UNITED
        STATES
 SECURITIES
        AND EXCHANGE COMMISSION
 Washington,
        D.C. 20549
 
 FORM
        10-QSB
  x QUARTERLY
        REPORT
        UNDER SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
 For
        the
        quarterly period ended September 30, 2005.
 
 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 small business issuer as specified in its charter)
 
 California
              33-0230641(State
                  or other jurisdiction of
              (I.R.S.
                  Employer Identification No.)incorporation
                  or organization)
 
 17751
                  Mitchell Avenue, Irvine, CA
              92614(Address
                  of principal executive offices)
              (Zip
                  Code)
 
 Issuer’s
        telephone number: (949) 486-6666
 
 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 x No o
 
 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
  APPLICABLE
        ONLY TO ISSUERS INVOLVED IN BANKRUPTCY PROCEEDINGS DURING THE PRECEDING FIVE
        YEARS
 
 Check
        whether the registrant filed all documents and reports required to be filed
        by
        Section l2, 13 or 15(d) of the Exchange Act after the distribution of securities
        under a plan confirmed by a court. Yes x No o
 
 The
        number of shares outstanding of the issuer’s Common Stock as of November10, 2005
        was 25,150,000.
 
 Transitional
        Small Business Disclosure Format (Check One): Yes o No x
  
 
 **INDEX**
 
 **Page****PART
                  I - FINANCIAL INFORMATION**Item
                  1.
              Financial
                  Statements (Unaudited)Consolidated
                  Balance Sheet -September 30, 2005Consolidated
                  Statements of Operations -For
                  the three and Six Months ended September 30, 2005 and 2004Consolidated
                  Statements of Cash FlowsFor
                  the Six Months ended September 30, 2005 and 2004Notes
                  to Financial StatementsItem
                  2.
              Management’s
                  Discussion and Analysis of Financial Condition andResults
                  of OperationsItem
                  3.
              Controls
                  and Procedures**PART
                  II - OTHER INFORMATION**Item
                  1.
              Legal
                  ProceedingsItem
                  2.
              Unregistered
                  Sales of Equity Securities and Use of ProceedsItem
                  3.
              Defaults
                  Upon Senior SecuritiesItem
                  4.
              Submission
                  of Matters to a Vote of Security HoldersItem
                  5.
              Other
                  InformationItem
                  6.
              Exhibits
                  and Reports on 8-KSIGNATURES
  2
  **PART
        I — FINANCIAL INFORMATION**
 
 **Item
        1. Financial Statements**
 
 **R.G.
        Global Lifestyles, Inc.**
 **(formerly
        L.L. Knickerbocker Company, Inc.)**
 **Consolidated
        Balance Sheet**
 **(unaudited)**
 
 September
                  30,2005**Assets**Current
                  assets:Cash
                  and cash equivalents
              
              $
              87,358Accounts
                  receivable
              
              
              1,010,434Inventory
              
              
              144,717Prepaid
                  expenses
              
              
              38,882Total
                  current assets
              
              
              1,281,391Fixed
                  assets, net
              
              
              17,037Intangible
                  assets, net
              
              
              185,000Deposits
                  held
              
              
              239,208Total
                  other assets
              
              
              424,208$
              1,722,636**Liabilities
                  and Stockholder’s Equity**Current
                  liabilities:Accounts
                  payable
              
              
              130,006Accrued
                  liabilities
              
              
              6,351Interest
                  Payable
              
              
              12,133Income
                  taxes payable
              
              
              235,932Note
                  Payable
              
              
              600,000Total
                  current liabilities
              
              
              984,422Total
                  liabilities
              
              
              984,422Stockholders’
                  equity:Preferred
                  stock, $0.001, 10,000,000 shares authorized, no shares issued and
                  outstanding
              
              
              -Common
                  stock, $0.001 par value, 100,000,000 shares authorized, 25,150,000
                  shares
                  issued and outstanding as of 9/30/05
              
              
              25,150Additional
                  paid-in capital
              
              
              295,279Prepaid
                  compensation
              
              
              (26,123
              )Accumulated
                  earnings
              
              
              443,908Total
                  stockholders’ equity
              
              
              738,214$
              1,722,636
  3
  **R.G.
        Global Lifestyles, Inc.**
 **(formerly
        L.L. Knickerbocker Company, Inc.)**
 **Consolidated
        Statements of Operations**
 **(unaudited)**
 
 For
                  the Three Months ended
              
              For
                  the Six Months endedSeptember
                  30,
              
              September
                  30,2005
              
              2004
              
              2005
              
              2004(Restated)
              
              
              
              (Restated)RevenueProduct
                  sales
              
              $
              1,109,992
              
              $
              1,483,207
              
              $
              1,934,717
              
              $
              3,215,245Cost
                  of sales
              
              
              395,810
              
              
              586,154
              
              
              796,344
              
              
              1,478,394Gross
                  profit
              
              
              714,182
              
              
              897,053
              
              
              1,138,373
              
              
              1,736,851ExpensesAdvertising
                  and marketing
              
              
              15,030
              
              
              86,979
              
              
              191,808
              
              
              171,678Commissions
              
              
              18,188
              
              
              9,070
              
              
              32,886
              
              
              10,824Consulting
                  services
              
              
              119,380
              
              
              25,962
              
              
              172,937
              
              
              37,086Depreciation
                  and amortization
              
              
              26,203
              
              
              25,337
              
              
              52,406
              
              
              25,337General
                  and administrative expenses
              
              
              95,535
              
              
              27,057
              
              
              167,515
              
              
              112,536Professional
                  fees
              
              
              79,611
              
              
              38,950
              
              
              150,157
              
              
              61,760Rent
                  - related party
              
              
              18,000
              
              
              -
              
              
              36,000
              
              
              -Salaries
                  and wages
              
              
              58,885
              
              
              70,657
              
              
              126,970
              
              
              119,261Stock
                  compensation - related party
              
              
              -
              
              
              104,000
              
              
              -
              
              
              104,000Stock
                  compensation - consulting services
              
              
              -
              
              
              46,000
              
              
              -
              
              
              46,000Total
                  expenses
              
              
              430,832
              
              
              434,012
              
              
              930,679
              
              
              688,482Net
                  income (loss) from operations
              
              
              283,350
              
              
              463,041
              
              
              207,694
              
              
              1,048,369Other
                  income (expense)Interest
                  income
              
              
              540
              
              
              28
              
              
              724
              
              
              28Tax
                  refund
              
              
              -
              
              
              -
              
              
              1,551
              
              
              -Interest
                  expense
              
              
              (12,133
              )
              
              (591
              )
              
              (12,133
              )
              
              (591
              )Unrealized
                  (loss) on investments
              
              
              -
              
              
              (103,643
              )
              
              -
              
              
              (103,643
              )Total
                  other income (expense)
              
              
              (11,593
              )
              
              (104,206
              )
              
              (9,858
              )
              
              (104,206
              )Net
                  income (loss) before income tax
              
              
              271,757
              
              
              358,835
              
              
              197,836
              
              
              944,163Income
                  tax expenseCurrent
                  federal
              
              
              (72,696
              )
              
              (125,620
              )
              
              (72,696
              )
              
              (330,484
              )Current
                  state
              
              
              (20,559
              )
              
              (31,728
              )
              
              (24,000
              )
              
              (83,477
              )Total
                  income tax expense
              
              
              (93,255
              )
              
              (157,348
              )
              
              (96,696
              )
              
              (413,961
              )Net
                  income (loss)
              
              $
              178,502
              
              $
              201,487
              
              $
              101,140
              
              $
              530,202Weighted
                  average number of common shares outstanding - basic and fully
                  diluted
              
              
              25,150,000
              
              
              19,965,120
              
              
              25,150,000
              
              
              24,865,000Net
                  income (loss) per share - basic & fully diluted
              
              $
              0.01
              
              $
              0.01
              
              $
              0.00
              
              $
              0.02
  4
  **R.G.
        Global Lifestyles, Inc.**
 **(formerly
        L.L. Knickerbocker Company, Inc.)**
 **Consolidated
        Statements of Cash Flows**
 **(unaudited)**
  For
                  the Six Months EndedSeptember
                  30,2005
              
              2004(Restated)**Cash
                  Flows from Operating Activities**Net
                  income
              
