<PAGE>

                                  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 June 30, 2007.

|_| 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)

30021 Tomas, Ste 200, Rancho Santa Margarita, CA           92688
------------------------------------------------           -----
    (Address of principal executive offices)            (Zip Code)

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

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 |_|

Indicate by check mark whether the Registrant is a shell company (as defined in
Rule 12b-2 of the Exchange Act). Yes |_| 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 |_|

APPLICABLE ONLY TO CORPORATE ISSUERS

The number of shares outstanding of the issuer's Common Stock as of August 14,
2007 was 27,317,092

Transitional Small Business Disclosure Format (Check One): Yes |_| No |X|

<PAGE>

                                      INDEX
                                      -----

                                                                            PAGE

                         PART I - FINANCIAL INFORMATION

Item 1.    Financial Statements (Unaudited)                                   3

           Consolidated Balance Sheet - June 30, 2007                         3

           Consolidated Statements of Operations -
           For the Three Months ended June 30, 2007 and 2006                  4

           Consolidated Statements of Cash Flows
           For the Three Months ended June 30, 2007 and 2006                  5

           Notes to Financial Statements                                      6

Item 2.    Management's Discussion and Analysis of Financial Condition
           and Results of Operations                                         16

Item 3.    Controls and Procedures                                           24

                           PART II - OTHER INFORMATION

Item 1.    Legal Proceedings                                                 25
Item 2.    Unregistered Sales of Equity Securities and Use of Proceeds       25
Item 3.    Defaults Upon Senior Securities                                   26
Item 4.    Submission of Matters to a Vote of Security Holders               26
Item 5.    Other Information                                                 26
Item 6.    Exhibits                                                          26

SIGNATURES                                                                   26

                                       2
<PAGE>

                         PART I -- FINANCIAL INFORMATION

ITEM 1. FINANCIAL STATEMENTS


                           RG GLOBAL LIFESTYLES, INC.
                           Consolidated Balance Sheet
                                 June 30, 2007
                                   (unaudited)

ASSETS

Current assets:
    Cash and cash equivalents                                 $        473,536
    Inventory - finished goods                                         253,854
    Federal income tax refund receivable                               155,000
    Prepaids and other current assets                                   26,040
                                                              -----------------
      Total current assets                                             908,430
                                                              -----------------

Property and equipment, net                                             18,643
Intangible assets, net                                               4,221,643
Other assets                                                           256,246

                                                              -----------------
TOTAL ASSETS                                                  $      5,404,962
                                                              =================


LIABILITIES AND STOCKHOLDERS' DEFICIT

Current liabilities:
    Accounts payable                                          $        215,445
    Accrued liabilities                                                185,666
    Deferred revenues                                                  381,804
    State income taxes payable                                          96,681
    Secured convertible notes payable                                1,870,433
    Warrant liability                                                5,276,831
    Conversion feature liability                                     5,685,122
    Notes payable (net of discount of $310,548)                        427,415
                                                              -----------------
      Total liabilities                                             14,139,397

Stockholders' deficit:
    Preferred stock, $0.001 par value, 10,000,000 shares
      authorized, no shares issued and outstanding                           -
    Common stock, $0.001 par value, 100,000,000 shares
      authorized, 27,317,092 shares issued and outstanding              27,317
    Additional paid-in capital                                      18,792,798
    Subscription receivable                                            (48,755)
    Accumulated deficit                                            (27,505,795)
                                                              -----------------
Total stockholders' deficit                                         (8,734,435)
                                                              -----------------

TOTAL LIABILITIES AND STOCKHOLDERS' DEFICIT                   $      5,404,962
                                                              =================

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

                                       3
<PAGE>
<TABLE>

                                     RG GLOBAL LIFESTYLES, INC.
                                Consolidated Statements of Operations
                                             (unaudited)


                                                               For the Three Months Ended
                                                                       June 30,
                                                            -------------------------------
                                                                2007               2006
                                                            ------------       ------------
<S>                                                         <C>                <C>
Revenues:
   Product sales                                            $     78,048       $        425
   Water treatment related                                       209,159                 --
                                                            ------------       ------------
     Total revenues                                              287,207                425

Cost of revenues:
   Product sales                                                  65,356              5,928
   Water treatment related                                       195,380                 --
                                                            ------------       ------------
     Total cost of revenues                                      260,736              5,928

Gross profit (loss)                                               26,471             (5,503)

Expenses:
   General and administrative (including
    stock-based compensation of $822,406
    and $830,466 respectively)                                 1,318,017          1,201,286
   Selling and marketing                                          60,739              3,345
                                                            ------------       ------------
     Total expenses                                            1,378,756          1,204,631
                                                            ------------       ------------

Operating loss                                                (1,352,285)        (1,210,134)
                                                            ------------       ------------

