)	$	(173,024)	$	(114,194)

EARNINGS PER SHARE BASIC AND DILUTED
	(Loss) income per share from continuing operations		(0.01)		(0.01)		(0.01)		(0.05)
	(Loss) per share from discontinued operations		-		(0.00)		-		(0.00)
	Net (Loss) per share		(0.01)		(0.01)		(0.01)		(0.05)
	Weighted average number of common stock shares outstanding, basic and diluted		19,374,020		5,646,162		13,249,630		2,363,055

See accompanying condensed notes to the interim consolidated financial statements


INTELLIGENT LIVING CORP.
CONSOLIDATED STATEMENTS OF CASH FLOWS
(Unaudited)
					For the 9 month period ended
					February 28,		February 29,
					2013		2012

CASH FLOWS FROM OPERATING ACTIVITIES:
	Net loss			$	(172,048)	$	(122,931)
	Adjustments to reconcile net loss
		to net cash used in operating activities:
			Amortization of debt discount		33,497		-
			Depreciation / Amortization		3,849		7,040
		Decrease (increase), net of acquisition, in:
			Accounts receivable		6,937		(21,641)
			Accounts receivable related party		(15,448)		20,078
			Prepaid expenses		3,145		-
			Inventory		-		(28,116)
		Increase (decrease), net of acquisition, in:
			Accrued liabilities and interest		14,392		45,746
			Employee advance receivable		(70)		-
			Accounts payable		80,667		8,396
			GST tax refundable		(722)		705
	Net cash used in operating activities				(45,801)		(90,723)

CASH FLOWS FROM FINANCING ACTIVITIES:
	Bank Line of Credit				3,359		(14,309)
	Proceeds of loans				75,000		-
	Proceeds of loans, related party				123,634		105,598
	Repayment of loans, related party				(150,962)		-
	Net cash provided by financing activities				51,031		91,289

Net increase (decrease) in cash					5,230		566

	Effect of foreign exchange on cash				1,107		4,074

Cash, beginning of period					2,685		3,475

Cash, end of period				$	9,022	$	8,115

SUPPLEMENTAL DISCLOSURES:
	Cash paid for interest and income taxes:						-
		Interest		$	19,824	$	18,869
		Income taxes		$	0	$	0

NON-CASH INVESTING AND FINANCING ACTIVITIES:
	Common stock issued for related party debt and interest			$	105,421	$	303,780
	Accounts payable converted to third party debt			$	85,000	$	-
	Common stock issued for third party debt and interest			$	97,250	$	56,250
	Accrued liabilities converted to related party debt			$	122,000	$	180,000
	Beneficial conversion feature on third party debt			$	62,976	$	-

See accompanying condensed notes to the interim consolidated financial statements

INTELLIGENT LIVING CORP. AND SUBSIDIARIES

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

February 28, 2013

(Unaudited)

NOTE 1 – BASIS OF PRESENTATION

Intelligent Living Corp (“ILC”, the “Company”, “we”, “us”) was incorporated in the State of Nevada in 1998 and maintains offices in Vancouver, British Columbia and Phoenix, Arizona. Through its wholly owned subsidiary MCM Integrated Technologies, Ltd. (“MCM”) the Company operates in the green building sector and historically has offered automation technology for single and multi unit new construction and existing buildings. Income was derived from both equipment sales and the provision of installation, repair and maintenance services and customers include residential home owners, developers and builders of single family and multi-unit developments and commercial businesses. MCM was incorporated in 1994, began supplying home automation and energy management solutions in 2003 and was acquired by Intelligent Living in 2006.

In 2008 the Company shifted its focus to the western Canadian housing market. Compared to the US housing market the western Canadian housing market, and in particular the greater Vancouver housing market, has remained relatively stable with new construction and renovation projects. Beginning in the summer of 2012 the Canadian resale market cooled and prices have contracted slightly in most areas. This trend is forecast to continue through the coming quarters as the market rebalances.

The market opportunities for the Company’s control and automation services and products and associated project margins are enhanced when combined with building design and construction. Over several quarters the Company has actively evaluated opportunities to expand its business activities vertically within the Company’s current green building, home automation and energy conservation sectors and horizontally within the construction and renovation sectors.

During FY 2012 the Company began planning the shift of its activities to design build services targeting small footprint energy efficient smart housing, specific to the needs of North American Indian communities and emergency relief housing, and multi-strata property renovation and development. Projects will incorporate automation and control as standard features. These areas of business capitalize on the Company’s experience designing and supplying environmental control and automation technology and better utilize the Company’s strong in-house engineering, design and project management capabilities.

Early in the planning process it became clear that restructuring would be required in order for the Company to attract the working capital financing required to support expansion. On October 31, 2011 the Company’s board of directors approved a Consent Resolution amending the Company’s Articles of Incorporation to affect a one for one hundred and fifty reverse split of the Company’s common stock, and 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 November 1, 2011. The Company filed a preliminary Schedule 14C Information Statement outlining proposed amendments to the Company’s Articles of Incorporation on November 9, 2011 and a definitive Schedule 14C Information Statement on November 25, 2011. The Company set November 25, 2011 as the record date for notification to shareholders. The Company filed the amended Articles of Incorporation with the Nevada Secretary of State on December 12, 2011, with an effective posting date of December 22, 2011. The reverse split was approved for trading purposes by the Financial Industry Regulatory Authority [FINRA] on January 18, 2012.