              $
              101,140
              
              $
              530,202Adjustments
                  to reconcile net income tonet
                  cash (used) by operating activities:Depreciation
                  and amortization
              
              
              52,406
              
              
              25,337Stock
                  based compensation - consulting services
              
              
              -
              
              
              46,000Stock
                  based compensation - related party
              
              
              -
              
              
              104,000Unrealized
                  loss on sale
              
              
              -
              
              
              67,409Changes
                  in operating assets and liabilities:(Increase)
                  in accounts receivable
              
              
              (503,620
              )
              
              (261,965
              )Decrease
                  in inventory
              
              
              10,148
              
              
              19,959(Increase)
                  in prepaid expenses
              
              
              (30,915
              )
              
              -(Increase)
                  in deposits held
              
              
              (172,108
              )
              
              (34,600
              )(Decrease)
                  in accounts payable
              
              
              (119,456
              )
              
              (414,586
              )Increase
                  (decrease) in accrued liabilities
              
              
              (256,867
              )
              
              47,799Increase
                  in income tax payable
              
              
              235,933
              
              
              413,961Increase
                  in interest payable
              
              
              12,133
              
              
              -Net
                  cash provided (used) by operating activities
              
              
              (671,206
              )
              
              543,516**Cash
                  Flows from Investing Activities**Purchase
                  of fixed assets
              
              
              (1,097
              )
              
              (6,654
              )Purchase
                  of intangible assets
              
              
              -
              
              
              (300,000
              )Net
                  cash used from investing activities
              
              
              (1,097
              )
              
              (306,654
              )**Cash
                  Flows from Financing Activities**Proceeds
                  from note payable
              
              
              600,000
              
              
              -Proceeds
                  from note payable-related party
              
              
              50,000Payments
                  on note payable
              
              
              -
              
              
              (40,000
              )Payment
                  on note payable-related party
              
              
              (50,000
              )Net
                  cash provided by financing activities
              
              
              600,000
              
              
              (40,000
              )Net
                  increase (decrease) in cash
              
              
              (72,303
              )
              
              196,862Cash
                  - beginning
              
              
              159,661
              
              
              181,045Cash
                  - ending
              
              $
              87,358
              
              $
              377,907Supplemental
                  disclosures:Interest
                  paid
              
              $
              -
              
              $
              591Income
                  taxes paid
              
              $
              881
              
              $
              1,650Non-cash
                  investing and financing activities:Shares
                  issued for services provided - related party
              
              $
              -
              
              $
              104,000Number
                  of shares issued for services - related party
              
              
              -
              
              
              2,080,000Shares
                  issued for consulting services provided
              
              $
              -
              
              $
              46,000Number
                  of shares issued for consulting services
              
              
              -
              
              
              920,000
  5
  **R.G.
        Global Lifestyles, Inc.**
 Notes
        to
        consolidated financial statements
 (unaudited)
 **Note
          1 - Basis of presentation**
 
 The
          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. 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 financial statements
          of the
          Company for the year ended March 31, 2005 and notes thereto included in
          the
          Company’s 10-KSB annual report filed June 29, 2005. The Company follows the same
          accounting policies in the preparation of interim reports.
 
 **Note
          2 - Organization**
 
 During
          the quarter ending June 30, 2005, the Company formed another wholly owned
          subsidiary, On Line Surgery, Inc. for the purpose of developing advertising
          and
          internet marketing of the Company’s products. As of the end of the second fiscal
          quarter this new subsidiary had not yet commenced operations. The consolidated
          financial statements include the accounts of the Company and its wholly
          owned
          subsidiaries after elimination of all material inter-company accounts,
          transactions and profits.
 
 **Note
          3 - Going concern**
 
 The
          accompanying unaudited consolidated financial statements have been prepared
          in
          conformity with accounting principles generally accepted in the United
          States of
          America, which contemplate that the Company will continue in business as
          a going
          concern. The Company has a net profit from consolidated operations of $207,694
          for the six months ended September 30, 2005. After provision for income
          tax, the
          net income for the six months ended September 30, 2005 is $101,140. The
          company
          has accumulated earning of $443,908, cash and cash equivalents of $87,358,
          and
          accounts receivable in the amount of $1,010,434 as of the same
          period.
 
 The
          Company plans to distribute its Amerikal Nutraceutical Corp. subsidiary
          to a
          group of founding shareholders. Had Amerikal Nutraceutical Corp. been
          distributed as of April 1, 2005, the Company’s results of operations would have
          been a net loss for the six months ended September 30, 2005.
 
 The
          Company’s wholly owned subsidiary, Aquair, Inc., has generated less than $6,000
          of sales as of September 30, 2005 and does not have a proven track record
          of
          profitability since its inception. The Company anticipates future sales
          and
          revenues from a patented water generator and the distribution of
          water-generating equipment. However, the Company may need to raise additional
          funds to fully execute its business plan for the next twelve
          months.
 
 6
 **R.G.
            Global Lifestyles, Inc.**
 Notes
            to
            consolidated financial statements
 (unaudited)
  The
          Company has not yet decided upon the specific method of raising additional
          working capital that may be required to meet its objectives. The Company
          may
          raise additional working capital funds through various means, including
          the
          future sale of the Company’s equity securities in private or public offerings,
          debt financing, hybrid financing, trade financing, receivables financing,
          factoring or any combination of credit, equity and/or debt which the Company
          can
          obtain. There can be no assurance as to the availability or terms upon
          which
          such financing and capital might be available.
 
 The
          Company has taken several actions to ensure that it will continue as a
          going
          concern through September 30, 2006. As discussed in Note 9 - Note payable,
          on
          July 1, 2005, the Company executed a promissory note (the “Note”) for $600,000
          in favor of two shareholders of the Company, who loaned the Company said
          funds
          to be used as working capital. The Company believes that similar arrangements
          for financing will be available in the future, allowing it to continue
          as a
          going concern through September 30, 2006.
 
 The
          consolidated financial statements do not include any adjustments that might
          result from the outcome of any uncertainty as to the Company’s ability to
          continue as a going concern. The consolidated financial statements also
          do not
          include any adjustments relating to the recoverability and classification
          of
          recorded asset amounts, or amounts and classifications of liabilities that
          might
          be necessary should the Company be unable to continue as a going
          concern.
 
 **Note
          4 - Restatement due to change in accounting estimate**
 
 On
          the
          previously filed financial statements for the six months ended September
          30,
          2004, the Company reported stock-based consulting fees and related party
          stock-based compensation as an expense using an estimate of the fair market
          value of the stock. Management estimated the fair market value to be $1.00
          per
          share. The expense reported for stock based consulting services and related
          party compensation was $320,000 and $463,333 respectively.
 
 The
          Company subsequently revised its estimate of fair market value for the
          common
          stock as of the date of the grant to $.05 per share. The expense estimate
          for
          stock based consulting services and related party compensation for the
          six
          months ended September 30, 2004 has been reduced to $46,000 and $104,000,
          respectively. The Company made these changes to better reflect the fair
          value of
          the stock issued for compensation. This change had the effect of reducing
          stock
          based compensation expense by $633,333. As a result, the provision for
          income
          taxes increased from $123,771 to $430,961, which resulted in increasing
          net
          income to $530,280 as of September 30, 2004.
 
 The
          Company did not amend its previous period filings to reflect this change
          in
          estimate because the Company’s common stock was not listed or trading on any
          exchange at that time. The Company’s common stock was reinstated for listing on
          the NASD Over the Counter-Bulletin Board effective January 15,
          2005.
 
 7
 **R.G.
            Global Lifestyles, Inc.**
 Notes
            to
            consolidated financial statements
 (unaudited)
  **Note
          5 - Reclassification**
 
 Certain
          reclassifications have been made to the prior year’s financial statements to
          conform to the current year presentation. These reclassifications had no
          effect
          on previously reported results of operations or retained earnings.
 
 **Note
          6 - Fixed assets**
 
 Fixed
          assets are recorded at cost and depreciation is provided over the estimated
          useful lives of the related assets using the straight-line method for financial
          statement purposes. The estimated lives of property and equipment are as
          follows:
 
 Office
                    equipment
                
                
                5
                    yearsComputer
                    software
                
                
                3
                    yearsFurniture
                    and fixtures
                
                
                7
                    years
 
 Fixed
          assets as of September 30, 2005 consisted of the following:
 
 2005Office
                    Equipment
                
                $
                20,873Accumulated
                    Depreciation
                
                
                (3,836
                )Net
                    Total Fixed Assets
                
                $
                17,037
 
 During
          the six month periods ended September 30, 2005 and 2004, the Company recorded
          depreciation expense of $2,406 and $377, respectively.
 