Other income (expense):
   Interest income                                                 3,018                 --
   Interest expense - related party                               (2,752)          (128,145)
   Interest expense                                             (189,536)          (143,077)
   Fair value of common stock issued in
       excess of notes payable satisfied                      (1,242,500)                --
   Change in fair value of derivative liabilities                942,085           (199,319)
   Interest and financing related to convertible notes                --         (4,159,182)
                                                            ------------       ------------
     Total other income (expense)                               (489,685)        (4,629,723)

Net loss before provision for income taxes                    (1,841,970)        (5,839,857)
                                                            ------------       ------------

Provision for income taxes                                            --                800

                                                            ------------       ------------
Net loss                                                    $ (1,841,970)      $ (5,840,657)
                                                            ============       ============

Weighted average number of
   common shares outstanding - basic and fully diluted        26,557,323         17,650,000
                                                            ============       ============

Net loss per share - basic and fully diluted                $      (0.07)      $      (0.33)
                                                            ============       ============

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

                                                 4
<PAGE>

                                               RG GLOBAL LIFESTYLES, INC.
                                          Consolidated Statements of Cash Flows
                                                       (unaudited)

                                                                                   For the Three Months Ended
                                                                                            June 30
                                                                                 ------------------------------
                                                                                     2007              2006
                                                                                 ------------      ------------
CASH FLOWS FROM OPERATING ACTIVITIES:
    Net loss                                                                     $(1,841,970)      $(5,840,657)

Adjustments to reconcile net loss to
  net cash used in operating activities:
      Amortization of debt discounts related to beneficial
         conversion features and warrants                                            149,589           239,276
      Fair value of common stock issued in excess
         of notes payable forgiven                                                 1,242,500                --
      Change in fair value of derivative liabilities                                (942,085)        4,259,048
      Depreciation and amortization                                                   79,024                30
      Stock-based compensation                                                       822,406           830,466
Changes in operating assets and liabilities:
      Prepaid and other current assets                                                    --           (76,200)
      Accounts payable                                                               122,011            19,662
      Accrued liabilities                                                             68,617            42,360
      Deferred revenues                                                              265,841                --
      Income taxes payable                                                             1,681                --
                                                                                 -----------       -----------
Net cash used in operating activities                                                (32,386)         (526,015)

CASH FLOWS FROM INVESTING ACTIVITIES:
    Purchase of fixed assets                                                          (2,871)           (1,800)
    Other assets                                                                     (20,230)              519
                                                                                 -----------       -----------
Net cash used in investing activities                                                (23,101)           (1,281)

CASH FLOWS FROM FINANCING ACTIVITIES:
    Proceeds from notes payable                                                           --           700,000
    Proceeds from exercise of stock options                                           26,745                --
                                                                                 -----------       -----------
Net cash provided by financing activities                                             26,745           700,000

Net increase (decrease) in cash                                                      (28,742)          172,704
Cash - beginning of period                                                           502,278           346,661
                                                                                 -----------       -----------
Cash - ending of period                                                          $   473,536       $   519,365
                                                                                 ===========       ===========

SUPPLEMENTAL DISCLOSURES OF CASH FLOW INFORMATION
  Cash paid during the period for:
      Interest                                                                   $        --       $        --
                                                                                 ===========       ===========
      Income taxes                                                               $        --       $        --
                                                                                 ===========       ===========

    Non-cash investing and financing activities:
      Issuance of common stock in settlement of notes payable
         and accrued interest                                                    $   175,000       $        --
                                                                                 ===========       ===========


                     The accompanying notes are an integral part of these financial statements.
</TABLE>
                                                           5
<PAGE>

                           RG GLOBAL LIFESTYLES, INC.
                   Notes to consolidated financial statements
                                   (unaudited)

NOTE 1 - BASIS OF PRESENTATION AND SIGNIFICANT ACCOUNTING POLICIES

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

These statements reflect all adjustments, consisting of normal recurring
adjustments, which, in the opinion of management, are necessary for fair
presentation of the information contained therein. It is suggested that these
consolidated interim financial statements be read in conjunction with the
consolidated financial statements and notes thereto of the Company for the year
ended March 31, 2007 included in the Company's 10-KSB annual report. The Company
follows the same accounting policies in the preparation of interim reports.

Revenue Recognition
-------------------

Product sales - For revenue from product sales, the Company recognizes revenue
in accordance with Staff Accounting Bulletin No. 104, "Revenue Recognition"
("SAB104"), which superseded Staff Accounting Bulletin No. 101, "Revenue
Recognition in Financial Statements" ("SAB101"). SAB 101 requires that four
basic criteria must be met before revenue can be recognized: (1) persuasive
evidence of an arrangement exists; (2) delivery has occurred; (3) the selling
price is fixed and determinable; and (4) collectibility is reasonably assured.
Determination of criteria (3) and (4) are based on management's judgments
regarding the fixed nature of the selling prices of the products delivered and
the collectibility of those amounts. Provisions for discounts and rebates to
customers, estimated returns and allowances, and other adjustments are provided
for in the same period the related sales are recorded.