Restructuring was completed during the year ended May 31, 2012 and the Company has begun implementation of its diversification strategy.

INTELLIGENT LIVING CORP. AND SUBSIDIARIES

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

February 28, 2013

(Unaudited)

The Company previously 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 December 2006 the Company discontinued its activity in the home décor sector and began a process to dispose of assets and obligations and evaluate ways and means to recover costs related to the home décor import and distribution business. This process concluded during the year ended May 31, 2012 and any future impact on ongoing operations is expected to be de minimis.

Results from ongoing operations reported for the period ending February 28, 2013 relate to sales of home automation and energy efficiency products and services including system design, equipment supply, installation and support and reflect development expenses related to the Company’s diversification strategy. Results from operations reported for the period ending February 29, 2012 relate to sales of home automation and energy efficiency products and services including system design, equipment supply, installation and support.

The Company’s year-end is May 31.

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-X 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, 2012. 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.

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 February 28, 2013, the Company had a working capital deficit of $1,125,403, an accumulated deficit of $15,423,448 and historically has reported 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 continue to 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.

INTELLIGENT LIVING CORP. AND SUBSIDIARIES

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

February 28, 2013

(Unaudited)

NOTE 2 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

This summary of significant accounting policies of Intelligent Living Corp. is presented to assist in understanding the Company’s financial statements. The financial statements and notes are representations of the Company’s management, which is responsible for their integrity and objectivity. These accounting policies conform to accounting principles generally accepted in the United States of America and have been consistently applied in the preparation of the financial statements.

Earnings per Share

The Company has adopted ASC 260 “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.

Fair Value of Financial Instruments

On July 1, 2008, the Company adopted Accounting Standards Codification Topic 820, Fair Value Measurements and Disclosures (“Topic 820”). Topic 820 defines fair value, establishes a three-level valuation hierarchy for disclosures of fair value measurement and enhances disclosure requirements for fair value measures. The three levels are defined as follows:

Level 1 inputs to the valuation methodology are quoted prices (unadjusted) for identical assets or liabilities in active markets.

Level 2 inputs to the valuation methodology include quoted prices for similar assets and liabilities in active markets, and inputs that are observable for the asset or liability, either directly or indirectly, for substantially the full term of the financial instrument.

Level 3 inputs to valuation methodology are unobservable and significant to the fair measurement.

The following table represents our assets and liabilities by level measured at fair value on a recurring basis at February 28, 2013

Total

Realized

Description

Level 1

Level 2

Level 3

Loss

Totals

The following table represents our assets and liabilities by level measured at fair value on a recurring basis at May 31, 2012:

Total

Realized

Description

Level 1

Level 2

Level 3

Loss

Totals

The adoption of this standard did not have a material effect on the Company’s financial position, results of operations or cash flows.

INTELLIGENT LIVING CORP. AND SUBSIDIARIES

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

February 28, 2013

(Unaudited)

Beneficial Conversion Feature of Debentures and Convertible Notes Payable

In accordance with FASB ASC 470-20, Accounting for Convertible Securities with Beneficial Conversion Features or Contingently Adjustable Conversion Ratios, we recognize the advantageous value of conversion rights attached to such types of convertible debt. Such rights give the debt holder the ability to convert their debt into common stock at a price per share that is less than the trading price to the public on the day the loan is made to us. The beneficial value is calculated as the intrinsic value (the market price of the stock at the commitment date in excess of the conversion rate) of the beneficial conversion feature of the debentures and related accruing interest, and is recorded as a discount to the related debt and an addition to additional paid in capital. The discount is amortized over the remaining outstanding period of related debt using the straight line method.

Recent Accounting Pronouncements

In October 2012, the Financial Accounting Standards Board (FASB) issued Accounting Standards Update (ASU) 2012-04, ''Technical Corrections and Improvements" in Accounting Standards Update No. 2012-04. The amendments in this update cover a wide range of Topics in the Accounting Standards Codification. These amendments include technical corrections and improvements to the Accounting Standards Codification and conforming amendments related to fair value measurements. The amendments in this update will be effective for fiscal periods beginning after December 15, 2012. The adoption of ASU 2012-04 is not expected to have a material impact on our financial position or results of operations.

In August 2012, the FASB issued ASU 2012-03, "Technical Amendments and Corrections to SEC Sections: Amendments to SEC Paragraphs Pursuant to SEC Staff Accounting Bulletin (SAB) No. 114, Technical Amendments Pursuant to SEC Release No. 33-9250, and Corrections Related to FASB Accounting Standards Update 2010-22 (SEC Update)" in Accounting Standards Update No. 2012-03. This update amends various SEC paragraphs pursuant to the issuance of SAB No. 114. The adoption of ASU 2012-03 is not expected to have a material impact on our financial position or results of operations.

