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 September 30, 2009





o TRANSITION REPORT
UNDER SECTION 13 OR 15(d) OF THE EXCHANGE ACT





Commission
File Number: 000-254888





RG GLOBAL LIFESTYLES,
INC.


(Exact
Name of issuer as specified in its charter)





California
            33-0230641(State
      or other jurisdiction of
            (I.R.S.
      Employer Identification No.)incorporation
      or organization)





2345 W Foothill, Suite
      7, Upland, CA
            91876(Address
      of principal executive offices)
            (Zip
      Code)





Issuer’s
telephone number: (949) 888-9500





Indicate
by check mark whether the registrant (1) has filed all reports required to be
filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the
preceding 12 months (or for such shorter period that the registrant was required
to file such reports), and (2) has been subject to such filing requirements for
the past 90 days.  Yes x   No o





Indicate
by check mark 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 oNo o





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  o
              
              Accelerated
      filer  oNon-accelerated
      filer   o  (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 o   No x





As of
September 30, 2009, there were 93,323,856 shares of the Registrant’s common
stock issued and outstanding.















INDEX





PagePART
      I - FINANCIAL INFORMATIONItem
      1.
            Financial
      Statements
            1Consolidated
      Balance Sheets –September 30, 2009 and March 31, 2009
            1Consolidated
      Statements of Operations For the Three and Six Months ended September 30,
      2009 and 2008
            2Consolidated
      Statements of Cash Flows For the Six Months ended September 30, 2009 and
      2008
            3Notes
      to Financial Statements
            4Item
      2.
            Management’s
      Discussion and Analysis of Financial Condition and Results
      of Operations
            13Item
      3.
            Quantitative
      and Qualitative Disclosures About Market Risk
            19Item
      4T.
            Controls
      and Procedures
            19PART
      II – OTHER INFORMATION19Item
      1.
            Legal
      ProceedingsItem
      2.
            Unregistered
      Sales of Equity Securities and Use of Proceeds
            20Item
      3.
            Defaults
      Upon Senior SecuritiesItem
      4.
            Submission
      of Matters to a Vote of Security Holders
            20Item
      5.
            Other
      InformationItem
      6.
            Exhibits
            20SIGNATURES
            21









Item 1. Financial
Statements


PART
I — FINANCIAL INFORMATION


RG
GLOBAL LIFESTYLES, INC.


CONSOLIDATED
BALANCE SHEETS


(unaudited)




As
      of
              September
      30,
              2009
            
            
            As
      of
              March
      31,
              2009AssetsCurrent
      assets:Cash
      and cash equivalents
            
            $
            4,147
            
            
            $
            3,007Accounts
      receivable
            
            
            673
            
            
            
            673Current
      assets of discontinued operations
            
            
            1,245
            
            
            
            2,565Total
      current assets
            
            
            6,065
            
            
            
            6,245Property
      and equipment, net
            
            
            32,949
            
            
            
            30,515Assets
      held for sale (Note 5)
            
            
            411,722
            
            
            
            424,351Intangible
      assets, net
            
            
            547,241
            
            
            
            576,042Other
      assets
            
            
            216,768
            
            
            
            198,678Assets
      of discontinued operations
            
            
            3,094
            
            
            
            3,094Total
      Assets
            
            $
            1,217,839
            
            
            $
            1,238,925Liabilities
      and Stockholders' DeficitCurrent
      liabilities:Accounts
      payable
            
            $
            1,055,328
            
            
            $
            1,038,100Accrued
      salaries and wages and consulting fees
            
            
            1,185,955
            
            
            
            1,082,488Accrued
      liabilities
            
            
            732,898
            
            
            
            694,360State
      income taxes payable
            
            
            95,732
            
            
            
            95,732Convertible
      notes payable
            
            
            500,000
            
            
            
            500,000Notes
      payable - related party
            
            
            51,233
            
            
            
            5,233Notes
      payable
            
            
            455,500
            
            
            
            455,500Current
      liabilities of discontinued operations
            
            
            63,996
            
            
            
            210,088Total
      current liabilities
            
            
            4,140,642
            
            
            
            4,081,501Long-term
      liability -Warrant
      liability
            
            
            219,998
            
            
            
            -Total
      liabilities
            
            
            4,360,640
            
            
            
            4,081,501Commitments
      and Contingencies (Note 12)Stockholders'
      Deficit:Preferred
      stock, $0.001 par value, 10,000,000 shares authorized; none issued and
      outstanding; 10,000,000 shares of Series A preferred stock have been
      designated with none issued and outstanding
            
            
            -
            
            
            
            -Common
      stock, $0.001 par value, 200,000,000 shares authorized, 93,323,856 and
      79,845,076 issued;93,069,491 and 76,368,211 outstanding,
      respectively
            
            
            93,070
            
            
            
            76,369Additional
      paid-in capital
            
            
            35,061,092
            
            
            
            37,593,763Accumulated
      deficit
            
            
            (38,296,963
            )
            
            
            (40,512,708
            )Total
      stockholders' deficit
            
            
            (3,142,801
            )
            
            
            (2,842,576
            )Total
      Liabilities and Stockholders' Deficit
            
            $
            1,217,839
            
            
            $
            1,238,925





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







1





RG GLOBAL LIFESTYLES, INC.


CONSOLIDATED
STATEMENTS OF OPERATIONS


(unaudited)





For
      the Three Months Ended
            
            
            For
      the Six Months EndedSeptember
      30
            
            
            September
      302009
            
            
            
            2008
            
            
            2009
            
            
            2008Revenue:Water
      treatment related
            $
            -
            
            
            $
            -
            
            
            $
            57,739
            
            
            $
            90,419Total
      revenues
            
            -
            
            
            
            -
            
            
            
            57,739
            
            
            
            90,419Cost
      of revenues:Water
      treatment related
            
            36,608
            
            
            
            215,228
            
            
            
            103,681
            
            
            
            433,280Total
      cost of revenue
            
            36,608
            
            
            
            215,228
            
            
            
            103,681
            
            
            
            433,280Gross
      loss
            
            (36,608
            )
            
            
            (215,228
            )
            
            
            (45,942
            )
            
            
            (342,861
            )General
      and administrative
            
            348,592
            
            
            
            677,740
            
            
            
            596,354
            
            
            
            1,770,703Selling
      and marketing
            
            1,605
            
            
            
            519
            
            
            
            3,340
            
            
            
            706Project
      costs
            
            5,100
            
            
            
            62,365
            
            
            
            75,464
            
            
            
            240,534Total
      expenses
            
            355,297
            
            
            
            740,624
            
            
            
            675,158
            
            
            
            2,011,943Operating
      loss
            
            (391,905
            )
            
            
            (955,852
            )
            
            
            (721,100
            )
            
            
            (2,354,804
            )Other
      income (expense):Interest
      income
            
            -
            
            
            
            66
            
            
            
            25
            
            
            
            66Interest
      expense
            
            (27,788
            )
            
            
            (104,689
            )
            
            
            (57,886
            )
            
            
            (153,620
            )Loss
      on sale of assets
            
            (6,329
            )
            
            
            -
            
            
            
            (6,329
            )
            
            
            -Change
      in fair value of derivative liability
            
            155,647
            
            
            
            -
            
            
            
            254,712
            
            
            
            -Other
      income (expense)
            
            (403
            )
            
            
            -
            
            
            
            (2,023
            )
            
            
            1,077Total
      other income (expense)
            
            121,127
            
            
            
            (104,623
            )
            
            
            188,499
            
            
            
            (152,477
            )Net
      loss from continuing operations
            
            (270,778
            )
            
            
            (1,060,475
            )
            
            
            (532,601
            )
            
            
            (2,507,281
            )Net
      income (loss) from discontinued operations, net of tax benefit of
      $0
            
            84,859
            
            
            
            (103,199
            )
            
            
            105,439
            
            
            
            (253,605
            )Net
      loss
            $
            (185,919
            )
            
            $
            (1,163,674
            )
            
            $
            (427,162
            )
            
            $
            (2,760,886
            )Weighted
      average number of common shares:Basic
      and diluted
            
            82,631,031
            
            
            
            44,319,500
            
            
            
            77,341,591
            
            
            
            43,772,751Net
      income (loss) per share:Basic
      and diluted – continuing operations
            $
            (0.00
            )
            
            $
            (0.03
            )
            
            $
            (0.01
            )
            
            $
            (0.06
            )Basic
      and diluted – discontinued operations
            $
            0.00
            
            
            $
            (0.03
            )
            
            $
            0.00
            
            
            $
            (0.06
            )





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







2





RG
GLOBAL LIFESTYLES, INC.