 **Note
          7 - Distribution agreements**
 
 During
          the period ending December 31, 2004, the Company entered an agreement to
          distribute products developed by another company. The purchase price paid
          for
          the distribution rights was $300,000 in cash, which represents its fair
          value.
          The amount was recorded as an intangible asset and is being amortized over
          the
          period of its estimated benefit period of three years. At September 30,
          2005,
          accumulated amortization was $125,000. During the six month periods ended
          September 30, 2005 and 2004, the Company recorded amortization expense
          of
          $50,000 and $25,000 respectively.
 
 8
 **R.G.
            Global Lifestyles, Inc.**
 Notes
            to
            consolidated financial statements
 (unaudited)
 **Note
          8 - Deposits**
 
 At
          September 30, 2005, the Company has a deposit with various vendors totaling
          $239,208 comprised of the following:
 
 September
                    30, 2005  Refundable
                      Deposit
                  
                  $
                  67,833Deposit
                      for Inventory
                  
                  
                  3,875Deposit
                      Marketing Services Agreement
                  
                  
                  7,500Deposit
                      equipment purchase
                  
                  
                  125,000Deposit
                      with Fulfillment Center
                  
                  
                  10,000Distributor
                      Agreement
                  
                  
                  25,000Total
                  
                  $
                  239,208
 
 **Note
          9 - Note payable**
 
 In
          July
          2005 the Company borrowed $600,000 from two shareholders. The promissory
          note
          evidencing this transaction provides for interest to accrue at the rate
          of eight
          percent per annum (8%), and the note matures 270 days from its date of
          execution.
 
 During
          the six months ended September 30, 2005 and 2004, the Company recorded
          interest
          expense of $12,133 and $591, respectively. As of September 30, 2005 and
          2004,
          the principal balance was $600,000 and 0, respectively. The accrued interest
          payable balance was $12,133 and $0, respectively.
 
 **Note
          10 - Stockholders’ equity**
 
 In
          the
          quarter ended September 30, 2005, the Company entered into a three-year
          agreement with a consultant. Pursuant to the agreement, the Company issued
          options to purchase 100,000 shares of the Company’s common stock. The options
          vest at the rate of one-third at the end of each 12 months under the agreement.
          The Company determined the fair market value of the options as of the date
          of
          the grant, using the Black Scholes valuation method. The value of the options
          on
          the grant date was $313,480 with an exercise price of $3.30. These options
          were
          not issued as part of any registered Stock Option Plan.
 
 The
          Company has reported in the prepaid compensation account the portion of
          the
          options ratably earned for the period ended September 30, 2005 in the amount
          of
          $26,123,. On July 1, 2006, at the twelve-month anniversary date of the
          consulting agreement when the options are vested, the Company will reduce
          prepaid compensation and record option based compensation expense.
 
 There
          have been no other issuances of shares by the Company in the fiscal quarter
          ended September 30, 2005.
 
 9
 **R.G.
            Global Lifestyles, Inc.**
 Notes
            to
            consolidated financial statements
 (unaudited)
 
 **Note
          11 - Related party transactions**
 
 During
          the fiscal year ended March 31, 2005, the Company entered into an agreement
          with
          a company wholly owned by an officer and director of the Company. The agreement
          provides for office space as well as administrative services at a fair
          market
          rate of $6,000 per month. The agreement is not binding and may be cancelled
          by
          either party at any time. During the six months ended September 30, 2005
          and
          2004, the Company expensed $36,000 and $0 under this agreement.
 
 During
          the quarter ended September 30, 2005, the Company repaid $50,000 previously
          advanced to the Company by a related party.
 
 **Note
          12 - New subsidiaries**
 
 During
          the quarter ending September 30, 2005, the Company formed one wholly owned
          subsidiary, On Line Surgery, Inc. for the purpose of diversifying its market,
          which has not yet commenced operations. The consolidated financial statements
          therefore do not include any specific reference to the formation of this
          subsidiary. However, the consolidated financial statements do include accounts
          of the Company and its wholly owned subsidiaries after elimination of all
          material intercompany accounts, transactions and profits.
 
 **Note
          13 - Litigation**
 
 On
          August
          30, 2005, the Company was served with a lawsuit filed by Atmospheric Water
          Technologies, Inc. seeking damages for alleged defamation, interference
          with
          prospective economic advantage and false advertising. The case was filed
          on
          August 24, 2005 in the Superior Court of the State of California, County
          of
          Orange as Case Number 05CC09548. The Company has filed appropriate responsive
          pleadings through its legal counsel. The Company has not recorded a provision
          for this matter as management intends to vigorously defend the allegations
          and
          believes that the payment of the damages requested by the Plaintiff is
          not
          probable. The Company believes, however, that any liability it may incur
          would
          not have a material adverse effect on its financial condition or its results
          of
          operations.
 
 **Note
          14 - Concentrations**
 
 Major
          Customer
 
 During
          the six months ended September 30, 2005 and 2004, one customer accounted
          for
          approximately 47.9% and 81.5%, respectively, of the Company’s total revenues.
          Additionally, this same customer accounted for approximately 29.3% and
          56.6% of
          total accounts receivable As of September 30, 2005 and 2004,
          respectively.
 
 10
 **R.G.
            Global Lifestyles, Inc.**
 Notes
            to
            consolidated financial statements
 (unaudited)
 **Note
          15 - Segment reporting**
 
 Up
          until
          the end of the second fiscal quarter, the Company has operated in a single
          business segment that includes the manufacture and sale of natural supplements,
          health and beauty aid products for the nutraceutical industry. As of September
          30, 2005, the Company generated revenues of $6,240 from sales of water
          generators under its Aquair subsidiary. However, the volume of sales from
          this
          activity had not reached a material level for purposes of segment reporting.
          The
          following table summarizes the Company’s revenues and long-lived assets in
          different geographic locations:
 
 For
                    the six months ended September 30,2005
                
                2004Revenues:United
                    States
                
                $
                101,686
                
                $
                -Singapore
                
                
                1,124,810
                
                
                2,778,571Other
                    Foreign Countries
                
                
                708,221
                
                
                436,674Total
                
                $
                1,934,717
                
                $
                3,215,245Long
                    Lived Assets (net):United
                    States
                
                $
                202,037
                
                $
                295,807Singapore
                
                
                -
                
                
                -Other
                    Foreign Countries
                
                
                -
                
                
                -Total
                
                $
                202,037
                
                $
                295,807
 
 Geographic
          area data is based upon product shipment destination. Export sales as a
          percentage of revenues were 94.7% and 100% for the six months ended September
          30, 2005 and 2004, respectively. During the six months ended September
          30, 2005
          and 2004, sales to a single customer were 47.9% and 81.5% of total sales
          respectively.
 
 The
          geographic summary of long-lived assets is based on two factors. First,
          it is
          based on physical location of the net physical assets ($17,073). Second,
          it is
          based on the domicile of the holder of the rights associated with net intangible
          assets ($185,000).
 
 The
          company manufactures its nutraceutical products in the United States. The
          units
          sold under the Aquair subsidiary are manufactured in both the United States
          and
          Korea. Most of the company’s revenues have been historically derived from
          shipments of products to Singapore, Indonesia, Thailand and other countries
          in
          South East Asia. These areas have, in the past, experienced various degrees
          of
          illiquidity, volatile currency exchange rates, reduced economic activity,
          and in
          some instances, war, revolution or insurrection. The Company may be adversely
          affected by economic conditions in these regions for the foreseeable future,
          although it is not possible to determine the nature or value of possible
          future
          events.
 
 11
 **R.G.
            Global Lifestyles, Inc.**
 Notes
            to
            consolidated financial statements
 (unaudited)
  **Note
          16 - Subsequent events**
 
 The
          Company held its annual meeting of stockholders on October 24, 2005 in
          Newport
          Beach, California. At the meeting, the following proposals were approved
          by the
          required vote of stockholders entitled to vote at the meeting:
 
 1.
                Six
                    (6) Directors were elected to hold office for the next 12
                    months.
 2.
                The
                    Company’s Articles of Incorporation were amended to increase the number
                    of
                    authorized Directors from the present six to a total of eleven
                    authorized
                    members.
 3.
                The
                    Company’s Articles of Incorporation were amended to increase the par
                    value
                    of the Company’s common stock to
                    $.001.
 4.
                The
                    appointment of Beckstead & Watts LLP as independent auditor was
                    ratified.
 