In July 2012, the FASB issued ASU 2012-02, "Intangibles -Goodwill and Other (Topic 350): Testing Indefinite-Lived Intangible Assets for Impairment" in Accounting Standards Update No. 2012-02. This update amends ASU 2011-08, Intangibles -Goodwill and Other (Topic 350): Testing Indefinite-Lived Intangible Assets for Impairment and permits an entity first to assess qualitative factors to determine whether it is more likely than not that an indefinite-lived intangible asset is impaired as a basis for determining whether it is necessary to perform the quantitative impairment test in accordance with Subtopic 350-30, Intangibles -Goodwill and Other -General Intangibles Other than Goodwill. The amendments are effective for annual and interim impairment tests performed for fiscal years beginning after September 15, 2012. Early adoption is permitted, including for annual and interim impairment tests performed as of a date before July 27, 2012, if a public entity's financial statements for the most recent annual or interim period have not yet been issued or, for nonpublic entities, have not yet been made available for issuance. The adoption of ASU 2012-02 is not expected to have a material impact on our financial position or results of operations.

In December 2011, the FASB issued ASU No. 2011-11, “Disclosures about Offsetting Assets and Liabilities”. Under ASU 2011-11 disclosures are required to provide information to help reconcile differences in the offsetting requirements under U.S. GAAP and IFRS. The new disclosure requirements mandate that entities disclose both gross and net information about instruments and transactions eligible for offset in the statement of financial position as well as instruments and transactions subject to an agreement similar to a master netting arrangement. In addition, the ASU requires disclosure of collateral received and posted in connection with master netting agreements or similar arrangements. The guidance is effective for fiscal years, and interim periods within those years, beginning on or after January 1, 2013.

INTELLIGENT LIVING CORP. AND SUBSIDIARIES

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

February 28, 2013

(Unaudited)

In September 2011, the FASB issued ASU No. 2011-08, “Testing Goodwill for Impairment (the revised standard)”. Under ASU No. 2011-08 companies have the option to perform a qualitative assessment that may allow them to skip the annual two-step test and reduce costs. The guidance is effective for fiscal years beginning after December 15, 2011 and earlier adoption is permitted.

In June 2011, the FASB issued ASU No. 2011-05, “Presentation of Comprehensive Income.” The guidance improves the comparability of financial reporting and facilitates the convergence of U.S. GAAP and IFRS be amending the guidance in ASC 220, Comprehensive Income. Under the amended guidance, an entity has the option to present the total of comprehensive income, the components of net income, and the components of other comprehensive income either in a single continuous statement of comprehensive income or in two separate but consecutive statements. In both choices, the entity is required to present on the face of the financial statements reclassification adjustments for items that are reclassified from other comprehensive income to net income in the statement(s) where the components of net income and the components of other comprehensive income are presented. This guidance is effective retrospectively for annual and interim periods beginning after December 15, 2011. The adoption of the guidance is not expected to have a material impact on the Company's Consolidated Financial Statements or the Notes thereto.

The Company has implemented all new accounting pronouncements that are in effect and that may impact its financial statements and does not believe that there are any other new accounting pronouncements that have been issued that might have a material impact on its financial position or results of operations, or cash flows.

NOTE 3 - COMMON STOCK

During the nine months ended February 28, 2013 the Company issued 10,566,667 shares of its unregistered common stock for conversion of $88,250 of third party debt principal. The conversion was made in accordance with the terms of the underlying agreements.

During the nine months ended February 28, 2013 the Company issued 14,056,000 shares of its unregistered common stock for conversion of $103,267 of related party debt principal and $2,154 of related party accrued interest. The conversion was made in accordance with the terms of the underlying agreements.

During the nine months ended February 28, 2013, the Company converted $9,000 of short term, third party note principal into 300,000 shares of the Company’s common stock. The conversion was within the terms of the underlying agreement.

NOTE 4 – RELATED PARTIES

The Company had short-term loans outstanding to corporate officers at May 31, 2012 in the amount of $350,232. They are unsecured, due on demand and bear interest at an average rate of 9.7%. Accrued interest to May 31, 2012 was $785.

During the nine months ended February 28, 2013, the Company converted $122,000 of accrued liabilities, into a new related party debenture in the same amount and re-classified and converted a $30,267 short term non-interest bearing note into a new related party debenture. The debentures bear interest at 6% and mature on June 1, 2014. The debentures are convertible into shares of common stock at a conversion price equal to the lowest closing price per share of the Company’s common stock for the 20 days on which the Company's shares traded immediately preceding the date of conversion or at a price of $0.0005 per share whichever is greater. The Company determined that there was no derivative liability or beneficial conversion associated with the new debentures.

INTELLIGENT LIVING CORP. AND SUBSIDIARIES

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

February 28, 2013

(Unaudited)

During the quarter ended February 28, 2013 the Company converted $103,267 of related party debenture principal and $2,154 of related party debenture interest into 14,056,000 shares of common stock at a share price of $0.01 per share. All conversions were made in accordance with the underlying debt agreement.

During the nine months ended February 28, 2013 the balance sheet liability associated with related party loans, debentures and accrued liabilities decreased by $129,865. The remaining loans totaling $341,665 are uncollateralized and due on demand. The Company paid the Company’s officers $72,375 of loan principal and $19,824 of interest in cash, and accrued related party interest of $1,487. Total outstanding related party debt [principal plus accrued interest] for the period ended February 28, 2013 and May 31, 2012 was respectively $343,152 and $351,017.