CONSOLIDATED
STATEMENTS OF CASH FLOWS


(unaudited)





For
      the Six Months EndedSeptember
      302009
              
              
              2008Cash
      flows from operating activities:Net
      loss
              
              $
              (427,162
              )
              
              $
              (2,760,886
              )Adjustments
      to reconcile net loss to net cash used in operating
      activities:Amortization
      of debt discounts related to beneficial conversion features and
      warrants
              
              
              -
              
              
              
              22,222Stock
      issued for services
              
              
              -
              
              
              
              110,197Change
      in fair value of derivative liabilities
              
              
              (254,712
              )Fair
      value of common stock in excess of notes payable forgiven
              
              
              -
              
              
              
              94,890Depreciation
      and amortization
              
              
              34,329
              
              
              
              468,333Loss
      on disposal of asset
              
              
              6,329
              
              
              
              -Stock-based
      compensation
              
              
              81,602
              
              
              
              764,392Change
      in operating assets and liabilities:Accounts
      receivable
              
              
              -
              
              
              
              271Inventory
              
              
              -
              
              
              
              9,268Income
      tax refund
              
              
              -
              
              
              
              143,775Prepaid
      expenses
              
              
              2,157
              
              
              
              (37,063
              )Other
      assets
              
              
              (18,889
              )
              
              
              -Accounts
      payable
              
              
              (78,758
              )
              
              
              270,134Accrued
      wages
              
              
              221,970
              
              
              
              -Accrued
      liabilities
              
              
              118,451
              
              
              
              539,312Net
      cash used in operating activities
              
              
              (314,683
              )
              
              
              (375,155
              )Cash
      flows from investing activities:Purchase
      of fixed assets
              
              
              (7,952)
              
              
              
              -Other
      assets
              
              
              -
              
              
              
              (17,592
              )Net
      cash used in investing activities
              
              
              (7,952)
              
              
              
              (17,592
              )
 Cash
      flows from financing activities:Proceeds
      from notes payable - related party
              
              
              9,500
              
              
              
              -Proceeds
      from preferred stock issued for cash
              
              
              314,312
              
              
              
              231,000Cash
      received from stock to be issued
              
              
              
              
              
              
              168,000Net
      cash provided by financing activities
              
              
              323,812
              
              
              
              399,000Net
      increase in cash
              
              
              1,177
              
              
              
              6,253Cash
      of discontinued operations
              
              
              (445
              )
              
              
              2,379Cash
      - beginning of period
              
              
              3,415
              
              
              
              9,940Cash
      - end of period
              
              $
              4,147
              
              
              $
              18,572SUPPLEMENTAL
      DISCLOSURES OF CASH FLOW INFORMATIONNon-cash
      investing and financing activities:Issuance
      of common stock in settlement of accounts payable and accrued
      expenses
              
              $
              49,870
              
              
              $
              -Settlement
      of accounts payable and accrued liabilities with stock option
      conversions
              
              
              71,250
              
              
              
              -Conversion
      of Series A preferred stock into common stock
              
              
              323,062
              
              
              
              -Conversion
      of stock options with notes payable and accrued interest
              
              $
              -
              
              
              $
              300,000




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








3





NOTES TO CONSOLIDATED FINANCIAL
STATEMENTS




Note
1 – Organization, History and Significant Accounting Policies and
Procedures





Organization and
History


R.G.
Global Lifestyles, Inc. (the “Company”), was incorporated in California on July
12, 1985 as International Beauty Supply Ltd.  The name of the corporation
was changed on May 28, 1993 to L.L. Knickerbocker Co., Inc., and thereafter on
January 9, 2003 to the present name, R.G. Global Lifestyles, Inc.





The
Company operates in the wastewater treatment business.  Recently, the
Company has changed its strategy from solely a build to sell manufacturing
environment to include a royalty based model whereby the Company would license
its DynIXTM Technology.  Currently the Company is focusing its efforts
toward potential customers in Australia. They are drilling thousands of Coal
Seam Gas wells, (CSG as they call it in Australia) which produce millions of
barrels of “produced water”.  This produced water has to be processed
and utilized in environmentally sound ways to satisfy the regulations of the
Queensland Government.  This area has tremendous potential for our
DynIX TM Technology and we are currently exploring multiple
opportunities.





As of
March 31, 2009, the Company decided to discontinue its energy drink operations
and focus completely on marketing its water treatment technology.  As
a result, the Company has classified balances related to its energy drink
business as discontinued operations in its financial statements as of March 31,
2009.





Note
2 – Accounting Policies and Basis of Presentation





The
consolidated financial statements included herein, presented in accordance with
United States generally accepted accounting principles and stated in US dollars,
have been prepared by the Company, without audit, pursuant to the rules and
regulations of the Securities and Exchange Commission (“SEC”). Certain
information and footnote disclosures normally included in financial statements
prepared in accordance with generally accepted accounting principles have been
condensed or omitted pursuant to such rules and regulations, although the
Company believes that the disclosures are adequate to make the information
presented not misleading.





These
statements reflect all adjustments, consisting of normal recurring adjustments,
which, in the opinion of management, are necessary for fair presentation of the
information contained therein. It is suggested that these consolidated interim
financial statements be read in conjunction with the consolidated financial
statements and notes thereto of the Company for the year ended March 31, 2009
included in the Company's annual report on Form 10-K. The Company follows the
same accounting policies in the preparation of interim reports.  The
financial statements for the three and six months ended September 30, 2009, are
not necessarily indicative of the results expected for the full
year.





Consolidation


The
consolidated financial statements include the accounts of the Company and its
wholly owned subsidiary Aquair, Inc. (inactive), its majority owned subsidiary
OC Energy Drink, Inc. (inactive), after elimination of all material
inter-company accounts and transactions. OC Energy is classified as discontinued
operations.





Estimates


The
preparation of financial statements in conformity with generally accepted
accounting principles requires management to make estimates and assumptions that
affect the reported amounts of assets and liabilities and disclosure of
contingent assets and liabilities at the date of the financial statements and
the reported amounts of revenue and expenses during the reporting period.
Significant estimates include the valuation of derivatives, equity instruments
such as options and warrants, and the percentage of completion related to
construction contracts, impairment of assets held for sale and intangible assets
related to its water treatment technology. Actual results could differ from
those estimates.





Concentrations


Credit
Risk


At times,
the Company maintains cash balances at a financial institution in excess of the
FDIC insurance limit. In addition, at we extend credit to customers in the
normal course of business, after we evaluate the credit worthiness. We do not
expect to take any unnecessary credit risks causing significant causing
write-offs of potentially uncollectible accounts.







4




Customer


During
the six months ending September 30, 2009, the Company discontinued doing
business with its only customer for water treatment.  The loss of this
customer has had a significant impact on the Company’s financial
results, see Note 3.