Construction contracts - In accordance with Statement of Position 81-1
"Accounting for Performance of Construction-Type and Certain Production-Type
Contracts", the Company uses the percentage completion method for the
recognition of revenue received in connection with it's engineering, equipment
sale and installation contracts. In making the estimate of the percentage of
revenue to recognize, the Company compares costs to the total projected cost of
the contract. Accordingly, the Company recognizes that portion of the revenue
and records the balance of the cash received as deferred revenues.

Loss Per Share
--------------

Net loss per share is provided in accordance with Statement of Financial
Accounting Standards ("SFAS") No. 128 "Earnings Per Share" ("SFAS 128"). Basic
loss per share is computed by dividing losses available to common stockholders
by the weighted average number of common shares outstanding during the period,
after giving effect to dilutive common stock equivalents, such as stock options,
warrants and convertible debt. The following is a summary of outstanding


                                       6
<PAGE>

                           RG GLOBAL LIFESTYLES, INC.
                   Notes to consolidated financial statements
                                   (unaudited)

securities which have been excluded from the calculation of diluted net loss per
share because the effect would have been anti-dilutive for the three months
ended June 30, 2007 and 2006:

                                           2007                  2006
                                     ------------------    ------------------

Common stock options                         8,311,230             8,317,600
Common stock warrants                       15,403,940             6,253,940
Secured convertible notes                    4,412,232             1,481,053
                                     ------------------    ------------------
 Totals                                     28,127,402            16,052,593
                                     ==================    ==================

Recent Accounting Pronouncements
--------------------------------

In June 2006, the Financial Accounting Standards Board ("FASB") issued
Interpretation No. 48, "Accounting for Uncertainty in Income Taxes, an
interpretation of FASB Statement 109" ("FIN 48"). FIN 48 prescribes a
recognition threshold and measurement attribute for the financial statement
recognition and measurement of a tax position taken or expected to be taken in a
tax return. FIN 48 is effective for fiscal years beginning in years beginning
after December 15, 2006. The adoption of FIN 48 at April 1, 2007 did not have a
significant impact on our consolidated financial statements.

NOTE 2 - GOING CONCERN

The accompanying financial statements have been prepared assuming the Company
will continue as a going concern. As shown in the accompanying consolidated
financial statements, the Company has incurred an operating loss (loss before
income taxes and other expenses) of $1,352,285 for the period ended June 30,
2007, loss, and current liabilities in excess of current assets of $13,230,967
at June 30, 2007. These conditions raise substantial doubt about the Company's
ability to continue as a going concern.

The future of the Company is dependent partly upon its ability to perform on
contracts for wastewater treatment systems not yet completed, and upon its
ability to realize profit on sales of its energy drinks, as well as upon its
ability to obtain equity and/or debt financing. There can be no assurance that
the Company will be able to achieve profitability in its operations, and it is
possible that additional equity or debt financing may be required to continue as
a going concern. Without such additional capital, there is substantial doubt as
to whether the Company will continue as a going concern.

The financial statements do not include any adjustments relating to the
recoverability and classification of recorded assets, or the amounts of and
classification of liabilities, which might be necessary in the event the Company
cannot continue in existence.

                                       7
<PAGE>

                           RG GLOBAL LIFESTYLES, INC.
                   Notes to consolidated financial statements
                                   (unaudited)

NOTE 3 - NOTES PAYABLE

As of June 30, 2007, the Company had the following notes payable and accrued
interest:

<TABLE>
                                                                 Notes          Accrued
                                                                Payable        Interest
                                                             -------------    -----------
<S>                                                           <C>              <C>
2006 Note Payable, interest at 8%, due on demand
 and currently in default                                     $   137,963      $  13,789
2007 Notes Payable, interest at 8%, due on December
 26, 2007 and January 17, 2008, face value of
 $600,000                                                         289,452         23,189
Secured Convertible Notes, interest at 6%, see
 discussion below regarding current status                      1,870,433         48,887
                                                             -------------    -----------
Totals                                                        $ 2,297,848      $  85,865
                                                             =============    ===========
</TABLE>

2006 NOTES PAYABLE
------------------
In April 2007, the Company entered into a series of conversion agreements with a
group of individuals who had received an assignment of a $300,000 note and
accrued interest of $24,000 which was due on March 31, 2007. On April 19, 2007,
certain holders agreed to receive share of the Company's common stock at $0.20
per share. The Company issued 875,000 shares of common stock valued at
$1,417,500 to three of the assignors in settlement of $162,037 in principal and
$12,963 in accrued interest. At the time of issuance, the Company recorded the
excess in fair value of the common stock over the liabilities satisfied of
$1,242,500 as additional interest expense.