The following table summarizes the amounts due to related parties at February 28, 2013:


Related Parties		Principal Outstanding on February 28, 2013		Interest Accrued to February 28, 2013
Short term notes	$	341,665	$	1,487
Total	$	341,665	$	1,487

The following table summarizes the amounts due to related parties at May 31, 2012:


Related Parties		Principal Outstanding on February 28, 2013		Interest Accrued to February 28, 2013
Short term notes	$	350,232	$	785
Total	$	350,232	$	785

The Company shares office space and administrative costs in Vancouver with ScanTech Imaging Corp. (“ScanTech”), a company controlled by Murat Erbatur the Company’s COO. The Company provides technical consulting services to ScanTech and Scan Tech’s clients on an as needed basis. For the period ended February 28, 2013 the total value of services provided was $48,735.

NOTE 5 – THIRD PARTY NOTES AND DEBENTURES PAYABLE

During the 12 months ended May 31, 2012 the Company reclassified $80,000 of accrued liability into a non interest bearing convertible note maturing on June 1, 2012. The accrued liability resulted from professional fees payable under a consulting contract dated July 2010. Pursuant to terms of the consulting contract, the note formalizes the Company’s option to settle the outstanding liability through issuance of common stock and the effective date of the note tacks back to December 2010 reflecting the period in which the Company realized the benefit of the services. The note is convertible into shares of the Company’s common stock at a conversion price not less than the greater of $0.0005 per share or the lowest closing price of the Company’s Common Stock for any trading day on which a Notice of Conversion is received, or for any of the 20 consecutive days on which shares of the Company traded immediately preceding the date of receipt of each Notice of Conversion. The Company determined that there was no derivative liability or beneficial conversion associated with the note.

INTELLIGENT LIVING CORP. AND SUBSIDIARIES

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

February 28, 2013

(Unaudited)

During the period ended May 31, 2012 the Company converted $18,750 of third party short term note principal into 625,000 shares of common stock at a share price of $0.03 per share. The conversion was made in accordance with the underlying debt agreement. The total short term third party non-interest bearing note principal outstanding on May 31, 2012 was $88,739.

In the 12 months ended May 31, 2012 the Company converted $37,500 of debenture principal and into 1,250,000 shares of the Company’s common stock. All conversions were within terms of the underlying agreements. The total $730,753 debenture principal outstanding on May 31, 2012 consists of: $75,000 in short term debentures and $655,753 in long term debentures.

During the nine months ended February 28, 2013 the Company converted $9,000 of short term note principal into 300,000 shares of the Company’s common stock. The conversion was within the terms of the underlying agreement.

During the quarter ended November 30, 2012 the Company negotiated an 8% convertible debenture, principal amount of $42,500, (“First Asher Note”) with Asher Enterprises, Inc. The debenture, due in June 2013, is convertible into shares of the Company’s common stock, at the discretion of the holder, commencing 180 days following the date of the debenture at a conversion price per share equal to a discount of 42% from the average of the lowest three closing prices for the Company’s stock during the ten days prior to conversion or $0.00009 per share whichever is greater. The Company determined that there was a beneficial conversion feature associated with the debenture equal to the principal value of the note of $42,500. A discount equal to the amount of the beneficial conversion feature is being amortized over the life of the note.

The Company evaluated the First Asher Note and determined that the shares issuable pursuant to the conversion option were determinate due to the Fixed Conversion Price and, as such, does not constitute a derivative liability as the Company has obtained authorization from a majority of shareholders such that should conversion occur at the Fixed Conversion Price the appropriate number of shares will be available or issuable for settlement to occur. The beneficial conversion feature discount resulting from the conversion price of $0.03 below the market price on September 6, 2012 of $0.038 provided a value of $42,500 of which $26,850 was amortized during the nine-months ended February 28, 2012.

During the quarter ended February 28, 2013 the Company negotiated a second 8% convertible debenture, principal amount of $32,500 (“Second Asher Note”), with Asher Enterprises, Inc. The debenture, due in September 2013, is convertible into shares of the Company’s common stock, at the discretion of the holder, commencing 180 days following the date of the debenture at a conversion price per share equal to a discount of 42% from the average of the lowest three closing prices for the Company’s stock during the ten days prior to conversion or $0.00009 per share whichever is greater. The Company determined that there was a beneficial conversion feature associated with the debenture equal to $16,226. A discount equal to the amount of the beneficial conversion feature is being amortized over the life of the note.

The Company evaluated the Second Asher Note and determined that the shares issuable pursuant to the conversion option were determinate due to the Fixed Conversion Price and, as such, does not constitute a derivative liability as the Company has obtained authorization from a majority of shareholders such that should conversion occur at the Fixed Conversion Price the appropriate number of shares will be available or issuable for settlement to occur. The beneficial conversion feature discount resulting from the conversion price of $0.007 below the market price on December 5, 2012 of $0.020 provided a value of $16,226 of which $4,997 was amortized during the nine-months ended February 28, 2012.

INTELLIGENT LIVING CORP. AND SUBSIDIARIES

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

February 28, 2013

(Unaudited)

During this quarter, the Company converted accounts payable $85,000 to a short term non-interest bearing convertible note. The principal is convertible into shares of common stock at a conversion price equal to the lowest closing price per share of the Company’s common stock for the 20 days on which the Company's shares traded immediately preceding the date of conversion or at a price of $0.0005 per share whichever is greater. The Company determined that there was a beneficial conversion feature associated with the debenture equal to $4,250. A discount equal to the amount of the beneficial conversion feature is being amortized over the life of the note.