Net Loss Per
Share


Net loss
per share is provided in accordance with SFAS No. 128 “Earnings Per Share”
(“SFAS 128”), codified into 260. Basic loss per share is computed by dividing
losses available to common stockholders by the weighted average number of common
shares outstanding during the period, after giving effect to dilutive common
stock equivalents, such as stock options, warrants and convertible debt. The
following is a summary of outstanding securities which have been excluded from
the calculation of diluted net loss per share because the effect would have been
anti-dilutive for the six months ended September 30, 2009 and 2008:





2009
            
            
            2008Common
      stock options
            
            
            4,703,955
            
            
            
            3,520,215Common
      stock warrants
            
            
            16,444,328
            
            
            
            3,582,433Secured
      convertible notes
            
            
            9,532,700
            
            
            
            -Totals
            
            
            30,680,983
            
            
            
            7,102,648





Recent Accounting
Pronouncements


In May
2009, the Financial Accountings Standards Board (“FASB”) issued ASC 855
“Subsequent Events” (formerly SFAS No. 165, Subsequent Events). FASB ASC
855 establishes general standards of accounting for and disclosure of events
that occur after the balance sheet date but before financial statements are
issued or are available to be issued. ASC 855 is effective for interim and
annual financial periods ending after June 15, 2009. The Company adopted
ASC 855 during the three months ended June 30, 2009. The Company evaluated
subsequent events through the issuance date of the financial statements,
December 24, 2009, and has disclosed the events identified within this
filing.





In June
2009, the FASB issued ASC 105 “Generally Accepted Accounting Principles”
(formerly SFAS No. 168 The FASB Accounting Standards Codification and the
Hierarchy of Generally Accepted Accounting Principles – a replacement of FASB
Statement No. 162). ASC 105 establishes the FASB Accounting Standards
Codification as the source of authoritative U.S. GAAP recognized by the FASB to
be applied by nongovernmental entities. ASC 105, which changes the referencing
of financial standards, is effective for interim or annual financial periods
ending after September 15, 2009. The Company adopted ASC 105 during the
three months ended September 30, 2009 with no impact to its financial
statements, except for the changes related to the referencing of financial
standards.





Note
3 - Going Concern Considerations





The
accompanying financial statements have been prepared assuming the Company will
continue as a going concern. As shown in the accompanying financial statements,
during the six months ended September 30, 2009, the Company incurred an
operating loss from continuing operations before income taxes of $721,100, and
used $314,683 of cash for operations. As of September 30, 2009, the Company had
a working capital deficit of $4,134,577. These conditions raise substantial
doubt about the Company's ability to continue as a going concern.





The
future of the Company is dependent upon its ability to obtain equity and/or debt
financing and ultimately achieving profitable operations from the development of
its business segments. During the six months ended September 30, 2009, the
Company funded operations through debt and equity offerings. Currently, the
Company does not have any commitments or assurances for additional capital. In
fiscal 2009, the Company commenced production under the water treatment contract
with a customer but shut down the plant in April 2009 due to its inability to
negotiate a higher royalty rate. In addition, the Company’s only customer has
declined to move forward with constructing additional water treatment
facilities.  There can be no assurance that the revenue from these
contracts will be sufficient for the Company to achieve profitability in its
operations, and it is possible that additional equity or debt financing may be
required to for the Company to continue as a going concern. The Company
estimates it has current cash reserves sufficient to fund operations through Q3
of fiscal 2010.  The financial statements do not include any
adjustments relating to the recoverability and classification of recorded
assets, or the amounts of and classification of liabilities, which might be
necessary in the event the Company cannot continue in existence.






5




Note
4 – Property and Equipment





Property
and equipment as of September 30, 2009 and March 31, 2009 consisted of the
following:





September
      30, 2009
            
            
            March
      31, 2009Office
      equipment, computer software, and furniture and fixtures
            
            $
            55,217
            
            
            $
            47,254Accumulated
      depreciation
            
            
            (22,268
            )
            
            
            (16,739
            )Total
            
            $
            32,949
            
            
            $
            30,515





During
the six months years ended September 30, 2009 and 2008, the Company recorded
depreciation expense of $5,528 and $308,930, respectively.





Note
5 – Assets Held for Sale – Impairment of Asset





On
December 8, 2008, the Company entered into a Memorandum of Understanding (“MOU”)
to sell its only existing water treatment plant to a third party. As a result,
the Company had classified the plant as Assets Held for Sale under SFAS 144,
codified into FASB ASC 360. In April 2009, the MOU was terminated because the
Company was unable to close the transaction largely due to the inability to
obtain a higher royalty under the Yates contact and the unwillingness of Yates
to add additional plants. In connection with the cancellation of the MOU, the
Company has shut the plant down due to the inability to currently run the plant
at a profit and ultimately the contract was cancelled. The Company is currently
in negotiations with other potential customers to purchase the plant. However,
to do so the plant will have to be moved to an alternative location. Thus, the
costs to sell the plant increased substantially and the fair market value of the
plant decreased upon cancellation of the MOU as some of the costs cannot be
recaptured upon sale. The Company determined the fair value of the plant through
estimating the fair market value of the assets based on the original purchase
price and the residual value. The Company has only included assets in which
could be transported to a new location. As a result, the Company determined that
the carrying value of the plant had been impaired and recorded a loss on
impairment on assets held for sale of $1,988,658 during the year ended March 31,
2009. The net book value of the assets held for sale is $411,722 as of September
30, 2009.





Based on
initial discussions with potential replacement customers it appears that the
Company is expected to have a continued interest in the assets and thus has
continued to reflect the asset as continued operations. Subsequent to September
30, 2009, a vendor was given a summary judgment allowing the potentially
foreclosure on the assets of the plant. The Company does not expect to have a
future interest in the plant due to this judgment. Due to these circumstances,
the Company evaluated the time line of events and factors in determined that the
filing of the request for summary judgment by the vendor was a change in the
legal landscape that directly impacted the carrying value of the plant. Prior to
the summary filing, the Company expected the case to go to trial in February
2010. Thus, the Company expects to record a further impairment of the plant
during the quarter ended December 31, 2009. The Company is currently determining
the impact on the financial statements.





Note
6 – DynIXTM Technology





During
fiscal 2007, the Company entered into a series of agreements with Catalyx Fluid
Solutions, Inc. (“Catalyx”) pursuant to which the Company acquired certain
technology, know-how, and patent rights related to water treatment for use in
the oil and gas industry. In addition, per the terms of the acquisition
agreement the initial $200,000 paid will be offset against future royalties of
$0.01 per barrel of water treated and 5% of equipment sold based on the Catalyx
technology. Royalties earned by Catalyx during the six month period ended
September 30, 2009 and 2008, were  $4,679 and $4,566,
respectively.  During the six months ended September 30, 2009 and
2008, the Company recorded amortization expense of $28,801 and $165,604,
respectively.







6





Note
7 – Discontinued Operations





The
Company has recently changed its focus to its water treatment segment due to the
decrease in energy drink revenues at OC Energy resulting from its inability to
market the product or obtain any contracts to place its products with retailers.
Thus, during the 4th
quarter of fiscal 2009, management decided to formally discontinue the
operations of OC Energy. The Company is currently attempting to sell the assets,
including intangibles, but to date have been unsuccessful in finding a
buyer.





In
accordance with SFAS 144, OC Energy’s financial results, including those
discussed above have been classified as a discontinued operation in the
consolidated financial statements for all periods presented.





The
financial results of OC Energy included in discontinued operation are as follows
for the three months ended September 30:





2009
            
            
            2008Sales
            
            $
            -
            
            
            $
            6,851Income
      taxes
            
            
            -
            
            
            
            -Income
      (loss) from discontinued operations after income taxes
            
            $
            84,859
            
            
            $
            (103,199
            )





The
financial results of OC Energy included in discontinued operation are as follows
for the six months ended by September 30:





2009
            
            
            2008Sales
            
            $
            4,800
            
            
            $
            36,469Income
      taxes
            
            
            -
            
            
            
            -Income
      (loss) from discontinued operations after income taxes
            
            $
            105,439
            
            
            $
            (253,605
            )





The
following is the condensed balance sheets of OC Energy as of September 30 and
March 31, 2009:





September
      30,
              2009
            
            
            March,
      31
              2009AssetsCurrent
      assets:Cash
      and cash equivalents
            
            $
            1,245
            
            
            $
            408Other
      current assets
            
            
            -
            
            
            
            2,157Total
      current assets
            
            
            1,245
            
            
            
            2,565Other
      assets
            
            
            3,094
            
            
            
            3,094Total
      assets
            
            $
            4,339
            
            
            $
            5,659LiabilitiesCurrent
      liabilities:Accounts
      payable
            
            $
            63,196
            
            
            $
            187,341Accrued
      expenses
            
            
            800
            
            
            
            22,747Total
      liabilities
            
            $
            63,996
            
            
            $
            210,088





Management
believes there are no contingent liabilities related to discontinued
operations.