 On
          October 28, 2005 the Company’s Board of Directors authorized the CEO of the
          Company to negotiate and execute an agreement between the Company and a
          group of
          founding shareholders, pursuant to which the Company will distribute its
          Amerikal Nutraceutical Corporation subsidiary to such shareholders in exchange
          for approximately 8 million shares of common stock of the Company. The
          Board of
          Directors determined it is in the best interest of the Company and its
          shareholders to enter into this distribution to (1) reduce the outstanding
          shares of the Company from approximately 25 million to approximately 17
          million,
          and (2) allow management to concentrate its efforts on implementing and
          executing its Aquair business plan. The Company’s legal and accounting advisors
          indicate that the proposed transaction will qualify as a tax-free distribution
          of a controlled corporation and exchange of equity under applicable provisions
          of the Internal Revenue Code, and accordingly the Company does not anticipate
          recognition of gain or loss as a result of the proposed agreement. Upon
          execution of the definitive agreement, the company will treat this disposition
          as “discontinued operations” for purposes of its consolidated financial
          statements.
  12
 FORWARD-LOOKING
        STATEMENTS
 
 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 its Aquair subsidiary 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;
 ·
              Ability
                  to successfully distribute its Amerikal Nutraceutical Corp’s subsidiary to
                  shareholders, and to receive tax-free status for the
                  exchange;
 ·
              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;
 ·
              Political
                  and economic instability and changes in monetary policy of the
                  foreign
                  countries we currently do business
                  in;
 ·
              Loss
                  of customers or sales weakness;
  13
 ·
              Inability
                  to achieve future sales levels or other operating
                  results;
 ·
              Ability
                  to produce or retain licensing rights to new
                  products;
 ·
              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;
 ·
              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 of R.G. Global Lifestyles, Inc., including Form 10-KSB as of March
        31, 2005, and those of its predecessor, the L.L. Knickerbocker Company, Inc.,
        and notes thereto.
 
 **Item
        2. Management’s Discussion and Analysis of Financial Condition and Results of
        Operations**
 
 **Overview
        and Outlook**
 
 R.G.
        Global Lifestyles, Inc. (the “Company”) was originally 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 R.G. Global Lifestyles, Inc. On July 28,
        2004
        the Company entered into an agreement with Amerikal International Holding,
        Inc.
        (“AIH”) whereby the Company acquired all of the issued and outstanding common
        stock of AIH in exchange for 1,900,000 voting common shares of the Company’s
        common stock. The acquisition closed and the shares were exchanged on July
        28,
        2004. At the close of the transaction, the former shareholders of AIH controlled
        a majority of the Company’s common stock. The common stock issued in the course
        of the reverse merger transaction was recorded at the net book value of the
        Company’s assets on the acquisition date. As allowed under SFAS 141, “Business
        Combinations,” we treated this acquisition as a recapitalization for accounting
        purposes, in a manner similar to reverse acquisition accounting.
 
 As
        a
        result of the merger, the Company now owns and operates Amerikal Nutraceutical
        Corp., a California corporation, (“ANC”) as a wholly-owned subsidiary. ANC’s
        business is to manufacture, sell and distribute dietary supplements, health
        and
        beauty aid products. The primary geographic markets for the Company’s products
        are in South East Asia and Asia, including Singapore, Indonesia, Malaysia,
        Thailand, Taiwan, Hong Kong and Japan. During 2005, in order to diversify
        its
        market and customer base, ANC launched a program of internet marketing for
        its
        LifeDerma TM brand of products. The focus of the Internet marketing program was
        to generate new customers in the United States.
 
 14
 In
        October, 2004 the Company formed Aquair, Inc. as a wholly owned subsidiary,
        a
        California corporation, to diversify the Company’s product-lines. Through
        Aquair, Inc., the Company has acquired the rights to market and distribute
        a
        patented water generator that precipitates drinking water from the air. The
        water generating machine has been tested in various locations. During the
        quarter ended September 30, 2005, the Company has made some sales of units
        to
        customers in the U.S. and Asia, and based upon written agreements recently
        concluded anticipates further sales to customers in Vietnam.
 
 During
        the fiscal quarter ended December 31, 2004, the Company entered into a
        distribution agreement to distribute products developed by another company.
        The
        purchase price paid for the distribution rights was $300,000 in cash, which
        represents the fair value of the distribution rights. We recorded this purchase
        price as an asset and will amortize the asset over the period of its estimated
        benefit period of three years.
 
 In
        addition to the foregoing, in January 2005 the Company issued 200,000 shares
        of
        its restricted common stock to acquire rights to an Internet portal known
        as On
        Line Surgery. Subsequently, in the quarter ended June 30, 2005, the Company
        formed On Line Surgery, Inc. as a wholly owned subsidiary, a California
        Corporation, to develop the advertising potential of this web portal for
        the
        Company’s existing and future nutraceutical products, as well as to generate
        advertising revenue from physicians and other potential customers. On Line
        Surgery, Inc. had not begun operations during the quarter ended September
        30,
        2005.
 
 Also
        during June 2005, Aquair, Inc. entered into an agreement with Munters, Inc.,
        a
        Swedish manufacturer of water generating equipment.. Pursuant to the agreement,
        Aquair, Inc. has the right to distribute and sell Munters water generating
        equipment products to the commercial residential building industry, government
        agencies, shipping industry and oil and gas industry. This agreement also
        grants
        Aquair, Inc. the right to bottle water generated by Munters new patented
        technology. This agreement is effective worldwide, with the exclusion of
        Thailand, Indonesia, Singapore and Malaysia. In connection with this agreement,
        a related party, Louis L. Knickerbocker, Chairman and CEO, advanced the good
        faith deposit of $50,000 toward the required purchase of equipment under
        the
        agreement. The Company reflected this deposit as an asset and recorded the
        note
        payable to the related party as a liability of the same amount. During the
        quarter ended September 30, 2005, the Company repaid the advance from the
        related party and increased its deposit with Munters Corporation to $125,000
        in
        accordance with the terms of the agreement.
 
 On
        August
        30, 2005, Aquair, Inc. executed a Distribution Agreement with Locke Media,
        which
        provides for Locke to be the exclusive distributor in Vietnam for the Company’s
        home/office model of atmospheric water generators. Locke issued purchase
        orders
        for 90 units for delivery as soon as possible. Under the terms of the agreement,
        Locke is obligated to make minimum purchases of $2 million of the product
        during
        the first year and an additional purchase of $2.5 million during the second
        year. There is a one year extension of the agreement which would allow for
        a
        final 10% increase in required purchase amount.
 
 15
 **Results
        of Operations for the Three and Six Months Ended September 30, 2005 and
        September 30, 2004.**
 
 Three
                  Months Ended September 30,
              
              Six
                  Months Ended September 30,2005
              
              2004
              
              2005
              
              2004Product
                  Sales
              
              $
              1,109,992
              
              $
              1,483,207
              
              $
              1,934,717
              
              $
              3,215,245Cost
                  of sales
              
              
              395,810
              
              
              586,154
              
              
              796,344
              
              
              1,478,394Gross
                  Profit
              
              
              714,182
              
              
              897,053
              
              
              1,138,373
              
              
              1,736,851General
                  and
                administrative
                  expenses
              
              
              95,535
              
              
              27,057
              
              
              167,515
              
              
              112,536Consulting
                  services
              
              
              119,380
              
              
              25,962
              
              
              172,937
              
              
              37,086Depreciation
                  and
                Amortization
              
              
              26,203
              
              
              25,337
              
              
              52,406
              
              
              25,337Total
                  Expenses
              
              
              430,832
              
              
              434,012
              
              
              930,679
              
              
              688,482Net
                  Income
              
              $
              283,350
              
              $
              463,041
              
              $
              207,694
              
              $
              1,048,369
 
 **Revenues
        and Cost of Sales** .
 **Increase/(decrease)**2005
                
                2004
                
                $
                
                %For
                    the three months ended September 30:Gross
                    Profit
                