The Company evaluated the $85,000 convertible note and determined that the shares issuable pursuant to the conversion option were determinate. The beneficial conversion feature discount resulting from the conversion price of $0.001 below the market price on December 31, 2012 of $0.021 provided a value of $4,250 of which $1,650 was amortized during the nine-months ended February 28, 2012.

During the nine month period ended February 28, 2013 the Company recorded expenses of $2,242 for accrued interest and $33,497 related to amortization of the debenture discount. Pursuant to the terms of the debenture, and by agreement with Asher, the Company has instructed its stock transfer agent to reserve an agreed upon number of shares of the Company’s common stock to be issued if the debenture is converted. As of February 28, 2013, 26,500,000 shares have been reserved, but are not considered as issued and outstanding.

All outstanding notes and debentures were evaluated for embedded derivatives in accordance with ASC 815 and were found to not include any embedded derivatives.

Third party short term principal outstanding on February 28, 2013 was $262,503, consisting of note principal $112,503 and debenture principal $150,000. Total third party long term principal outstanding on February 28, 2013 consisted of debenture principal of $619,753. Total outstanding third party principal outstanding on February 28, 2013 was $882,256.

The following tables summarize the outstanding principal and discounts associated with debentures and notes outstanding at May 31, 2012 and February 28, 2013.


May 31, 2012
Long and Short Term Debentures			Notes	Total
Principal at end of period	Remaining Discounts	Balance Sheet Amount net of discounts	Principal at end of period	End of Period Balance Sheet Amount
$730,753	$ -	$730,753	$88,739	$819,492
February 28, 2013
Long and Short Term Debentures			Notes	Total
Principal at end of period	Remaining Discounts	Balance Sheet Amount net of discounts	Principal at end of period	End of Period Balance Sheet Amount
$769,753	$29,479	$740,274	$112,503	$852,777

INTELLIGENT LIVING CORP. AND SUBSIDIARIES

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

February 28, 2013

(Unaudited)

The principal and accrued interest on notes and debentures as of May 31, 2012 and February 28, 2013 are summarized in the following tables:


Notes and Debentures		Principal Amount at May 31, 2012	Weighted Average Interest Rate		Accrued Interest May 31, 2012
Third Party Notes	$	88,739	NIL	$	NIL
Third Party Debentures		730,753	6.5%		272,672
Total	$	819,492	5.8%	$	272,672
Notes and Debentures		Principal Amount at Feb 28, 2013	Weighted Average Interest Rate		Accrued Interest February 28, 2013
Third Party Notes	$	112,503	-	$	-
Third Party Debentures		769,753	6.7%		311,698
Total	$	882,256	5.8%	$	311,698

Principal payments on loans and debentures payable in the years ending May 31, 2013 through 2017 are as follows:


Fiscal Year	Principal
2013	$187,503
2014	$307,480
2015	$387,273
2016	-
2017	-
Total	$882,256

NOTE 6 – DISCONTINUED OPERATIONS

In prior periods the Company disposed of all discontinued inventory and fully depreciated all plant and equipment assets. At February 28, 2013, assets from discontinued operations were de minimis.

Liabilities from discontinued operations consisted of:


Description		May 31, 2012	February 28, 2013
Note Payable	$	61,250	$	-
Total liabilities related to discontinued operations	$	61,250	$	-

NOTE 7 – SUBSEQUENT EVENTS

There were no subsequent events from the end of the quarter to the date of issuance of this filing

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 annual 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

Restructuring was completed during the year ended May 31, 2012 and the Company has begun implementation of its diversification strategy.

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. 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.

During the nine month period June 1, 2012 through February 28, 2013, the US dollar to Canadian Dollar exchange rate has varied from a low of 0.9601 on June 3 , 2012 to a high of 1.0334 on September 15, 2012. The closing exchange rate was 0.9747 and the average exchange rate over the nine month period ended February 28, 2013 was 1.0015 resulting in a foreign currency translation loss of ($976) for the nine month period ended February 28, 2013.

Transactions with related parties

Our By-Laws include a provision regarding related party transactions which requires that each participant to such transaction identify all direct and indirect interests to be derived as a result of the Company's entering into the related transaction. A majority of the disinterested members of the board of directors must approve any related party transaction.

Except for the transactions described below, none of our directors, senior officers or principal shareholders, nor any associate or affiliate of the foregoing have any interest, direct or indirect, in any transaction, since the beginning of the fiscal year ended May 31, 2012, or in any proposed transactions, in which such person had or is to have a direct or indirect material interest.

During the year ended May 31, 2012, the Company’s CEO loaned the Company $42,645 and the Company’s COO loaned the Company $9,530. These amounts are uncollateralized and due on demand. The Company paid $25,828 in interest to its COO in cash and accrued $7,868 in interest due the Company’s CEO.

During the year ended May 31, 2012 $180,000 of accrued liabilities, $115,388 of short term note payable and $2,612 of accrued interest due the Company’s CEO was consolidated into a debenture bearing interest at a rate of 6%. The debenture and $5,780 of accrued interest were converted into 9,926,000 shares of common stock of the Company at an average price of $0.03 per share. The conversion was made in accordance with the underlying debt agreement.