Note 8 – Certain Balance Sheet
Elements





Other
Assets




7





At
September 30, 2009 and March 31, 2009, the Company had deposits with various
vendors comprised of the following:





September
      30,
              2009
            
            
            March
      31,
              2009Deposit
      against future Catalyx royalty
            
            $
            175,652
            
            
            $
            180,331Other
            
            
            41,116
            
            
            
            18,347Total
            
            $
            216,768
            
            
            $
            198,678





Accrued
Liabilities





At
September 30, 2009 and March 31, 2009, the Company had accrued expenses as
follows:





September
      30,
              2009
            
            
            March
      31,
              2009Amounts
      due to YPC (see Note 12)
            
            $
            230,972
            
            
            $
            230,972Accrued
      interest
            
            
            160,785
            
            
            
            120,327Cash
      received for preferred stock to be issued
            
            
            177,000
            
            
            
            141,112Accrued
      consulting fees
            
            
            75,281
            
            
            
            128,235Other
            
            
            88,860
            
            
            
            73,714Totals:
            
            $
            732,898
            
            
            $
            694,360





Note
9 – Notes Payable





2007
Notes Payable





On
January 12, 2007, the Company entered into a note agreement with an accredited
investor for proceeds totaling $350,000.  This note matured on January
12, 2008 and is currently in default as the holder had demanded payment. In
connection with the default, the interest rate increased to 11% per annum. As of
September 30, 2009, accrued interest recorded in accrued liabilities related to
this note was $10,295.  See Note 12 for discussion of a lawsuit
filed by holder of the note against the Company and the payment of accrued
interest by Company.





Note
Payable to Vendor





On
January 29, 2008, the Company the issued a promissory note to a vendor in
settlement of $780,500 in accounts payable. The vendor manufactured and
installed the Company’s water treatment facility.  The note bears
interest at 10% per annum with a one-time default penalty of 10% of the
principal balance, and is secured by the Company’s contract with Yates Petroleum
Corporation and the equipment that was manufactured by the
vendor.  The note calls for an initial payment of $270,000 due on
February 1, 2008 with monthly principal payments of $100,000 due each month
until paid off.  The Company did not make its April 2008 payment and
any payments there after and is currently in default on this note.  As
a result of this default, the Company accrued an additional $41,000 penalty to
interest expense during the year ended March 31, 2009.  The balance
due on this note at September 30, 2009, was $410,500 with accrued interest and
penalties of $107,270.





MOU
Note Payable





On
December 17, 2008, the Company issued a $45,000 promissory note in connection
with the MOU to purchase its water treatment plant.  The funds were
used for operations.  The note bears interest at 10% with a default rate of
18%.  The sale was never completed and the note matured on March 8,
2009.  See Note 6 for more disclosure regarding the MOU.  As
of September 30, 2009, the note is in default and interest is being accrued at
the default rate. At September 30, 2009, accrued interest on the accompanying
balance sheet was $5,386.






8





Convertible
Notes Payable





In April
and September 2008, the Company entered into note agreements with an accredited
investor and shareholder for proceeds totaling $150,000.  The notes
are due on demand, incur interest at 11% and are convertible into 1,000,000
shares of Series A Preferred Stock. As of September 30, 2009, the notes were
outstanding and accrued interest recorded in accrued liabilities related to
these notes was $22,284.





Note
10 – Stockholders’ Deficit





Authorized
Shares





On July
15, 2009, the Company amended their articles of incorporation to increase the
number of authorized common shares to 200 million and to increase the
designation of Series A preferred stock to 10 million shares.





Stock
Options Exercised





During
the six months ended September 30, 2009, employees and consultants exercised
stock options for 2,914,300 shares of common stock for services rendered by the
consultants and employees.  The exercises were cash less of which
liabilities of $174,858 were used to offset the exercise price of
$0.06.





Issuance
of Common Stock in Settlement of Liabilities





During
the six months ended September 30, 2009, the Company issued 364,500 shares of
common stock valued at $23,970 to vendors of OC Energy in settlement of $122,430
in liabilities. The Company recorded a gain on settlement within net income from
discontinued operations on the accompany statement of operations for the
difference between the fair value of the common stock and the liability
relived.





Issuance
of Common Stock for Services





During
the six months ended September 30, 2009, the Company issued 500,000 shares of
common stock valued at $28,000 to a consultant of the Company whose husband is
also a member of the board of directors. The fair value of the common stock
issued offset amounts payable to the consultant. The consultant provides
administrative and accounting services to the Company. As of September 30, 2009,
amounts payable to the consultant of $12,485 were included in accounts
payable.





Series
A Preferred Stock





As of
September 30, 2009, the Company has received gross proceeds of $500,062 for the
purchase of 3,333,747 shares of Series A preferred stock (“Series A”) at $0.15
per share.  The Series A is convertible into six shares of common
stock. During the six months ended September 30, 2009, 2,153,749 shares
($323,062 in proceeds) of Series A were converted into 12,922,480 shares of
common stock. As of September 30, 2009, proceeds of $177,000 remain for future
issuances of Series A. The proceeds have been recorded as accrued liabilities as
to date the required Series A shares have not been issued.





Note
11 – Options and Warrants





Options





On May 3,
2006 and December 26, 2006, the Company’s Board of Directors adopted the 2006
and 2007 Incentive and Non-statutory Stock Option Plan (“2006 Plan”) for
issuance of stock options to employees and others. Compensation expense for
these plans recorded during the six months ended September 30, 2009 and 2008 was
$81,602 and $747,392, respectively. All amounts were recorded in general and
administrative expense.





The
following is a summary of activity of outstanding stock option activity for the
six months ended September 30, 2009:







9




Numberof
      SharesBalance,
      March 31, 2009
            
            
            7,618,255Options
      granted
            
            
            -Options
      exercised
            
            
            (2,914,300)Options
      cancelled or forfeited
            
            
            -Balance,
      September 30, 2009
            
            
            4,703,955





Although
management believes its estimate regarding the fair value of the services to be
reasonable, there can be no assurance that all of the subjective assumptions
will remain constant, and therefore the valuation of the services may not be a
reliable measure of the fair value of stock compensation or stock based payments
for consulting services.





Warrants


Effective
April 1, 2009, the Company adopted the provisions of EITF 07-5, "Determining Whether an
Instrument (or Embedded Feature) is Indexed to an Entity’s Own Stock” (“EITF
07-5”), codified into FASB ASC 815. EITF 07-5 applies to any freestanding
financial instruments or embedded features that have the characteristics of a
derivative, as defined by SFAS No. 133, “Accounting for Derivative
Instruments and Hedging Activities,” and to any freestanding financial
instruments that are potentially settled in an entity’s own common stock. As a
result of adopting EITF 07-5, 4,888,888 of our issued and outstanding common
stock purchase warrants previously treated as equity pursuant to the derivative
treatment exemption were no longer afforded equity treatment. These warrants
have an exercise price of $0.90 and expire in May of 2013; however, these
warrants have exercise price reset features in the event the Company issues
common stock below the exercise price of the warrants.  As such,
effective April 1, 2009, we reclassified the cumulative effect of the fair value
of these common stock purchase warrants from equity to liability status as if
these warrants were treated as a derivative liability on April 1,
2009.  We reclassified from additional paid-in capital, $3,117,617,
$2,642,907 from accumulated deficit and $474,710 to a long-term warrant
liability to recognize the fair value of such warrants on such
date.