2007 NOTES PAYABLE
------------------
During the quarter ended June 30, 2007, the Company amortized $149,589 of the
discount resulting from the warrants and beneficial conversion feature to
interest expense. At June 30, 2007, the remaining discount relating to these
notes was $310,548.

$2,000,000 SECURED CONVERTIBLE NOTES
------------------------------------
On June 6, 2006, the Company entered into a definitive securities purchase
agreement and ancillary agreements with accredited investors for a private
placement of $2,000,000 of 6% callable secured convertible notes due June 6,
2009 (the "Secured Notes") and stock purchase warrants to purchase 4,000,000
shares of the Company's common stock, vesting immediately and exercisable before
June 6, 2013, with an exercise price of $1.10 subject to adjustment upon certain
events. In the event of default, the Secured Notes incur interest at fifteen
percent (15%) per annum, until such default has been cured. The Company received
the proceeds under these Secured Notes in three tranches; June 2006 - $700,000;
July 2006 - $600,000; and October, 2006 - $700,000. The Secured Notes are
convertible at the option of the holder at any time prior to maturity into
shares of the Company's common stock at a conversion price based upon the
average of the three lowest trading prices of the Company's common stock for the
previous 20 trading days discounted by 50%. The Secured Notes are secured by a
security interest in substantially all of the assets of the Company.

                                       8
<PAGE>

                           RG GLOBAL LIFESTYLES, INC.
                   Notes to consolidated financial statements
                                   (unaudited)

In connection with the issuance of the Secured Notes, the Company evaluated the
terms and features of the conversion feature and the warrants and determined
that the instruments embodied certain derivative features that were not clearly
and closely related to the debt instrument. Thus, the conversion feature and
warrants did not meet the established criteria for equity classification under
Emerging Issues Task Force ("EITF") 00-19 "Accounting for Derivative Financial
Instruments Indexed to, and Potentially Settled in, a Company's Own Stock". On
the dates of issuance, the Company allocated the proceeds between the Secured
Notes, warrants and conversion feature. Since the fair value of the warrants and
conversion feature exceeded the carrying value of the Secured Notes, the Company
recorded $4,040,569 of additional expense during the period ended June 30, 2007.
The Company up until March 31, 2007, see discussion below, was amortizing the
discount of the Secured Notes of $2,000,000 over the term of the Secured Notes.
The conversion feature and warrants are being carried at their respective fair
values with changes in their values recorded in the statement of operations.

Upon issuance in June 2006, the Company valued the conversion feature liability
of the Secured Notes at $1,252,520 using the Black Scholes valuation method
based upon the following weighted average variables; a risk free interest rate
of 5.25%, an exercise price of $0.45, a volatility of 160%, and a remaining term
of 3.0 years.

Upon issuance in June 2006, the Company valued the 4,000,000 detached warrants
to purchase shares of the Company's common stock at $3,488,049 based upon the
Black Scholes method of valuation using the following weighted average
variables; risk free interest rate of 5.25%, an exercise price of $1.10, a
volatility of 150%, and an estimated remaining life of 7 years.

As of June 30, 2007, the fair value of the conversion feature liability related
to Secured Notes was $5,685,122. The Company valued the beneficial conversion
feature at June 30, 2007, using the Black Scholes method of valuation with the
following variables; a risk free interest rate of 5.25%, an exercise price of
$0.44, a volatility of 277%, and a remaining life of 2.09 years. The change in
the fair value of the derivative liability for the quarter ended June 30, 2007
was an increase of $377,184.

At June 30, 2007, the Company valued the warrants at $5,276,831 based upon the
Black Scholes method of valuation using the following variables; risk free
interest rate of 5.25%, an exercise price of $1.10, a volatility of 277%, and an
estimated remaining life of 5.9 years. The change in the fair value of the
warrant liability for the quarter ended June 30, 2007 was a decrease of
$1,319,269.

In January 2007, a dispute arose between the Company and the holders of the
Secured Notes, see Note 6 for additional information. The Company carries the
Secured Notes at their face value due to the dispute. In addition, the Company
has not recorded any potential penalty provision under the Secured Notes
attributable to the allegations of default based upon the Company's belief that
the holders of the Secured Notes violated the terms of the agreement and in
reliance upon the analysis of legal counsel to the Company regarding its
obligations under the Secured Notes.

                                       9
<PAGE>

                           RG GLOBAL LIFESTYLES, INC.
                   Notes to consolidated financial statements
                                   (unaudited)

NOTE 4 - STOCKHOLDERS' EQUITY

See Notes 3 and 5 for discussion of shares of common stock issued during the
period ended June 30, 2007. There were no issuances of common stock by the
Company during the period ended June 30, 2006.