                $
                714,182
                
                $
                897,053
                
                $
                (182,871
                )
                
                (20
                %)
 
 During
        the three months ending September 30, 2005, the Company generated gross profit
        of $714,182 on net product sales of $1,109,992 and cost of sales totaling
        $395,810, compared to $897,053 of gross profit on net product sales of
        $1,483,207 and costs of sales of $586,154 in the three months ending September
        30, 2004. The primary reason for the decrease in revenues was because of
        the
        Company’s decision to diversify its customer base and no longer focus on one
        customer to purchase the Company’s products. Additionally, the Company chose to
        invest its assets in developing markets outside its historical markets, and
        to
        focus resources to expand sales in its Aquair subsidiary.
 **Increase/(decrease)**2005
                
                2004
                
                $
                
                %For
                    the six months ended June 30:Gross
                    Profit
                
                $
                1,138,373
                
                $
                1,735,851
                
                $
                (597,478
                )
                
                (34
                %)
 
 During
          the six months ending September 30, 2005, the Company generated gross profit
          of
          $1,138,373 on net product sales of $1,934,717 and cost of sales totaling
          $796,344, compared to $1,735,851 of gross profit on net product sales of
          $3,215,245 and costs of sales of $1,478,394 in the six months ending September
          30, 2004. This resulted in a decrease in gross profits of $597,478, or
          34%, from
          the same period one year ago. The decrease in revenues was a result of
          diversifying its customer base, expansion into new markets, and to focus
          on
          development of sales in its Aquair subsidiary. The Company in the last
          six
          months generated sales in the United States, which is a new market for
          the
          Company’s products and did not have comparable figures in 2004. In addition to
          these costs, the Company introduced its new product line of Aquair through
          its
          wholly owned subsidiary.
 
 16
 **General
        and Administrative expenses**
 
 2005
                2004
                **Increase/(decrease)**$
                %
  **Increase/(decrease)**2005
                
                2004
                
                $
                
                %For
                    the three months ended September 30:General
                    & administrative
                  Expenses
                
                $
                95,535
                
                $
                27,057
                
                $
                68,478
                
                
                253
                %
 
 General
        and administrative expenses were $95,535 for the three months ended September
        30, 2005 versus $27,057 for the three months ended September 30, 2004, which
        resulted in an increase of $68,478. General and administrative expenses
        increased comparatively for the three months ended September 30, 2005 to
        the
        comparative period in 2004 as a result of the expansion of domestic operations
        of its products as well as establishing the necessary support needed for
        the
        Company’s new subsidiaries and its products.
 **Increase/(decrease)**2005
                
                2004
                
                $
                
                %For
                    the six months ended September 30:General
                    & administrative
                  Expenses
                
                $
                167,515
                
                $
                112,536
                
                $
                54,979
                
                
                49
                %
 
 General
        and administrative expenses were $167,515 for the six months ended September
        30,
        2005 versus $112,536 for the six months ended September 30, 2004, which resulted
        in an increase of $54,979 or 49%. The increase in general and administrative
        expenses was due to the continued expansion of operations in new markets.
        Overall, the comparative increase in general and administrative expenses
        between
        the two periods is equalized when taking into consideration the restatement
        of
        the six months ended September 30, 2004. After the restatement, as mentioned
        in
        footnote 3 of the financial statements, the fair market value of the common
        stock issued for consulting fees was revised.
  **Total
        Operating Expenses**
 **Increase/(decrease)**2005
                
                2004
                
                $
                
                %For
                    the three months ended September 30:Total
                    Operating Expenses
                
                $
                430,832
                
                $
                434,012
                
                $
                (3,180
                )
                
                (1
                %)
 
 17
 Our
        operating expenses for the three months ended September 30, 2005 were $430,832
        compared to $434,012 for the three months ended September 30, 2004. For both
        periods, we incurred expenses for general management and legal fees related
        to
        continuing operations. For the three months ended September 30, 2005, the
        Company expended $18,000 in rent paid to a related party, and paid $79,611
        in
        legal and accounting fees. During the three months ended September 30, 2005,
        the
        company incurred total general and administrative expenses of $95,535, compared
        to $27,057 of similar expenses in the same period last year. Although the
        Company has experienced new costs associated with expanding into new markets
        and
        the introduction of a new product line, the Company has become more efficient
        in
        controlling costs associated with these items thereby reducing the overall
        expenses as compared to the same period in 2004.
 **Increase/(decrease)**2005
                
                2004
                
                $
                
                %For
                    the six months ended September 30:Total
                    Operating Expenses
                
                $
                930,679
                
                $
                688,482
                
                $
                242,197
                
                
                35
                %
 
 Our
        operating expenses for the six months ended September 30, 2005 were $930,679
        compared to $688,482 for the six months ended September 30, 2004. For both
        periods, we incurred expenses for general management and legal fees related
        to
        continuing operations. The increase in total operating expenses was attributable
        to establishing new target markets and the diversification of new product
        lines.
 
 **Net
        Income**
 **Increase/(decrease)**2005
                
                2004
                
                $
                
                %For
                    the three months ended September 30:Net
                    income
                
                $
                283,350
                
                $
                463,041
                
                $
                (179,691
                )
                
                (39
                %)
 
 The
        net
        income from operations for the three months ended September 30, 2005 was
        $283,350, versus a net income of $463,041 for the three months ended September
        30, 2004, a decrease in net income of $179,691 or 39%. The decrease in net
        income as compared to the same period in 2004 was due to the Company focusing
        efforts to reduce its reliance on one customer, expansion of its Aquair
        subsidiary, and diversification of its markets, as discussed in previous
        sections.
 **Increase/(decrease)**2005
                
                2004
                
                $
                
                %For
                    the six months ended September 30:Net
                    income
                
                $
                207,694
                
                $
                1,048,369
                
                $
                (840,675
                )
                
                (80
                %)
 
 18
 The
        net
        income for the six months ended September 30, 2005 was $207,694, versus a
        net
        income of $1,048,369 for the six months ended September 30, 2004, a decrease
        in
        net income of $840,675. The significant reason for the decrease in net income
        was due to the Company’s changes related to its diversification from reliance on
        one customer, and to startup expenses of its subsidiary Aquair. and its
        products.
 
 **Liquidity
        and Capital Resources**
 
 We
        had
        cash and cash equivalents of $87,358 at September 30, 2005. We also had
        $1,010,434 of accounts receivable, prepaid expenses of $38,882, and $144,717
        in
        inventory, making our total current assets at September 30, 2005 equal to
        $1,281,391. We also had the following long-term assets: $17,037 in fixed
        assets
        net of depreciation, $185,000 of intangible distribution rights and Web portal
        rights net of amortization, and $239,208 of cash deposits held by others.
        Our
        total assets at September 30, 2005 were $1,722,636.
 
 Our
        total
        current liabilities were $984,422 as of September 30, 2005. This total consisted
        of $130,006 of accounts payable, $6,351 of accrued expenses, $12,133 of interest
        payable, $235,932 of accrued income taxes payable. Also included in current
        liabilities is the balance due on a note payable in the amount of $600,000
        that
        will mature prior to the close of the third fiscal quarter ending December
        31,
        2005. The total of current liabilities also represented the total liabilities
        of
        the Company as of September 30, 2005. .
 
 The
        Company has financed its operations through cash generated from sales of
        product
        through its wholly owned subsidiary Amerikal Nutraceutical Corp. During the
        six
        months ended September 30, 2005, the Company generated $1,934,717 of sales
        revenues, of which the Company used $796,344 to pay direct costs of operations
        and other expenses of $930,679, resulting in a net income from operations
        of
        $207,694. After taking into account other income and the provision for income
        taxes, the financial net income for the six months ended September 30, 2005
        was
        $101,140. During the quarter ended September 30, 2005, the Company incurred
        a
        new liability of $600,000 in the form of a note payable to an unrelated party
        who advanced funds to the Company on July 1, 2005. The Note is due to be
        repaid
        270 days from its inception. The Company received an equipment rebate of
        $350
        regarding the prior purchase of fixed assets, and increased our deposits
        held by
        others to $239,208. Income taxes payable increased to a total of $235,932
        as a
        result of the current quarter’s profit. The Company’s net cash used by operating
        activities was $671,206. Net cash provided by financing activities was $600,000.
 