Additional
                Paid-inCapital
            
            
            AccumulatedDeficitBalances
      at March 31, 2009
            
            $
            37,593,763
            
            
            $
            (40,512,708
            )Cumulative
      effect of warrants reclassified
            
            
            (3,117,617
            )
            
            
            3,117,617Reclassification
      of long term warrant liability
            
            
            -
            
            
            
            (474,710
            )Fiscal
      2010 equity issuances
            
            
            584,946
            
            
            
            -Net
      loss
            
            
            -
            
            
            
            (427,162
            )Balances
      at September 30, 2009
            
            $
            35,061,092
            
            
            $
            (38,296,963
            )





All
future changes in the fair value of these warrants will be recognized currently
in earnings until such time as the warrants are exercised or expire. These
common stock purchase warrants do not trade in an active securities market, and
as such, we estimate the fair value of these warrants using the Black-Scholes
option pricing model using the following assumptions:





September
      30,
            
            April
      1,2009
            
            2009Annual
      dividend yield
            
            
            -Expected
      life
            
            
            3.67
            
            
            
            4.17Risk-free
      interest rate
            
            
            1.65
            %
            
            
            1.65
            %Expected
      volatility
            
            
            250
            %
            
            
            250
            %








10





Expected
volatility is based primarily on historical volatility. Historical volatility
was computed using weekly pricing observations for recent periods that
correspond to the remaining life of the warrants. We believe this method
produces an estimate that is representative of our expectations of future
volatility over the expected term of these warrants. We currently have no reason
to believe future volatility over the expected remaining life of these warrants
is likely to differ materially from historical volatility. The expected life is
based on the remaining term of the warrants. The risk-free interest rate is
based on five-year U.S. Treasury securities.





The fair
value of these common stock purchase warrants declined to $219,998 as of
September 30, 2009.  As such, we recognized a gain of
$254,712 from the change in fair value of these warrants for the six months
ended September 30, 2009.





The
following is a summary of activity of outstanding common stock warrants for the
six months ended September 30, 2009:





Numberof
      SharesBalance,
      March 31, 2009
            
            
            16,444,328Warrants
      granted
            
            
            -Warrants
      exercised
            
            
            -Balance,
      September 30, 2009
            
            
            16,444,328





Note
12 – Commitments and Contingencies





Legal
Proceedings


On June
11, 2008, the Company and Grant King was served a lawsuit from one of its note
holders claiming that the Company defaulted on repayment on a note payable in
the amount of $350,000 plus interest at 8%.  The note is convertible
into common stock at a rate of $0.20 per share. The complaint asks for payment
of these amounts plus damages.  On August 12, 2008, the parties agreed
to stipulated order whereby Grant King was dismissed from the lawsuit and the
Company was granted a 90-day extension to respond to the complaint (until
November 10, 2008) in exchange the Company paid $49,530 which represents the
interest due on the note through July 18, 2008. On January 30, 2009, the
Company paid $8,016 of additional interest on the note making it then current,
and entered into a stipulation whereby the Company had until February 19, 2009
to satisfy this entire note obligation.  The Company failed to do so
and on April 1, 2009, a judgment was entered against it. As of September 30,
2009, the Company has the principal of $350,000 and accrued interest of $10,295
recorded in the financial statements.





On July
11, 2008, the Company received notice that one of the Company’s vendors filed a
lien against the Company’s water treatment plant for past due amounts due to the
vendor. As of September 30, 2009, the vendor was due approximately $140,310,
which is included in accounts payable.  The Company disputed this lien
and a lawsuit was filed by the vendor.  On October 29, 2009, the
vendor filed a motion for summary judgment.  The Company did not
respond to the summary judgment. On or around December 12, 2009, the Wyoming
court issued a stipulated judgment allowing the vendor to foreclose and
liquidate the water treatment plant and recoup principle balance of $140,310,
pre-judgment interest of $21,563 and costs $1,097.  See Note 5 for
discussion related to additional impairment of the water treatment
plant.





On July
17, 2009, the Company received notice that one of the Company’s vendors filed a
lien against the Company’s water treatment plant for past due amounts due to the
vendor for hauling waste water.  The disputed amount totaled
approximately $145,000, which is included in accounts payable.  No
additional amounts for damages have been accrued in the accompanying
consolidated financial statement as the Company cannot reasonably estimate the
damages, if any, due to the recentness of the issue.




11





Water
Treatment Contract





On June
25, 2007, the Company entered into contract with Yates Petroleum Corporation
(“YPC”) to engineer, design, and install a water treatment system (“System”) of
Coal Bed Methane (“CBM”) produced water provided by YPC. The Company will own
and operate the System and regeneration waste pond. The Company will receive a
base rate under the contract of $0.125 (12.50 cents) per barrel (42 US gallons)
of water discharged by the System. The term of the contract was for 60 months
from the start of the first billing cycle.





YPC was
responsible for constructing the inflow pond and will receive a credit from the
Company of $50,000 each month for the first six months of operation. In
addition, YPC received reimbursements on current billings for future repairs and
maintenance to the inflow pond. As of September 30, 2009, the Company accrued
$230,972 related to reimbursement of costs due to YPC for the construction of
the inflow pond and repair and maintenance incurred on behalf of the Company
which is included in accrued expenses on the accompanying balance sheet. The
Company expensed these costs as the future cash flows of the facility did not
support the carrying value of the plant at the time the expenditures were
incurred. In April 2009, due to the customers unwillingness to change the
royalty rate under the contract the Company shut down the plant and subsequently
cancelled the contract.





Yates was
named as a co-defendant in connection with a lawsuit filed by a vendor. In
connection with this suit, Yates filed a cross-claim against the Company. Yates
claims that the Company violated the contract and has damaged Yates. Specific
liabilities mentioned relate to the non-payment of credits and reimbursed
expenditures totaling $236,306. In addition, the cross-claim requests that the
court order the Company to provide a plan for the remove of the System and
reimburse Yates for legal fees in connection with the lawsuit filed against
them. As of September 30, 2009, the Company has only accrued items discussed in
the preceding paragraph.





Note
13 – Related Party Transactions





From time
to time, Grant King, Chief Executive Officer, loans the Company monies for
operating purposes. The loan accrues interest at 11% and is due upon
demand.  During the six months ended September 30, 2009, an additional
$9,500 was advanced to the Company under the terms stated above. As of
September 30, 2009 amounts outstanding under the note are $51,233.





As of
September 30, 2009, amounts due to Aquair Asia for Grant and Mark King’s
contracted employment $189,896, which are included in accrued liabilities on the
accompanying balance sheet. During the six months ended September 30, 2009, the
individuals exercised 1,226,000 options and reduced the amounts payable to them
by an additional $73,560 through applying the required exercise price of $0.06
to the liability.





During
the fiscal year ended March 31, 2008, the Company issued a purchase order to
Catalyx Fluid Solutions, Inc. (“Catalyx”), for the purchase of resin, at the
approximate cost of $756,000, needed for the operation of the Company’s
wastewater treatment plant in Wyoming. Catalyx is partially owned by Juzer
Jangbarwala, a former Company Director and Chief Technology Officer. In
addition, from time to time Catalyx has paid for various costs related to the
wastewater treatment plant on behalf of the Company, for which the Company has
reimbursed Catalyx.  As of September 30, 2009, amounts due to Catalyx
included in accounts payable were $280,000.





In July
2007, the Company entered into a lease agreement with Catalyx Engineering, Inc.
(“CEI”), a company that is owned in part by Juzer Jangbarwala, a former Company
Director and Chief Technology Officer, to sub-lease approximately 7,000 square
feet to serve as its new corporate office in Anaheim, California. As of
September 30, 2009, the Company has included $7,200 in accounts payable for
rental payments due to CEI.