During the nine month period ended February 28, 2013, the Company converted $122,000 of accrued liabilities due the Company’s CEO into a 6% convertible debenture, negotiated short term loans of $32,365 with the Company’s CEO, repaid loan and debenture principal of $85,375 in cash and converted $73,000 of debenture principal and $1,700 of debenture accrued interest into 9,960,000 shares of common stock of the Company at an average price of $0.01 per share. The Company re-classified $30,267 of loan principal due one of the Company’s principal shareholders to a related party loan and converted the principal balance into a 6% convertible debenture and converted $30,267 of debenture principal and $454 of debenture accrued interest into 4,096,000 shares of common stock of the Company at an average price of $0.01 per share. During the nine months ended February 28, 2013 the balance sheet liability associated with short term principal due the Company’s COO decreased by $2,806. Related party loans are uncollateralized and due on demand. The Company repaid the Company’s COO interest of $19,824 in cash and accrued $1,487 in interest due the Company’s CEO. Total outstanding related party debt [principal plus accrued interest] for the period ended February 28, 2013 and May 31, 2012 was respectively $343,152 and $351,017.

The Company shares office space and administrative costs in Vancouver with ScanTech Imaging Corp. (“ScanTech”), a company controlled by Murat Erbatur the Company’s COO. The Company provides technical consulting services to ScanTech and Scan Tech’s clients on an as needed basis. For the nine month periods ended February 28, 2013, and February 29, 2012 the total value of services provided was $50,006 and Nil respectively.

RESULTS OF OPERATIONS – for the nine months and three months ended February 28, 2013 and February 29, 2012

For the nine months ended February 28, 2013, revenues from continuing operations were $69,650 compared to $233,098 in the same period ending last year, a decrease of 70%. The decrease in revenue is the net of a 92% decrease in the value of third party residential installations combined with a 100% increase in related party technical consulting work. For the corresponding three month periods ended February 28, 2013 and February 29, 2012 revenue was $35,236 and $67,488, a decrease of 48%. The decrease is the net of a 96% decrease in the value of third party residential installations combined with a 100% increase in related party technical consulting work. The decrease in revenue from third party residential installations is directly a result of the Company’s decision to phase out of sub-contract work and transition to design build services

For the nine months ended February 28, 2013, gross profit was $62,750 compared to 106,945 in the same period in the prior year, a decrease of 41%. Gross margin (gross profit as a percent of revenue) was 90%, compared to 46% for the same period in the prior year. For the corresponding three month periods ended February 28, 2013 and February 29, 2012 gross profit was $30,035 and $22,025 respectively, an increase of 36%. Gross profit is the net of revenue less the cost of goods. In the periods compared, the Company’s cost of goods was low compared to prior quarters. This resulted because revenues were substantially due to professional time billed for completion of sub-contract work and technical consulting which does not have any associated cost of materials.

This resulted in the large increase in gross margin reflecting the low cost of revenue associated with professional fees.

Operating expenses for the nine months ending February 28, 2013 were $141,079 versus $164,052 for the nine months ending February 29, 2012 and $106,560 versus $49,647 for the three month periods ended February 28, 2013 and February 29, 2012. The year to date operating expense decrease of 14% resulted from: 100% reduction in selling expenses, 94% reduction in salary costs, 45% reduction in depreciation expenses, and a 50% increase in administration expenses resulting principally from a professional services contract. Increased operating expenses for the three month period ended February 28, 2013 versus the three month period ended February 29, 2012 were primarily a result of increased administration expenses resulting principally from a professional services contract.

The Company recorded an operating loss from continuing operations of ($78,329) for the nine month period ended February 28, 2013 compared to an operating loss of ($57,107) for the nine months ending February 29, 2012, an increase of 37%. The Company recorded an operating loss from continuing operations of ($76,525) for the three month period ended February 28, 2013 compared to an operating loss of ($26,622) for the three month period ending February 29, 2012, an increase of 177%.

Total other expenses for the nine month period ending February 28, 2013 were ($93,719) compared to ($63,680) for the comparable period in the prior year, an increase of 47%. The increase resulted from a 100% increase in accretion expense associated with the Company’s recent third party financings and a small decrease in interest expense compared to the same period in the prior year. Total other expenses for the three month period ended February 28, 2013 were ($41,185) compared to ($21,670) for the comparable period in the prior year. The increase was entirely due to third party financing accretion expense.

The net loss from continuing operations for the nine month period ending February 28, 2013 was ($172,048) compared to a net loss of ($120,787) in the comparable period in the prior year, an increase of 42%. For the three month period ended February 28, 2013 the Company recorded a net loss from continuing operations of ($117,710) compared to a net loss of ($49,292) for the comparable period in the prior year, an increase of 139%.

During the nine month and three month periods ended February 28, 2013 the Company did not incur expenses associated with its discontinued wholesale business. In the comparable periods in the prior year the net loss from discontinued operations was ($2,144) and ($1,702) respectively. The elimination of expenses is a result of the windup of discontinued operations during the year ended May 31, 2012.

The consolidated net loss for the nine months ended February 28, 2013 was ($172,048) compared to a total net loss of ($120,787) for the corresponding period in the prior year. A loss of ($976) was realized as a result of foreign currency translation and the resulting comprehensive loss the period ending February 28, 2013 was $(173,024) compared to a gain of $8,737 as a result of foreign currency translation and a comprehensive loss of ($114,194) for the corresponding period in the prior year.