NOTE 5 - OPTIONS AND WARRANTS

OPTIONS
-------

STOCK OPTION PLANS

On May 3, 2006, the Company's Board of Directors adopted the 2006 Incentive and
Non-statutory Stock Option Plan ("2006 Plan") for issuance of stock options to
employees and others. Under the 2006 Plan, the Company reserved 10,000,000
shares for issuance. As of June 30, 2007, there were 42,400 options available
for issuance under the 2006 Plan.

On December 26, 2006, the Board of Directors authorized the issuance of up to
6,000,000 options under its 2007 Incentive and Non-statutory Stock Option Plan
("2007 Plan"). The 2007 Plan has not yet been approved by a vote of the
shareholders of the Company. As of June 30, 2007, there were 745,200 options
available for issuance under the 2007 Plan.

Compensation expense recorded during the quarter ended June 30, 2007 was
$776,030 under the above plans, of which $618,806 was stock-based compensation
to employees and $157,224 was stock-based compensation to consultants. The
Company accounts for options issued to consultants under EITF 96-18 and revalues
these options at each quarter end. At June 30, 2007, the options were valued
based upon the Black Scholes method of valuation using the following estimates:
5.25 % risk free rate, 277% volatility, and an expected life of approximately
five years.

The following is a summary of activity of outstanding stock options:

                                                            Number
                                                          of Shares
                                                       ---------------

Balance, March 31, 2007                                    13,851,230
 Options granted                                                    -
 Options exercised                                           (419,500)
 Options cancelled or forfeited                            (5,120,500)
                                                       ---------------
Balance, June 30, 2007                                      8,311,230
                                                       ===============

                                       10
<PAGE>

                           RG GLOBAL LIFESTYLES, INC.
                   Notes to consolidated financial statements
                                   (unaudited)

EXERCISES AND SIGNIFICANT CANCELLATIONS OF STOCK OPTIONS

During the quarter ended June 30, 2007, two consultants exercised a total of
107,000 options vested under the 2006 Plan. In addition, an officer exercised
312,500 options vested under the 2006 Plan. One consultant paid for the exercise
of his options by foregoing payment of an outstanding invoice for legal services
in the amount of $8,400. The other consultant has yet to remit the $13,000 due
under the exercise. The officer paid for a portion of the exercise of his
312,500 options by reducing net accrued salary payable by $26,745, leaving
$35,755 payable to the Company. As of June 30, 2007, the Company recorded a
subscription receivable in the amount of $48,755 attributable to the remaining
amounts due in connection with exercise of the options. On August 13, 2007, this
subscription receivable was reduced by $35,755 through a payment received from
the officer.

On April 24, 2007, the Company's Chief Executive Officer passed away. In
accordance with the 2006 and 2007 Plans, the unvested options of 3,924,500
expired during the period. Vested options under the 2006 and 2007 Plan will
expire under their initial term of five years. During the three months ended
June 30, 2007, a consultant terminated his employment. As of June 30, 2007, the
Company has not cancelled the vested portion of his options for approximately
247,000 shares of common stock.

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

WARRANTS

On October 11, 2006, the Company issued 300,000 warrants at an exercise price of
$0.47 to a consultant for services. One third of the warrants were vested upon
issuance, the remaining 200,000 warrants vest over the period of two years.
During the quarter ended June 30, 2007, the Company recorded total compensation
expense of $17,700. The Company accounts for this agreement under EITF 96-18 and
revalues these warrants at each quarter end. At June 30, 2007, the warrants were
valued based upon the Black Scholes method of valuation using the following
estimates: 5.25 % risk free rate, 277 % volatility, and an expected life of five
years.

The following is a summary of activity of outstanding common stock warrants:

                                                         Number
                                                       Of Shares
                                                    -----------------

Balance, March 31, 2007                                   15,403,940
 Warrants granted                                                  -
 Warrants exercised                                                -
                                                    -----------------
Balance, June 30, 2007                                    15,403,940
                                                    =================

                                       11
<PAGE>

                           RG GLOBAL LIFESTYLES, INC.
                   Notes to consolidated financial statements
                                   (unaudited)

NOTE 6 - COMMITMENTS AND CONTINGENCIES

LEGAL PROCEEDINGS

On July 3, 2007, the Company and its subsidiary Aquair entered into a settlement
agreement with plaintiff Atmospheric Water Technologies, Inc. in the Orange
County Superior Court Case No. 05CC09548. Under the terms of the settlement, (i)
all parties will be released from liability, (ii) the Company and Aquair, as
well as the Company's late Chairman and CEO Louis Knickerbocker, will be
dismissed with prejudice from the lawsuit, (iii) plaintiff will issue a press
release announcing the dismissal of the case, and (iv) the Company, through its
insurer, will pay $15,000 to plaintiff.