 For
        the
        six month period ended September 30, 2004, as restated to give effect to
        the
        accounting estimate change described in the footnotes to the attached financial
        statements, the Company had experienced a net income from operations of
        $530,202, based upon total revenues of $3,215,245. The primary reason for
        the
        reduced revenues in the current quarter is that the Company made the decision
        to
        implement a strategy to diversify its customer and market base, which diverted
        personnel and attention away from traditional markets and customers. In addition
        to diversifying its customer base, during the six months ended September
        30,
        2005, the Company increased its gross profit margin to 58.8% of sales compared
        to 54.0% of gross sales in the same period last year, by reducing the direct
        cost of sales.
 
 19
 **PLAN
        OF OPERATION FOR THE NEXT TWELVE MONTHS.**
 
 Over
        the
        next twelve months, the Board of Directors has determined to focus on the
        development of business under its Aquair subsidiary. The Board of Directors
        has
        authorized the officers of the Company to negotiate and execute an agreement
        whereby the Company will distribute its Amerikal Nutraceutical Corp. subsidiary
        to a group of founding shareholders. In exchange, the Company will receive
        approximately eight million shares of its previously issued unregistered
        common
        stock, which will be cancelled. The Company expects the completion of the
        Amerikal agreement to be finalized within the next 30 days. The proposed
        transaction is believed by the Company, based upon advice received from its
        accountants and attorneys, to be a tax free distribution of a controlled
        corporation and exchange of equity, under the applicable provisions of the
        Internal Revenue Code. Accordingly, the Company does not anticipate recognition
        of any gain or loss on the proposed transaction.
 
 The
        Company will also take steps to list and sell its On Line Surgery subsidiary,
        in
        order to concentrate upon the business plan of its Aquair subsidiary. Through
        Aquair, Inc., the Company plans to license and distribute water generating
        equipment in the United States and Asia that creates drinking water from
        the
        air. The Company also may increase revenue through acquisitions of companies
        to
        expand its Aquair customer base. The Company further plans to increase its
        sales, marketing, and investor relations efforts for the Aquair product line
        by
        adding personnel and/or consultants.
 
 As
        of
        September 30, 2005, we had cash and cash equivalents of $87,358, and accounts
        receivable in the amount of $1,010,434. In view of the plan of the Company
        to
        distribute its Amerikal Nutraceutical Corp. subsidiary, in order to fully
        execute its business plan for the next twelve months the Company may need
        to
        raise additional funds to meet increased demand for the manufacture and
        distribution of its Aquair products. The Company has not yet decided upon
        the
        specific method of raising additional working capital that may be required
        to
        meet its objectives. Additional working capital funds may be obtained through
        various means, including the future sale of the Company’s equity securities in
        private or public offerings, debt financing, hybrid financing, trade financing,
        receivables financing, factoring or any combination of credit, equity and/or
        debt which the Company can obtain on terms deemed favorable to the Company
        by
        the Board of Directors. In furtherance of the anticipated need to raise
        additional working capital, the Board of Directors has filed a Certificate
        of
        Determination of the rights and preferences concerning the Company’s authorized
        but unissued preferred stock. The Company has not yet embarked upon a plan
        for
        the raising of additional working capital.
 
 Until
        the
        end of this fiscal quarter, the Company’s principal operating subsidiary
        Amerikal Nutraceutical Corp. has been engaged in continuing product research
        and
        development relating to the production, distribution and marketing of its
        natural health and beauty aid products. In addition, the Company concluded
        its
        Internet based test marketing program for the Company’s LifeDerma products, but
        continued its research and testing related to its new operating subsidiary,
        Aquair, Inc. As a result of our planned growth, the Company anticipates it
        will
        need to purchase additional plant and equipment over the next twelve months,
        but
        that such purchases and the amounts are contingent upon its business success
        and
        overall market conditions. Similarly, the Company may need to significantly
        increase its workforce to respond to growing business needs, but the amounts
        and
        timing cannot be ascertained with certainty at this time.
 
 20
 **Off-Balance
        Sheet Arrangements.**
 
 There
        are
        no off Balance Sheet arrangements that have or are reasonably likely to have
        a
        current or future effect upon 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 the Company’s
        operations.
 
 **Going
        Concern**
 
 The
        accompanying unaudited consolidated financial statements have been prepared
        in
        conformity with accounting principles generally accepted in the United States
        of
        America, which contemplate that the Company will continue in business as
        a going
        concern. During the three (3) months ended September 30, 2005 the Company
        showed
        a profit from consolidated operations in the amount of $283,350. The net
        income
        after provision for income tax is $178,502 for the most recent fiscal quarter.
        As a result of the profit generated from consolidated operations in the most
        recent fiscal quarter, the Company now shows a net profit from consolidated
        operations for the first six months of the fiscal year in the amount of
        $207,694. After provision for income tax, the net income for the six months
        ended September 30, 2005 is $101,140.
 
 Through
        the Company’s wholly owned subsidiary, Amerikal Nutraceutical Corp., the Company
        has developed a source of revenue from the sale of American-made dietary
        supplements and health and beauty-aid products in South East Asian and Asian
        countries, as well as having introduced its products to the United States
        market
        through the use of a test marketing program on the Internet. In addition,
        on
        September 19, 2005, the Company finalized a Sale and Purchase Agreement with
        Med-Eq AS, a Norwegian Company, granting the Company exclusive rights to
        sell
        its patented YTE raw material extract (the “Product”) for uses as an aphrodisiac
        and sports/energy product to US Companies, which companies will develop
        proprietary formulations and sell finished products worldwide. In addition,
        the
        Company has been granted the right to develop its own private label sales
        of the
        Product worldwide. The Agreement provides for minimum purchases of 3000
        kilograms of the Product for the first year, increasing to 12,000 kilograms
        for
        subsequent years. Sales under the Med-Eq agreement have not yet
        commenced.
 
 The
        Company’s wholly owned subsidiary, Aquair, Inc., has commenced sales and
        anticipate future sales and revenues from a patented water generator and
        the
        distribution of water-generating equipment under the recently-concluded
        agreement with Munters Corporation. To date less than $6,000 of sales have
        been
        generated from these product-lines, as selling activity began late in last
        fiscal quarter. The Company has recently concluded a distribution agreement
        with
        Locke Media regarding sales in Vietnam.
 
 The
        consolidated financial statements do not include any adjustments that might
        result from the outcome of any uncertainty as to the Company’s ability to
        continue as a going concern. The consolidated financial statements also do
        not
        include any adjustments relating to the recoverability and classification
        of
        recorded asset amounts, or amounts and classifications of liabilities that
        might
        be necessary should the Company be unable to continue as a going
        concern.
 
 21
 On
        July
        1, 2005, the Company executed a promissory note (the “Note”) for $600,000 in
        favor of Karim Joseph Murray and Larbi John Murphy, shareholders of the Company,
        who loaned the Company said funds to be used as working capital. The note
        accrues interest at a rate of 8% per annum and matures 270 days from the
        date of
        the note.
 
 **Critical
        Accounting Policy and Estimates**
 
 This
        Management’s Discussion and Analysis of Financial Condition and Results of
        Operations section discusses the Company’s consolidated financial statements,
        which have been prepared in accordance with accounting principles generally
        accepted in the United States of America. The preparation of these consolidated
        financial statements requires management to make estimates and assumptions
        that
        affect the reported amounts of assets and liabilities at the date of the
        consolidated financial statements, and the reported amounts of revenues and
        expenses during the reporting period. On an ongoing basis, management evaluates
        its estimates and judgments, including those related to revenue recognition,
        accrued expenses, financing operations, and contingencies. Management bases
        its
        estimates and judgments on historical experience and on various other factors
        that are believed to be reasonable under the circumstances, the results of
        which
        form the basis for making judgments about the carrying value of assets and
        liabilities that are not readily apparent from other sources. Actual results
        may
        differ from these estimates under different assumptions or conditions. The
        most
        significant accounting estimates inherent in the preparation of the Company’s
        consolidated financial statements include estimates as to the appropriate
        carrying value of certain assets and liabilities which are not readily apparent
        from other sources, primarily stock-based compensation. The methods, estimates
        and judgments the Company uses in applying these most critical accounting
        policies have a significant impact on the results it reports in its consolidated
        financial statements.
 