For the three months ended February 28, 2013 the total net loss was ($117,710) compared to ($50,994) for the corresponding period in the prior year. The Company recognized a gain of $13,727 on foreign currency translation for the three month period ended February 28, 2013 compared to a gain of $7,983 for the same period in the prior year. The Company recorded a comprehensive loss of ($103,983) for the three months ended February 28, 2013 compared to a comprehensive loss of ($43,011) for the corresponding period in the prior year.

LIQUIDITY AND CAPITAL RESOURCES

Liquidity

As of February 28, 2013, our principal sources of liquidity included cash and cash equivalents, cash flow from our operating subsidiary, and shareholder and related party loans. At February 28, 2013, cash and cash equivalents totaled $9,022 compared to $2,685 at May 31, 2012.

Our business continues in transition and our liquidity must be considered in light of the risks, expenses and difficulties frequently encountered by companies in our stage of re-development. The Company has historically operated in both the US and Canadian markets. The transition to the home automation sector through the acquisition of MCM Integrated Technologies occurred at the same time that the U.S. housing market entered a protracted period of substantially reduced home construction and renovation activity, declining home prices, extensive mortgage foreclosures and a contraction in the availability of consumer credit. The ongoing impairment in the U.S. economy and, to a lesser extent, the Canadian economy and financial markets has and will continue to impact the Company’s sales and liquidity for the foreseeable future.

Risk factors relevant to these events and management decisions include, but are not limited to: the success of the Company’s diversification strategy and initiative, 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, intense competition, the strength of the North American housing market and consumer economy in general, and cannot be credibly quantified by the Company at this time.

Internal and External Sources of Capital

For the nine month period ending February 28, 2013 the Company realized a loss from operations of ($78,329) and a net loss of ($172,048). As of February 28, 2013 the Company had a working capital deficit of $1,125,403 and 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 develops positive net cash flow to maintain liquidity. Until such time as we have positive cash flow on a sustained 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.

Investing Activities

There were no investing activities during the nine month period ending February 28, 2013.

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 raised approximately $13.7 million from the sale of common stock and as at February 28, 2013 we have borrowings of approximately $1.22 million from investors and shareholders. Funds from these sources were used as working capital to fund the development of the Company.

In the nine month period ended February 28, 2013 the balance sheet value of the Company’s related party loan and debenture principal and accrued liabilities decreases by $160,834 the Company’s line of credit increased by $3,359. These loans are interest bearing and due on demand. The Company negotiated third party convertible 8% interest bearing loans of $75,000.

FUTURE PLAN OF OPERATIONS

Beginning in 2008 the Company shifted its focus to the western Canadian housing market. The western Canadian housing market, and in particular the greater Vancouver housing market, has remained strong through the US housing downturn with new construction and renovation projects, and ongoing momentum in home sales and re-sales. Through 2012 the U.S. housing market continued to remain depressed with some signs of a market bottom having been reached. The Company will remain focused on the Canadian market until such time as the US market gains upward momentum and or until a significant market opportunity becomes available.

The Company is actively pursuing expansion both vertically within the Company’s current green building, home automation and energy conservation sectors and horizontally within related sectors including home construction and development. The Company is pursuing expansion opportunities in parallel with a shift in the Company's focus from supplier/sub-contractor to prime contractor/developer. This shift in focus will allow the Company to gain greater financial and market leverage from its knowhow and engineering and project management capabilities. This shift will also increase the Company's flexibility to pursue project and development

opportunities. This shift of focus is expected to result in a short term impact on revenue as the Company is not actively pursuing new supplier/sub-contractor business.

Beginning in the second quarter of FY 2011 the Company began discussions with a local specialty builder and entered into a non-binding letter of intent to explore joint opportunities for property development within the greater Vancouver area, design build housing specific to the needs of First Nations communities and small economical fast erecting relief housing. The Company initially favored a joint venture approach to these markets; however, after detailed analysis of structural and financial cost benefits, the Company is pursuing these opportunities as the prime contractor/developer.

This effort has led to eco and energy friendly designs for single family housing, a multi-suite elder’s residence and small footprint relief housing. The designs capitalize on modular construction techniques and utilize advanced building systems. The Company is in negotiation with a coastal First Nations band for turnkey design build housing and has executed Memorandum of Understanding and Non-Disclosure agreements with Coast Tsimshian Resources LP a major First Nations owned timber supplier to jointly pursue domestic markets for Native American Indian housing in both Canada and US and offshore markets for small footprint relief housing. The opportunity to supply housing to Native American Indian communities is extensive and the Company plans to focus effort on developing this market over the balance of the current fiscal year.

The Company has also undertaken extensive pro-forma analysis of multi-strata development opportunities within greater Vancouver communities that have zoning approval for building multi-units on single family residential lots. The Company recently completed a major renovation of a penthouse condominium in Vancouver. This project is a blueprint and showcase for the Company’s green building, home automation and energy conservation capabilities. The Company is working with a realtor specializing in Vancouver’s urban core evaluating renovation opportunities and is actively looking at ways and means of securing development funding. The greater Vancouver housing market has cooled significantly during the current year. Resale and new construction listings are up and the number of registered sales has decreased while residential building permit applications have declined. The Company plans to pursue this market opportunistically and not as a priority until current market conditions improve.