The Company's ongoing litigation with it previous investors the NIR Group has
been remanded back to the New York Supreme Court, from the federal district
court, and is now titled AJW Partners LLC, AJW Offshore Ltd, AJW Qualified
Partners LLC, and New Millenium Capital Partners II LLC v. RG Global Lifestyles,
Inc. and Louis Knickerbocker, and is Case No. 600323/07. Recently, however,
plaintiffs agreed to voluntarily dismiss Louis Knickerbocker without prejudice
(therefore the caption will change upon the next round of pleadings).
Additionally, the parties have agreed to informally stay the proceeding for
thirty (30) days pending resolution of the Company's claim for $3 million in
insurance proceeds from its "key man" life insurance policy with AIG American
General it owned and is the beneficiary of.

Other than the foregoing lawsuits, the Company is not aware of any litigation,
either pending or threatened.

WATER TREATMENT CONTRACTS

On May 29, 2007, the Company received its second progress payment of $450,000
from a customer in connection with its pending engineering, equipment sale and
installation contract with the customer. In accordance with the Company's
revenue recognition policy, the Company has recorded the revenue on the basis of
a percentage completion of the pending contract. As of June 30, 2007, payments
received in excess of revenues recorded (deferred revenue) under this contract
was $356,804.

In June 2007, the Company entered into contract with Yates Petroleum Corporation
("YPC") to engineer, design, and install a water treatment system ("System") of
Coal Bed Methane ("CBM") produced water provided by YPC. The Company will own
and operate the System and regeneration waste pond. The term of the contract is
for 60 months from the start of the first billing cycle. The Company received an
initial deposit of $25,000 from YPC and has recorded such as deferred revenue.
YPC is responsible for constructing the inflow pond and will receive a credit
from the Company of $50,000 each month for the first three months. In addition,
YPC will receive credits on current billings for future repairs and maintenance
to the inflow pond. The base rate under the contract is $0.125 per barrel (42 US
gallons) of water discharged by the System up to the maximum load.

                                       12
<PAGE>

                           RG GLOBAL LIFESTYLES, INC.
                   Notes to consolidated financial statements
                                   (unaudited)

OC ENERGY DISTRIBUTIONS CONTRACTS

The Company has entered into various agreements with distributors for the
distribution of is OC Energy Drink products. Some of these agreements include
clauses where by the distributor has the exclusive right to distribute the
Company's products to for a particular area.

NOTE 7 - SEGMENT REPORTING AND CONCENTRATIONS

Currently the Company generates all of its revenues, and incurred all of its
expenses from the sale of OC Energy products and from construction projects
related to water treatment technology. A summary of revenues generated by
segment for the quarter ended June 30, 2007, is as follows:


                                                         2007
                                                  ------------------

   Water treatment segment                        $         209,159
   OC energy drink segment                                   78,048
                                                  ------------------
      Total                                       $         287,207
                                                  ==================

A summary of operating loss by segment for the quarter ended June 30, 2007, is
as follows:

                                                         2007
                                                  -----------------

   Water treatment segment                        $       (161,119)
   OC energy drink segment                                 (92,067)
   Corporate segment                                    (1,099,099)
                                                  -----------------
   Total                                          $     (1,352,285)
                                                  =================

The assets related to the OC Energy segment are insignificant and thus have not
been presented. During the quarter ended June 30, 2007, sales to a single
customer were 100% of total sales for both the OC Energy Drink sales and
revenues related to water-treatment technology.

NOTE 8 - RELATED PARTY TRANSACTIONS

Effective April 1, 2006, the Company entered into an agreement with a company
wholly owned by the former Chief Executive Officer of the Company for the
subleasing of office space and administrative support services. During the
quarters ended June 30, 2007 and 2006, payments to this related party for these
services were $18,046 and $41,800, respectively. The agreement was cancelled
effective June 1, 2007.

During the quarter ended June 30, 2007, the Company accrued interest payable of
$2,752 to a director of the Company on the unpaid portion of a note payable, see
Note 4.

                                       13
<PAGE>

                           RG GLOBAL LIFESTYLES, INC.
                   Notes to consolidated financial statements
                                   (unaudited)

During the quarter ended June 30, 2007, an officer, who is also a director of
the Company, exercised 312,500 of vested options granted to him under the
Company's 2006 Plan, see Note 5 for additional information.

NOTE 9 - SUBSEQUENT EVENT

On August 13, 2007, an officer and director of the Company paid the balance of
his subscription receivable to the Company for exercise of 312,500 options.