The
Company utilized CEI for engineering services related to the design and
construction of its water treatment plant in Wyoming.  As of September
30, 2009, amounts due to CEI included in accounts payable were
$23,803.





Note
14 – Subsequent Events





Subsequent
to September 30, 2009, the Company received $47,500 for the purchase of 316,667
shares of Series A preferred stock.





See Note
12 for discussion regarding a summary judgment against the Company.





On
October 13, 2009, the Company entered into an MOU for an operating agreement
with Pro-Water LLC to operate its 10 acre injection well in Utah. Under the
terms of the MOU, Pro-Water LLC had the option to cancel the MOU after reviewing
and gaining an understanding of the Company financial position.  After
reviewing the financial condition of the Company, Pro-Water LLC has decided not
to proceed and has cancelled the MOU.





12





CAUTIONARY
STATEMENT REGARDING FORWARD-LOOKING INFORMATION





This
document contains “forward-looking statements” within the meaning of the Private
Securities Litigation Reform Act of 1995. All statements other than statements
of historical fact are “forward-looking statements” for purposes of federal and
state securities laws, including, but not limited to, any projections of
earnings, revenue or other financial items; any statements of the plans,
strategies and objections of management for future operations; any statements
concerning proposed new services or developments; any statements regarding
future economic conditions or performance; any statements or belief; and any
statements of assumptions underlying any of the foregoing.





Forward-looking
statements may include the words "may," "could," "estimate," "intend,"
"continue," "believe," "optimistic," "plan," "aim," "will," "likely," "expect"
or "anticipate" or other similar words. These forward-looking statements present
our estimates and assumptions only as of the date of this report. Readers are
cautioned not to place undue reliance on these forward-looking statements, which
speak only as of the date on which they are made. Except for our ongoing
securities laws, we do not intend, and undertake no obligation, to update any
forward-looking statement.





Although
we believe that the expectations reflected in any of our forward-looking
statements are reasonable, actual results could differ materially from those
projected or assumed in any of our forward-looking statements. Our future
financial condition and results of operations, as well as any forward-looking
statements, are subject to change and inherent risks and uncertainties. The
factors impacting these risks and uncertainties include, but are not limited
to:






            Increased
      competitive pressures from existing competitors and new
      entrants;
            Deterioration
      in general or regional economic conditions;
            Adverse
      state or federal legislation or regulation that increases the costs of
      compliance, or adverse findings by a regulator with respect to existing
      operations;
            Ability
      to grow business in DynIX wastewater treatment technology, and meet or
      exceed its return on shareholders’ equity target, which will depend on the
      Company’s ability to manage its capital needs and the effect of business
      and/or acquisitions;
            If
      acquisitions are made, the costs and successful integration of
      acquisitions;
            Barriers
      in trade with foreign countries or tariff regulations and other United
      States and foreign laws;
            Loss
      of customers or sales weakness;
            Effect
      of environmental regulations in the field of wastewater treatment
      associated with coal bed methane mining;
            Inability
      to achieve future sales levels or other operating
  results;
            Ability
      to locate suitable new products for distribution within our business
      sector, and retain licensing rights to such new products on acceptable
      terms;
            The
      continuation of favorable trends, including the drop in affordable potable
      water globally;
            Outcomes
      and costs associated with litigation and potential compliance
      matters;
            Inadequacies
      in the Company’s internal control over financial reporting, which could
      result in inaccurate or incomplete financial reporting;
            Dilution
      to Shareholders from convertible debt or equity
  financings;
            Loss
      of key management or other unanticipated personnel
  changes;
            The
      unavailability of funds for capital expenditures; and
            Operational
      inefficiencies in distribution or other
systems.





The
following discussion should be read in conjunction with the historical financial
statements and related notes thereto of R.G. Global Lifestyles, Inc., including
Form 10-K as of March 31, 2009.





Item
2. Management’s Discussion and Analysis of Financial Condition and Results of
Operations





You
should read the following discussion and analysis of our financial condition and
results of operations together with "Selected Financial Data" and our financial
statements and related notes appearing elsewhere in this quarterly
report.  This discussion and analysis contains forward-looking
statements that involve risks, uncertainties, and assumptions. The actual
results may differ materially from those anticipated in these forward-looking
statements as a result of certain factors, including, but not limited to, those
presented under "Risk Factors" in our prior SEC filings and elsewhere in this
quarterly report.






13





OVERVIEW





RG
Global





RG Global
is a full service water and wastewater treatment engineering and construction
company headquartered in Southern California. Services include innovative
technologies; water and wastewater engineering; construction and construction
management; start-up, operation and maintenance services; and equipment
manufacturing for industrial and municipal sectors. Areas of expertise include
water treatment and distribution; wastewater collection, treatment, and
disposal/reclamation. Its multi-disciplinary team includes professional and
licensed engineers and scientists with extensive experience in current
engineering, environmental, and construction technologies.





DynIXTM
TECHNOLOGY





The
Company, under the name RG Global, manufactures plants that utilize its
proprietary (DynIXTM) wastewater treatment technology, based on an
ion-exchange process for the treatment and reclamation of wastewater. The DynIXTM
Technology removes sodium and other pollutants from wastewater allowing it to be
returned to the environment within local, state and federal environmental
compliance regulations. The successful removal of the treated wastewater in turn
allows energy companies to harvest and sell methane, gas and oil associated with
such fields. The Company receives a royalty from the customer for every barrel
of water treated and purified. With the majority our focus currently in
Australia we are putting most of our sales effort there. The Australians have
signed long term contracts with China for Liquefied Natural Gas (LNG) which is
produced from the thousands of CSG wells that have and are currently being
drilled daily. Our DynIXTM technology can be used as a standalone solution in
many cases and can also be used in conjunction with Reverse Osmosis (RO) and
Ultra Filtration (UF) for other more difficult processing requirements.
Australia is one of the hottest CSG mining areas in the world with a great
potential market for water processing and purification needs.





OC ENERGY
DRINKS





The
Company is discontinuing investing in its energy drink in order to focus its
resources on the development and licensing of its DynIXTM
Technology.




14





RESULTS
OF OPERATIONS FOR THE THREE-MONTH PERIOD ENDED SEPTEMBER 30, 2009 AND
2008.





The
following table summarizes the results of continuing operations and balance
sheet amounts of the Company for the periods and dates shown:





Three
      Months Ended
              September
      302009
            
            
            2008INCOME STATEMENT
      DATARevenue
            
            $
            -
            
            
            $
            -Gross
      loss
            
            
            (36,608
            )
            
            
            (215,228
            )Loss
      from operations
            
            
            (391,905
            )
            
            
            (955,852
            )Net
      loss from continuing operations
            
            
            (270,778
            )
            
            
            (1,060,475
            )Net
      loss
            
            
            (185,919
            )
            
            
            (1,163,674
            )Net
      loss per weighted average common share
            
            $
            (0.00
            )
            
            $
            (0.02
            )As of
                September 30, 2009
            
            
            As of
                March 31, 2009BALANCE SHEET
      DATATotal
      assets
            
            $
            1,217,839
            
            
            $
            1,238,925Total
      liabilities
            
            $
            4,360,640
            
            
            $
            4,081,501Stockholders'
      deficit
            
            $
            (3,142,801
            )
            
            $
            (2,842,576
            )





REVENUES





For
      the quarter ended September 30
            
            
            Increase/(Decrease)2009
            
            
            2008
            
            
            
            $
            
            %Revenues
            
            $
            -
            
            
            $
            -
            
            
            $
            -
            
            -
            %





The
Company generated no revenues during the quarters ended September 30, 2009 and
2008.