Cash flow from ongoing business activities combined with the availability of loans from related and third parties are estimated to be sufficient to sustain the current level of operations and planned activities through to the end of the 2013 fiscal year.

OFF BALANCE-SHEET ARRANGEMENTS

During year ended May 31, 2012, and the nine months ended February 28, 2013 the Company did not engage in any off-balance sheet arrangements.

ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK

Interest Rate Risk

Our exposure to market risk for changes in interest rates relates to our bank credit facility because borrowings under the facility are variable rate borrowings and to the portion of our related party debt which accrues interest at the Prime Rate plus an applicable margin. Assuming that the balance on our variable interest loans as of February 28, 2013, 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 $3,420 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.

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 nine month period ended February 28, 2013, the Company did not purchase goods valued in US dollars for sale in Canadian dollars and was not subject to transaction risk.

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.

Fluctuation in exchange rates resulted in a year-to-date foreign currency translation loss of ($976) on February 28, 2013. For the comparable period in the prior year, the foreign currency translation gain was $8,737 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

Evaluation of Disclosure Controls and Procedures

In connection with the preparation of this quarterly report on Form 10-Q, an evaluation was carried out by our management, with the participation of the Chief Executive, Principal Financial and Accounting Officer, of the effectiveness of our disclosure controls and procedures (as defined in Rules 13a-15(e) and 15d-15(e) under the Securities Exchange Act of 1934 ("Exchange Act")) as of February 28, 2013. Based on that evaluation the Chief Executive, Principal Financial and Accounting Officer has concluded that, as of the end of the period covered by this report, there was a material weakness in our internal control over financial reporting. A material weakness is a deficiency, or a combination of control deficiencies, in internal control over financial reporting such that there is a reasonable possibility that a material misstatement of the issuer’s annual or interim financial statements will not be prevented or detected on a timely basis. The material weakness relates to the lack of monitoring or review of work performed by our management and lack of segregation of duties. As of February 28, 2013, in the preparation of audited financial statements, footnotes and financial data, all of our financial reporting was carried out solely by our chief financial and accounting officer and we did not have an audit committee to monitor and review the work performed. The lack of segregation of duties resulted from lack of accounting staff with accounting technical expertise necessary for an effective system of internal control. Based on this evaluation the Chief Executive and Principal Financial Officer has concluded that as of the end of the period covered by this report, the Company’s disclosure controls and procedures were not effective.

Our management, including our principal executive officer and principal financial officer, does not expect that our disclosure controls and procedures or our internal controls will prevent all error or fraud. A control system, no matter how well conceived and operated, can provide only reasonable, not absolute, assurance that the objectives of the control system are met. Further, the design of a control system must reflect the fact that there are resource constraints and the benefits of controls must be considered relative to their costs. Due to the inherent limitations in all control systems, no evaluation of controls can provide absolute assurance that all control issues and instances of fraud, if any, have been detected. To address the material weaknesses, we performed additional analysis and other post-closing procedures in an effort to ensure our consolidated financial statements included in this report have been prepared in accordance with generally accepted accounting principles. Accordingly, management believes that the financial statements included in this report fairly present in all material respects our financial condition, results of operations and cash flows for the periods presented.

Changes in Internal Controls over Financial Reporting

There were no changes in our internal control over financial reporting (as defined in Rule 13(a)-15(f) or 15(d)-15(f)) that occurred during the period covered by this quarterly report that have materially affected, or are reasonably likely to materially affect, our internal control over financial reporting.

Limitations on the Effectiveness of Internal Controls

Because of its inherent limitations, internal control over financial reporting may not prevent or detect misstatements. Therefore, even those systems determined to be effective can provide only reasonable assurance with respect to financial statement preparation and presentation.

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

During the nine month period ended February 28, 2013 the Company converted $200,517 of debt principal and $2,145 of accrued interest into 24,922,667 shares of unregistered common stock at an average price of $0.01 per share. The conversions were made in accordance with the underlying debt agreements.

The Company offered and sold the securities in reliance on an exemption from federal registration under Section 4(2) of the Securities Act of 1933, as amended (the “Securities Act”), and Rule 506 promulgated thereunder, or alternatively, under Regulation S promulgated under the Securities Act .

ITEM 3. DEFAULTS UPON SENIOR SECURITIES

None.

ITEM 4. MINE SAFETY DISCLOSURES.

Not applicable.

ITEM 5. OTHER INFORMATION

None

ITEM 6. EXHIBITS


NO.	DESCRIPTION
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

101.INS⁽¹⁾	XBRL Instance Document
101.SCH⁽¹⁾	XBRL Taxonomy Extension Schema Document
101.CAL⁽¹⁾	XBRL Taxonomy Extension Calculation Linkbase Document
101.DEF⁽¹⁾	XBRL Taxonomy Extension Definition Linkbase Document
101.LAB⁽¹⁾	XBRL Taxonomy Extension Label Linkbase Document
101.PRE⁽¹⁾	XBRL Taxonomy Extension Presentation Linkbase Document

(1) Pursuant to Rule 406T of Regulation S-T, these interactive data files are deemed not filed or part of a registration statement or prospectus for purposes of Sections 11 or 12 of the Securities Act of 1933 or Section 18 of the Securities Act of 1934 and otherwise are not subject to liability.

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 and Accounting Officer

Dated: April 18, 2013

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