                                       14
<PAGE>

                           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:

     o    Increased competitive pressures from existing competitors and new
          entrants;
     o    Deterioration in general or regional economic conditions; Adverse
          state or federal legislation or regulation that increases the costs of
          compliance, or
     o    adverse findings by a regulator with respect to existing operations;
          Ability to grow business in its relatively new OC Energy Drink product
          lines and CFS products and services and meet or exceed its return on
          shareholders' equity target, which will depend on
     o    the Company's ability to manage its capital needs and the effect of
          business and/or acquisitions;
     o    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 o foreign laws;
     o    Loss of customers or sales weakness;
     o    Inability to achieve future sales levels or other operating results;
          Ability to locate suitable new products for distribution within our
          business sector, and retain
     o    licensing rights to such new products on acceptable terms;
     o    The continuation of favorable trends, including the drop in affordable
          potable water globally;
     o    Outcomes and costs associated with litigation and potential compliance
          matters; Inadequacies in the Company's internal control over financial
          reporting, which could result in
     o    inaccurate or incomplete financial reporting;
     o    Dilution to Shareholders from convertible debt or equity financings;
     o    Loss of key management or other unanticipated personnel changes;
     o    The unavailability of funds for capital expenditures; and o
          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, 2007, and those of its predecessor, the L.L. Knickerbocker Company,
Inc., and notes thereto.

                                       15
<PAGE>

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

You should read the following discussion and analysis of our financial condition
and results of operations together with "Selected Financial Data" and our
financial statements and related notes appearing elsewhere in this quarterly
report. This discussion and analysis contains forward-looking statements that
involve risks, uncertainties, and assumptions. The actual results may differ
materially from those anticipated in these forward-looking statements as a
result of certain factors, including, but not limited to, those presented under
"Risk Factors" on page 21 and elsewhere in this quarterly report.

OVERVIEW

OC ENERGY DRINKS
----------------

The Company has launched it line of "OC ENERGY" caffeinated energy drinks and
oxygenated water fashioned for the Orange County lifestyle. Presently there are
three Energy Drinks and one Highly Oxygenated Water. The Energy Drinks consist
of a 2-oz high-powered "shot" energy drink ("Insane"), a 10-oz energy drink
("KIK-IT") and a 10-oz diet energy drink ("KIK-IT Diet") in addition to a 17-oz
("O2") bottle of 100% pure oxygenated structured water. Befitting the OC
lifestyle, the energy drinks are low in natural sugar and high in vitamins and
minerals. The bottles are custom-designed. Sales of the products have commenced
in the first fiscal quarter of 2008.

CFS TECHNOLOGY
--------------

CFS sells and/or leases, and provides professional support of its proprietary
wastewater treatment technology ("CFS Technology") for the reclamation of
wastewater associated with the production of methane in coal bed applications.
The technology removes sodium and other pollutants from such wastewater allowing
it to be returned to the environment within compliance regulations. The
successful removal of the treated wastewater in turn allows energy companies to
harvest and sell methane associated with coal beds.

In March 2007, the Company entered into an agreement for the construction, sale
and support of a plant utilizing its CFS Technology with Black Diamond Energy.

On June 22, 2007, the Company entered into an agreement with Yates Petroleum
Corporation on a "build, own, operate" model whereby the Company will construct,
own and operate a plant using the CFS Technology and charge a royalty on a per
barrel basis of reclaimed water.

The Company is currently pursuing additional energy companies in Wyoming, and
other locations, for the lease or sale, construction, use and/or support of the
CFS Technology and anticipates executing definitive agreements.

ATMOSPHERIC PURE WATER GENERATORS
---------------------------------

Aquair plans to distribute licensed environmentally-friendly water generating
equipment that creates purified drinking water from air for residential and
commercial uses, and converts brackish, polluted, or grey water to purified
water.

Aquair has acquired the rights to market and distribute water generators that
precipitate drinking water from air. The various water generating machines have
been tested in various locations. As of April 2007, the Company has sold limited
amounts of units to customers in the U.S. and Asia, and anticipates further
sales to those regions and Australia, however the Company is currently
dedicating less resources towards the sales of atmospheric water generators as
in the past, as it is focusing on sales and marketing OC Energy Drinks and CFS
Technology projects.

MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF
OPERATIONS

RESULTS OF OPERATIONS FOR THE QUARTER ENDED JUNE 30, 2007 AND 2006.

The following discussion compares results of continuing operations of the
Company only during the periods described.