GROSS PROFIT (LOSS)





For
      the quarter ended September 30
            
            
            Increase/(Decrease)2009
            
            
            2008
            
            
            $
            
            %Gross
      loss
            
            $
            (36,608
            )
            
            $
            (215,228
            )
            
            $
            178,620
            
            182
            %





The gross
loss from the Company’s results for the quarter ended September 30, 2009 was
primarily the result costs incurred to maintain the plant, for which no revenue
was generated in the current quarter. During the quarter ended September 30,
2008, gross loss associated with the Company's water treatment technology was
$215,228. During the quarter ended September 30, 2009, the Company was unable to
operate the plant at full capacity. Included in its cost of sales were labor
costs and depreciation expense of approximately $150,000.







15





TOTAL
OPERATING EXPENSES





For
      the quarter ended September 30
            
            
            Increase/(Decrease)2009
            
            
            2008
            
            
            $
            
            %Total
      Operating Expenses
            
            $
            355,297
            
            
            $
            740,624
            
            
            $
            (385,327
            )
            52
            %





Total
operating expenses include management and administrative personnel costs
(including non-cash stock-based compensation), corporate office costs,
accounting fees and legal expenses. The decrease in total operating expenses in
the quarter ended September 30, 2009 as compared to the quarter ended September
30, 2008 was primarily the result of decreases in salaries and wages, consulting
and stock based compensation.





DISCONTINUED
OPERATIONS


For
      the quarter ended September 30
            
            
            Increase/(Decrease)2009
            
            
            2008
            
            
            $
            
            %Discontinued
      Operations
            
            $
            84,859
            
            
            $
            (103,199
            )
            
            $
            188,058
            
            182
            %





The
company realized a gain from discontinued operations for the quarter ended
September 30, 2009 as compared to the quarter ended September 30, 2008 due
credits received from vendors in 2009 relatively low administrative expenses as
compared to the quarter ended September 30, 2008.





RESULTS
OF OPERATIONS FOR THE SIX-MONTH PERIOD ENDED SEPTEMBER 30, 2009 AND
2008.





The
following table summarizes the results of continuing operations and balance
sheet amounts of the Company for the periods and dates shown:





Six
      Months Ended September 302009
            
            
            2008INCOME STATEMENT
      DATARevenue
            
            $
            57,739
            
            
            $
            90,419Gross
      loss
            
            
            (45,942
            )
            
            
            (342,861
            )Loss
      from operations
            
            
            (721,100
            )
            
            
            (2,354,804
            )Net
      loss from continuing operations
            
            
            (532,601
            )
            
            
            (2,507,281
            )Net
      loss
            
            
            (427,162
            )
            
            
            (2,760,886
            )Net
      loss per weighted average common share
            
            $
            (0.01
            )
            
            $
            (0.06
            )


REVENUES





For
      the Six Months ended September 30
            
            
            Increase/(Decrease)2009
            
            
            2008
            
            
            $
            
            %Revenues
            
            $
            57,739
            
            
            $
            90,419
            
            
            $
            (32,680
            )
            (36
            )%





The six
months ended September 30, 2009, only includes one month of production while the
same period in 2008 include four months of production. The decrease in water
treatment sales was due to the cancellation of its contract with Yates Petroleum
during the six months ended September 30, 2009.






16





GROSS LOSS





For
      the quarter ended September 30
            
            
            Increase/(Decrease)2009
            
            
            2008
            
            
            $
            
            %Gross
      loss
            
            $
            (45,942
            )
            
            $
            (342,861
            )
            
            $
            296,919
            
            86
            %





The gross
loss for the six months ended September 30, 2009 was primarily the result of the
Company’s inability to operate the plant to generate sufficient
revenue..





TOTAL
OPERATING EXPENSES





For
      the quarter ended September 30
            
            
            Increase/(Decrease)2009
            
            
            2008
            
            
            $
            
            %Total
      Operating Expenses
            
            $
            675,158
            
            
            $
            2,011,943
            
            
            $
            (1,336,785
            )
            (66
            %)





Total
operating expenses include management and administrative personnel costs
(including non-cash stock-based compensation), corporate office costs,
accounting fees, legal expense, information systems expense, and product
marketing and sales expense. The decrease in total operating expenses in the
quarter ended September 30, 2009 as compared to the quarter ended September 30,
2008 was primarily the result of decreases in salaries and wages, consulting and
stock based compensation.





DISCONTINUED
OPERATIONS


For
      the quarter ended September 30
            
            
            Increase/(Decrease)2009
            
            
            2008
            
            
            $
            
            %Discontinued
      Operations
            
            $
            105,439
            
            
            $
            (253,605
            )
            
            $
            359,044
            
            142
            %





The
company realized a gain from discontinued operations for the quarter ended
September 30, 2009 as compared to the quarter ended September 30, 2008 due
credits received from vendors in 2009 relatively low administrative expenses as
compared to the quarter ended September 30, 2008.





LIQUIDITY
AND CAPITAL RESOURCES





The
accompanying consolidated financial statements have been prepared on a
going-concern basis, which contemplates the realization of assets and
satisfaction of liabilities and other commitments in the normal course of
business. The report of our independent auditors contains an explanatory
paragraph expressing substantial doubt about the Company’s ability to continue
as a going concern as a result of recurring losses and negative cash flows. The
financial statements do not include any adjustments relating to the
recoverability and classification of recorded asset amounts or the amounts and
classification of liabilities that may be necessary if we are unable to continue
as a going concern.





The
Company’s principal sources of liquidity consist of cash and cash equivalents,
cash generated from product sales and construction contracts, and the issuance
of equity and/or debt securities. In addition to funding operations, the
Company’s principal short-term and long-term liquidity needs have been, and are
expected to be, the debt service requirements of its notes payable, capital
expenditures and general corporate expense expenses. In addition, if sales and
operations increase, the Company will be required to increase its purchases of
equipment for the construction of plants utilizing the DynIXTM Technology. As of
September 30, 2009, the Company had cash and cash equivalents of $4,147 and
liabilities outstanding of $4,360,640.






17





The
Company believes that its existing sources of liquidity, along with cash
expected to be generated from product sales and construction contracts and cash
generated from the issuance of debt and equity securities, will be sufficient to
fund its operations, anticipated capital expenditures, working capital and other
financing requirements through Q3 of fiscal 2010. The Company will
need to continue a focused program of capital expenditures to effectuate its
DynIXTM Technology project constructions. In order to fund capital expenditures
or increase working capital above the current plan, or complete any
acquisitions, the Company may seek to obtain additional debt or equity
financing. It may also need to obtain additional debt or equity financing if it
experiences downturns or cyclical fluctuations in its business that are more
severe or longer than anticipated, or if the Company fails to achieve
anticipated revenue, experiences significant increases in the costs associated
with products sales, or if it engages in additional strategic transactions.
However, the Company cannot provide assurance that such financing will be
available to it on favorable terms, or at all. If, after utilizing the existing
sources of capital available to the Company, further capital needs are
identified and the Company is not successful in obtaining the financing, it may
be forced to curtail its existing or planned future operations.





OPERATING
ACTIVITIES





Operating
cash flows used during the six months ended September 30, 2009, amounted to
$314,683.  The primary use of operating cash was to pay consultants
and salaries and wages. This was the result of a net loss of $427,162, offset by
non-cash and non-operating items (depreciation, amortization of intangible
assets, stock-based compensation and interest expense from the amortization of
debt discounts) totaling ($182,452)  added to net changes in current
assets and liabilities of $244,931.





INVESTING
ACTIVITIES





Investing
cash flows used during the six months ended September 30, 2009, amounted to
$7,952 generated primarily from the sales of minor fixed assets.





FINANCING
ACTIVITIES





Financing
cash flows during the six months ended September 30, 2009, amounted to $323,812
and consisted of a loan from a related party investor of $9,500 and proceeds
from issuing common stock of $314,312.





CRITICAL
ACCOUNTING POLICIES





We
prepare our consolidated financial statements in accordance with accounting
principles generally accepted in the United States of America. The preparation
of these financial statements requires the use of estimates and assumptions that
affect the reported amounts of assets and liabilities and the disclosure of
contingent assets and liabilities at the date of the financial statements and
the reported amount of revenues and expenses during the reporting period. Our
management periodically evaluates the estimates and judgments made. Management
bases its estimates and judgments on historical experience and on various
factors that are believed to be reasonable under the circumstances. Actual
results may differ from these estimates as a result of different assumptions or
conditions.