 **Equity
        - Based Compensation**
 
 In
        the
        presentation of the consolidated financial statements, the Company has restated
        and reclassified certain aspects of the prior period statements of financial
        operations due to a change in accounting estimate. The changes are described
        in
        the notes to the financial statements attached and incorporated in this filing.
        The purpose of the change was to more accurately reflect the fair market
        value
        of the expense for stock-based compensation for shares issued in the previous
        accounting period.
 
 The
        Company records stock-based compensation to its officers, directors, and
        outside
        consultants at the fair market value of the services in general and
        administrative expense. In 2004, prior to being approved for quotation of
        its
        stock on the OTCBB, the Company recorded the expenses of stock based
        compensation issued to related parties (officers and directors), as well
        as
        stock based compensation issued to consultants, at $0.05 per share based
        upon a
        valuation study conducted at the request of the Board of Directors. Subsequent
        to the listing of the Company’s common stock on the OTCBB, it issued shares of
        unregistered common stock to two attorneys in exchange for legal services.
        As of
        the date of this share issuance in March 2005, the Company’s common stock was
        trading at approximately $1.51 per share, and it therefore recorded the stock
        issuance as of that date as an expense at the fair market value of the stock
        issued.
 
 22
 The
        Company recently granted stock options pursuant to a consulting agreement
        dated
        July 18, 2005 among the Company, Aquair, Inc. and General Steve Ritchie.
        In
        exchange for sales and marketing services to be rendered for Aquair, Inc.
        and as
        partial compensation for services, General Ritchie was granted an option
        to
        purchase 100,000 shares of the Company’s common stock, vesting over a three-year
        period with one third vesting at twelve months from date of execution of
        the
        Agreement, one third at twenty-four months, and the final third at thirty
        six
        months. As of the date of this agreement, the Company’s common stock was trading
        at approximately $3.00 per share. Based upon the Black Scholes method of
        calculation, the Company determined that the fair value of the options granted
        would be $313,480 over the life of the Agreement. The Company recorded the
        grant
        of the options as prepaid compensation in the amount of $26,123 based upon
        the
        fair value of that proportion of options vesting in this fiscal quarter.
        The
        Company will expense the options as compensation upon the vesting of the
        options
        at the end of each year under the agreement.
 
 The
        Company has not yet adopted a plan for issuance of stock options to employees
        or
        others. 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.
 
 **FACTORS
        THAT MAY AFFECT OUR RESULTS OF OPERATIONS**
 
 RISKS
        RELATING WITH OUR BUSINESS AND MARKETPLACE
 
 ***The
        Company is a relatively young company with a minimal operating history since
        being reorganized in 2003.***
 
 Since
        the
        Company’s reorganization in 2003 we have generated revenue from operations.
        However, our future operating results will depend on many factors, including
        the
        ability to generate sustained and increased demand and acceptance of our
        products, the level of our competition, and our ability to attract and maintain
        key management and employees. While management believes its estimates of
        projected occurrences and events are within the timetable of its business
        plan,
        there can be no guarantees or assurances that the results anticipated will
        occur.
 
 ***If
        we are unable to obtain additional funding, our business plan may be slowed
        and
        if we do obtain additional financing our then existing shareholders may suffer
        dilution.***
 
 We
        will
        require additional funds to expand our sales and marketing activities, and
        to
        support operations and implement our business strategy. There can be no
        assurance that financing will be available in amounts or on terms acceptable
        to
        us, if at all. The inability to obtain additional capital will restrict our
        ability to grow and may reduce our ability to conduct business operations.
        If we
        are unable to obtain additional financing, we will likely be required to
        curtail
        our business plan. Any additional equity financing may involve dilution to
        our
        then existing shareholders.
 
 23
 ***If
        we acquire additional companies or products in the future, they could prove
        difficult to integrate, disrupt our business, dilute stockholder value or
        adversely affect our operating results.***
 
 We
        anticipate that we will make other investments in complementary companies
        or
        products. We may not realize the anticipated benefits of any such acquisition
        or
        investment. The success of our acquisition program will depend on our ability
        to
        overcome substantial obstacles, such as the availability of acquisition
        candidates, our ability to compete successfully with other acquirers seeking
        similar acquisition candidates, the availability of funds to finance
        acquisitions and the availability of management resources to oversee the
        operation of acquired businesses. Furthermore, we may have to incur debt
        or
        issue equity securities to pay for future acquisitions or investments, the
        issuance of which could be dilutive to us or our existing shareholders. In
        addition, our profitability may suffer because of acquisition-related costs
        or
        future impairment costs for acquired goodwill and other intangible assets.
 
 ***We
        may be unable to retain the services of key personnel, and we may be unable
        to
        successfully recruit qualified personnel.***
 
 Our
        success depends to an extent upon the continued service of key personnel;
        loss
        of the services of such personnel could have an adverse effect on our growth,
        revenues, and prospective business. In addition, in order to successfully
        implement and manage our business plan, we will be dependent upon, among
        other
        things, successfully recruiting qualified managerial and sales personnel
        having
        experience in business. Competition for qualified individuals is intense.
        There
        can be no assurance that we will be able to find, attract and retain existing
        employees or that we will be able to find, attract and retain qualified
        personnel on acceptable terms.
 
 ***There
        are inherent risks to doing business abroad and in foreign
        markets.***
 
 We
        may
        not be successful in obtaining export licenses to conduct business abroad.
        Licenses for the export of our products are required from government agencies
        in
        accordance with various statutory authorities. We can not give any assurance
        that we will continue to be successful in obtaining these necessary licenses
        in
        order to conduct business abroad. Additionally, countries in which we do
        business may from time to time, impose new quotas, duties, tariffs, or other
        restrictions, which could adversely affect our operations and our ability
        to
        continue to do business in those countries.
 
 ***If
        we cannot effectively manage our growth, we may incur
        losses.***
 
 Any
        dramatic growth in our business could place a substantial burden on our
        production capacity and administrative resources. Businesses, which grow
        rapidly, often have difficulty managing their growth. Our management may
        not be
        able to manage our growth effectively or successfully. Rapid growth can often
        put a strain on management, financial, and operational resources of a company.
        In addition, we would likely need to enhance our operational systems and
        personnel procedures. Our failure to meet these challenges could cause our
        efforts to expand operations to prove unsuccessful and cause us to incur
        operating losses.
 
 24
 
 RISKS
        FACTORS RELATING TO OUR COMMON STOCK
 
 ***Our
        common stock is subject to SEC “Penny Stock” rules.***
 
 Since
        our
        common stock is a penny stock, as defined in Rule 3a51-1 under the Securities
        Exchange Act, it will be more difficult for investors to liquidate their
        investment of our common stock. Until the trading price of the common stock
        rises above $5.00 per share, if ever, trading in the common stock is subject
        to
        the penny stock rules of the Securities Exchange Act specified in rules 15g-1
        through 15g-10. Those rules require broker-dealers, before effecting
        transactions in any penny stock, to:
 
 ·
              Deliver
                  to the customer, and obtain a written receipt for, a disclosure
                  document;
 ·
              Disclose
                  certain price information about the
                  stock;
 ·
              Disclose
                  the amount of compensation received by the broker-dealer or any
                  associated
                  person of the broker-dealer;
 ·
              Send
                  monthly statements to customers with market and price information
                  about
                  the penny stock; and
 ·
              In
                  some circumstances, approve the purchaser’s account under certain
                  standards and deliver written statements to the customer with information
                  specified in the rules.
 
 Consequently,
        the penny stock rules may restrict the ability or willingness of broker-dealers
        to sell the common stock and may affect the ability of holders to sell their
        common stock in the secondary market and the price at which such holders
        can
        sell any such securities. These
        additional procedures could also limit our ability to raise additional capital
        in the future.
 
 ***Since
        our shares are trading on the OTC Bulletin Board, trading volumes and prices
        may
        be sporadic because it is not an exchange.***
 
 Our
        common shares are currently listed for public trading on the Over-the-Counter
        Bulletin Board. The trading price of our common shares has been subject to
        wide
        fluctuations. Trading prices of our common shares may fluctuate in response
        to a
        number of factors, many of which will be beyond our control. The stock market
        has generally experienced extreme price and volume fluctuations that have
        often
        been unrelated or disproportionate to the operating performance of companies
        with limited business operations. There can be no assurance that trading
        prices
        and price earnings ratios previously experienced by our common shares will
        be
        matched or maintained. Broad market and industry factors may adversely affect
        the market price of our common shares, regardless of our operating
        performance.
 