The
methods, estimates, and judgment we use in applying our most critical accounting
policies have a significant impact on the results we report in our financial
statements. The SEC has defined “critical accounting policies” as those
accounting policies that are most important to the portrayal of our financial
condition and results, and require us to make our most difficult and subjective
judgments, often as a result of the need to make estimates of matters that are
inherently uncertain. Based upon this definition, our most critical estimates
relate to the fair value of warrant liabilities.  We also have other key
accounting estimates and policies, but we believe that these other policies
either do not generally require us to make estimates and judgments that are as
difficult or as subjective, or it is less likely that they would have a material
impact on our reported results of operations for a given period. For additional
information see Note 2, “Summary of Significant Accounting Policies” in the
notes to our reviewed financial statements appearing elsewhere in this quarterly
report and our annual audited financial statements appearing on Form 10-K.
Although we believe that our estimates and assumptions are reasonable, they are
based upon information presently available, and actual results may differ
significantly from these estimates.






18





OFF-BALANCE
SHEET ARRANGEMENTS





The
Company does not have any off-balance sheet arrangements that have or are
reasonably likely to have a current or future effect on the Company's financial
condition, changes in financial condition, revenues or expenses, results of
operations, liquidity, capital expenditures or capital resources that are
material to investors.





Item
3. Quantitative and Qualitative Disclosures About Market Risk – N/A





Item
4T. Controls and Procedures





Disclosure
Controls and Procedures





As
required by SEC Rule 13a-15 or Rule 15d-15, our Chief Executive and Principal
Accounting Officers carried out an evaluation under the supervision and with the
participation of our management, of the effectiveness of the design and
operation of our disclosure controls and procedures as of the end of the period
covered by this report.  In the course of this evaluation, our chief
executive officer and principal accounting  officer concluded that our
disclosure controls and procedures were not effective in ensuring that material
information relating to the Company required to be disclosed by the Company in
reports that it files or submits under the Exchange Act is recorded, processed,
summarized and reported within the time periods specified in the SEC's rules and
forms and that such information is accumulated and communicated to management,
including the chief executive officer and the Principal Accounting officer, as
appropriate, to allow timely decisions regarding required
disclosure.





Our
management does not expect that our disclosure controls and procedures or our
internal control over financial reporting will necessarily prevent all fraud and
material error. Our disclosure controls and procedures are designed to provide
reasonable assurance of achieving our objectives and our Chief Executive Officer
and Principal Accounting Officer concluded that our disclosure controls and
procedures are effective at that reasonable assurance level. 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. Because
of 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, within the Company have been detected. These inherent limitations
include the realities that judgments in decision-making can be faulty, and that
breakdowns can occur because of simple error or mistake. Additionally, controls
can be circumvented by the individual acts of some persons, by collusion of two
or more people, or by management override of the internal control. The design of
any system of controls also is based in part upon certain assumptions about the
likelihood of future events, and there can be no assurance that any design will
succeed in achieving its stated goals under all potential future conditions.
Over time, control may become inadequate because of changes in conditions, or
the degree of compliance with the policies or procedures may
deteriorate.





Changes
in Internal Control Over Financial Reporting





Pursuant
to Rule 13a-15(d) or Rule 15d-15(d) of the Exchange Act, our management, with
participation with the Company’s Chief Executive and Principal Accounting
Officers, is responsible for evaluating any change in the company's internal
control over financial reporting (as defined in Rule 13a-15(f) or Rule 15d-15(f)
under the Exchange Act), that occurred during each of the issuer's fiscal
quarters that has materially affected, or is reasonably likely to materially
affect, the company's internal control over financial reporting.





Based on
the foregoing evaluation, the Company has concluded that there was no change in
our internal control over financial reporting that occurred during the fiscal
quarter ended September 30, 2009, that has materially affected, or is reasonably
likely to materially affect, our internal control over financial
reporting.  The Company continues to have material weaknesses in its
internal control over financial reporting.







PART
II — OTHER INFORMATION
 
 Item
1. Legal Proceedings
   19
 
 On June
11, 2008, the Company and Grant King was served a lawsuit from one of its note
holders claiming that the Company defaulted on repayment on a note payable in
the amount of $350,000 plus interest at 8%.  The note is convertible
into common stock at a rate of $0.20 per share. The complaint asks for payment
of these amounts plus damages.  On August 12, 2008, the parties agreed
to stipulated order whereby Grant King was dismissed from the lawsuit and the
Company was granted a 90-day extension to respond to the complaint (until
November 10, 2008) in exchange the Company paid $49,530 which represents the
interest due on the note through July 18, 2008. On January 30, 2009, the
Company paid $8,016 of additional interest on the note making it then current,
and entered into a stipulation whereby the Company had until February 19, 2009
to satisfy this entire note obligation.  The Company failed to do so
and on April 1, 2009, a judgment was entered against it. As of September 30,
2009, the Company has the principal of $350,000 and accrued interest of $10,295
recorded in the financial statements.
 
 On July
11, 2008, the Company received notice that one of the Company’s vendors filed a
lien against the Company’s water treatment plant for past due amounts due to the
vendor. As of September 30, 2009, the vendor was due approximately $140,310,
which is included in accounts payable.  The Company disputed this lien
and a lawsuit was filed by the vendor.  On October 29, 2009, the
vendor filed a motion for summary judgment.  The Company did not
respond to the summary judgment. On or around December 12, 2009, the Wyoming
court issued a stipulated judgment allowing the vendor to foreclose and
liquidate the water treatment plant and recoup principle balance of $140,310,
pre-judgment interest of $21,563 and costs $1,097.  See Note 5 for
discussion related to additional impairment of the water treatment
plant.
 
 On July
17, 2009, the Company received notice that one of the Company’s vendors filed a
lien against the Company’s water treatment plant for past due amounts due to the
vendor for hauling waste water.  The disputed amount totaled
approximately $145,000, which is included in accounts payable.  No
additional amounts for damages have been accrued in the accompanying
consolidated financial statement as the Company cannot reasonably estimate the
damages, if any, due to the recentness of the issue.
 
 Yates was
named as a co-defendant in connection with a lawsuit filed by a vendor. In
connection with this suit, Yates filed a cross-claim against the Company. Yates
claims that the Company violated the contract and has damaged Yates. Specific
liabilities mentioned relate to the non-payment of credits and reimbursed
expenditures totaling $236,306. In addition, the cross-claim requests that the
court order the Company to provide a plan for the remove of the System and
reimburse Yates for legal fees in connection with the lawsuit filed against
them.
 
 Other
than the foregoing, the Company is not aware of any litigation, either pending
or threatened.
 
 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.
 
 The
following Exhibits are filed or incorporated by reference as part of this
Quarterly Report on Form 10-Q:
 
 
 Exhibit
                Number
              
              Description of Document31.1
              
              Certification
      pursuant to Section 302 of the Sarbanes-Oxley Act31.2
              
              Certification
      pursuant to Section 302 of the Sarbanes-Oxley Act32.1
              
              Certification
      pursuant to Section 906 of the Sarbanes-Oxley Act32.2
              
              Certification
      pursuant to Section 906 of the Sarbanes-Oxley
  Act
 
 
 20
 
 SIGNATURES
 
 In
accordance with Section 13 or 15(d) of the Exchange Act, the registrant caused
this report to be signed on its behalf by the undersigned, thereunto duly
authorized.
 
 R
G Global Lifestyles, Inc.
 
 
 Signature
              Title
              Date/s/
      Grant
      KingGrant
      King
              Chief
      Executive Officer
              December
      24, 2009/s/
      Richard
      LambrightRichard
      Lambright
              Principal
      Accounting Officer
              December
      24, 2009
                              21