 In
        the
        past, following periods of volatility in the market price of a company’s
        securities, securities class-action litigation has often been instituted.
        Such
        litigation, if instituted, could result in substantial costs for us and a
        diversion of management’s attention and resources.
 
 25
 ***We
        are subject to SEC regulations and changing laws, regulations and standards
        relating to corporate governance and public disclosure, including the
        Sarbanes-Oxley Act of 2002, new SEC regulations and other trading market
        rules,
        are creating uncertainty for public companies.***
 
 We
        are
        committed to maintaining high standards of corporate governance and public
        disclosure. As a result, we intend to invest appropriate resources to comply
        with evolving standards, and this investment may result in increased general
        and
        administrative expenses and a diversion of management time and attention
        from
        revenue-generating activities to compliance activities.
 
 **Item
        3. Controls and Procedures**
 
 As
        required by SEC rules, we have evaluated the effectiveness of the design
        and
        operation of our disclosure controls and procedures at the end of the period
        covered by this report. The evaluation was carried out by our Audit Committee
        under the supervision of and with the participation of our management, including
        our Chief Executive Officer and Chief Financial Officer (the “Certifying
        Officers”). Based upon this evaluation, the Certifying Officers have concluded
        that the design and operation of our disclosure controls and procedures are
        effective. Such disclosure controls and procedures are designed to ensure
        that
        material information is made known to the Certifying Officers, particularly
        during the period in which this report was prepared. The Certifying Officers
        have evaluated the effectiveness of our disclosure controls and procedures
        as of
        the end of the period covered by this report and believe that our disclosure
        controls and procedures are effective based on the required evaluation. During
        the period covered by this report, there were no changes in internal controls
        that materially affected, or are reasonably likely to materially affect,
        our
        internal control over financial reporting.
 
  **PART
        II — OTHER INFORMATION**
 
 **Item
        1. Legal Proceedings**
 
 As
        of
        August 30, 2005 the Company was served with a lawsuit filed as Case No.
        05CC09548 in Orange County, California Superior Court. In the complaint,
        Universal Communications Systems, Inc. and its subsidiary Atmospheric Water
        Technologies, Inc. allege defamation, interference with prospective economic
        advantage, and false advertising, and seek damages and attorney’s fees against
        the Company. The Board of Directors believes these claims to be without merit,
        and has engaged legal counsel to strongly defend these claims. Through our
        legal
        counsel, the Company has caused the appropriate legal pleadings to be filed
        in
        response to the Complaint in this case. The Company believes that any liability
        it may incur in connection with this case will not have a material adverse
        effect upon its financial condition or its results of operations.
 
 Other
        than the foregoing incident or occurrence, the Company is not aware of any
        litigation, either pending or threatened, and has not been the defendant
        or
        plaintiff in any litigation, since the discharge from bankruptcy attributable
        to
        its predecessor L.L. Knickerbocker Company, Inc.
 
 **Item
        2. Unregistered Sales of Equity Securities and Use of
        Proceeds**
 
 The
        Company granted to General Steve Ritchie of 100,000 stock options on July
        18,
        2005, which will be vested over a three-year period, with one third vesting
        each
        year. Mr. Ritchie can exercise his option to purchase 100,000 shares
        at
        $3.30 per share. At the time of this report no stock issuances have occurred.
        We
        believe that the issuances of the options were exempt from the registration
        and
        prospectus delivery requirements of the Securities Act of 1933 by virtue
        of
        Section 4(2).
 
 26
 **Item
        3. Defaults Upon Senior Securities**
 
 None.
 
 **Item
        4. Submission of Matters to a Vote of Security Holders**
 
 As
        a
        subsequent event to the period ended September 30, 2005, the Company held
        its
        annual meeting of shareholders on October 24, 2005. Business conducted at
        the
        meeting included the following proposals:
 
 1.
              To
                  elect six directors to hold office for one year term and until
                  each of
                  their successors are elected and
                  qualified;
 2.
              To
                  amend the Articles of Incorporation with respect to increasing
                  the number
                  of authorized members from the present six to a total of eleven
                  authorized
                  members of the Board of Directors.
 3.
              To
                  amend the Articles of Incorporation with respect to increasing
                  the par
                  value of the Company’s common stock to
                  $0.001.
 4.
              To
                  ratify the appointment of Beckstead and Watts LLC as independent
                  auditor;
                  and
 5.
              To
                  act upon other business as may properly come before the
                  meeting.
 
 Each
        share of Common Stock was entitled to one vote. Only shareholders of record
        at
        the close of business on September 2, 2005, were entitled to vote. The number
        of
        outstanding shares at the time was 25,150,000 held by approximately 3200
        shareholders. The required quorum of shareholders was present at this
        meeting.
 
 **Item
        5. Other Information**
 
 None.
 
 **Item
        6. Exhibits and Current Reports on 8-K**
 
 3.1
              Articles
                  of Incorporation of International Beauty Supply Ltd. (“IBS”) filed July
                  12, 1985.1
 3.2
              Amendment
                  to Articles of Incorporation of IBS filed May 28, 1993.2
 3.3
              Certificate
                  of Amendment to Articles of Incorporation of the L.L. Knickerbocker
                  Company Inc. (“LLK”) filed June 27, 1994.2
 3.4
              Certificate
                  of Amendment to Articles of Incorporation of LLK filed September
                  29,
                  1994.2
 
 1  Incorporated by reference to the L.L. Knickerbocker Co., Inc. Form SB-2
          Registration Statement No. 33-85230-LA as filed on October 13,
          1994.
 2  Incorporated by reference to L.L. Knickerbocker Co., Inc. Form 10-K as
          filed on
          April 14, 2000.
  27
  3.5
              Certificate
                  of Amendment of the Articles of Incorporation of LLK, filed September
                  1,
                  1995.3
 3.6
              Certificate
                  of Amendment of the Articles of Incorporation of LLK, filed June
                  19,
                  1996.3
 3.7
              Certificate
                  of Amendment to the Articles of Incorporation of LLK filed April
                  22,
                  1999.2
 3.8
              Certificate
                  of Amendment to the Articles of Incorporation of the L.L. Knickerbocker
                  Company Inc. filed January 9, 2003.3
 3.9
              Bylaws
                  of the L.L. Knickerbocker Company Inc.4
 10.1
              Consulting
                  Agreement between Aquair, Inc. and Brig. GeneralSteve
                  Ritchie dated July 18, 2005, filed
                  herewith.
 10.2
              Promissory
                  Note for $600,000 executed by the Company in favor of Karim Joseph
                  Murray
                  and Larbi John Murray, dated July 1, 2005, filed herewith.
 10.3
              Distribution
                  Agreement entered into between Aquair, Inc. and Locke Media dated
                  August
                  30, 2005.
 10.4
              Sales
                  and Purchase Agreement entered into between Amerikal Neutraceutical
                  Corporation and Med-Eq AS dated September 19,
                  2005.
 31.1
              Certification
                  of Chief Executive Officer Pursuant to the Securities Exchange
                  Act of
                  1934, Rules 13a-14 and 15d-14, as adopted pursuant to Section 302
                  of the
                  Sarbanes-Oxley Act of 2002, filed
                  herewith.
 31.2
              Certification
                  of Chief Financial Officer Pursuant to the Securities Exchange
                  Act of
                  1934, Rules 13a-14 and 15d-14, as adopted pursuant to Section 302
                  of the
                  Sarbanes-Oxley Act of 2002, filed
                  herewith.
 32
              Certification
                  pursuant to 18 U.S.C Section 1350, as adopted pursuant to Section
                  906 of
                  the Sarbanes Oxley Act of 2002, filed
                  herewith.
 
 3Incorporated by reference to the Company’s Form 10-KSB, as filed on June 29,
        2005.
 4  Incorporated by reference to the L.L. Knickerbocker Co., Inc. Annual Report
        on
        Form 10-KSB as filed on March 29, 1995.
 28
 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___________________________Louis
                    L. Knickerbocker
                Chairman
                    of the Board, CEO
                November
                    14, 2005___________________________William
                    C. Hitchcock
                Chief
                    Financial Officer
                November
                    14, 2005






29