                                       16
<PAGE>

                                                    Three Months Ended June 30
                                                       2007            2006
                                                   ------------    ------------
INCOME STATEMENT DATA
---------------------
Revenue                                            $   287,207     $       425
Gross profit (loss)                                $    26,471     $    (5,503)
Loss from operations                               $(1,352,285)    $(1,210,134)
Net loss                                           $(1,841,970)    $(5,839,857)
Net loss per weighted average common share         $     (0.07)    $     (0.33)

BALANCE SHEET DATA
------------------
Total assets                                       $  5,404,962    $   935,273
Total liabilities                                  $ 14,139,397    $ 6,305,965
Stockholders' deficit                              $ (8,734,435)   $(5,370,692)


REVENUES

For the quarter ended June 30                              Increase/(decrease)
                                      2007        2006         $          %
---------------------------------- ----------   ---------  ----------  --------
Revenues                           $ 287,207    $425       $286,782    67,478.1%

During the quarter ended June 30, 2007, the Company's primary source of revenues
was sales of its water treatment technology which accounted for $209,159 of
total revenues. During the quarter ended June 30, 2006, the Company's primary
source of revenues was sales of air to water generating equipment, which
accounted for $425 or 100% of revenues. The increase in revenues related to the
commencement of sales of water treatment technology and the commencement of
sales of the Company's energy drink products.

GROSS PROFIT (LOSS)

For the quarter ended June 30                               Increase/(decrease)
                                      2007        2006          $          %
---------------------------------- ----------   ---------   ----------  --------
Gross profit (loss)                $26,471      $(5,503)     $31,974     581.0%

During the quarter ended June 30 2007, a significant portion of the cost of
revenues related to sales of water treatment technology and production costs
related to the manufacture of energy drink products. During the quarter ended
June 30, 2006, the Company's cost revenues consisted of costs related to freight
costs for shipments of air to water generating equipment.

TOTAL OPERATING EXPENSES

For the quarter ended June 30                               Increase/(decrease)
                                      2007        2006          $          %
---------------------------------- ----------   ---------   ----------  --------
Total Operating Expenses           $1,378,756  $1,204,631   $174,125    14.5%

Our total operating expenses include personnel costs, product marketing and
sales costs, the costs of corporate functions, accounting, transaction costs,
legal, public company, information systems and non-cash stock-based
compensation.

For both periods, we incurred expenses for general management, and legal and
accounting fees related to continuing operations. For the quarter ended June 30,
2007, the Company expended $18,046 in rent paid to a then-related party, and
paid $172,806 in legal and accounting fees, compared to $41,800 and $80,330
respectively for these expenses in the quarter ended June 30, 2006.

                                       17
<PAGE>
<TABLE>
<S>     <C>

OTHER INCOME (EXPENSE)

For the quarter ended June 30                                      Increase/(decrease)
                                        2007            2006            $              %
----------------------------------  ------------    ------------   ------------    ----------
Other Income (Expense)              $(489,685)      $(4,629,723)   $(4,140,038)      (89.4%)

</TABLE>

The change in other income (expense) during the quarter ended June 30, 2007, was
directly attributed to a change in the fair value of derivative liability
related to convertible notes. In the quarter ended June 30, 2006, other income
(expense) included a one-time charge for interest and financing charges related
to convertible notes in the amount of $4,040,569.

LIQUIDITY AND CAPITAL RESOURCES

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

Our principal sources of liquidity consist of cash and cash equivalents, cash
generated from product sales and construction contracts, and the issuance of
equity and/or debt securities. In addition to funding operations, our principal
short-term and long-term liquidity needs have been, and are expected to be, the
debt service requirements of our notes payable, capital expenditures and general
corporate expenses. In addition, as our sales and operations ramp up, we
anticipate significant purchases of equipment for the construction of plants
utilizing the CFS Technology and possibly for purchase of OC Energy drinks from
our bottler for wholesale to the distribution and retail channels. As of June
30, 2007, we had cash and cash equivalents of $473,536 and notes payable
outstanding of $2,297,848.

We believe that our existing sources of liquidity, along with cash expected to
be generated from product sales and construction contracts, will be sufficient
to fund our operations, anticipated capital expenditures, working capital and
other financing requirements through December 2007. However, we will need to
continue a focused program of capital expenditures to effectuate our CFS
Technology project constructions and OC Energy drink production capacity
expansion. In order to fund capital expenditures or increase our working capital
above our current plan, or complete any acquisitions, we may seek to obtain
additional debt or equity financing. We may also need to seek to obtain
additional debt or equity financing if we experience downturns or cyclical
fluctuations in our business that are more severe or longer than anticipated, or
if we fail to achieve anticipated revenue, experience significant increases in
the costs associated with products sales, or if we engage in additional
strategic transactions. However, we cannot assure you that such financing will
be available to us on favorable terms, or at all. If, after utilizing the
existing sources of capital available to the Company, further capital needs are
identified and the Company is not successful in obtaining the financing, it may
be forced to curtail its existing or planned future operations.

During the quarter ended June 30, 2007, we funded operations through existing
cash on hand, cash receipts related to sales of our water treatment technology,
sales of our energy drink products and through reduction of various expenditures
including the deferral of payroll to certain members of management.

OPERATING ACTIVITIES

Operating cash flows used during the quarter ended June 30, 2007, reflect our
net loss of ($1,841,970) and increased working capital requirements, partially
offset by non-cash charges (depreciation, amortization of intangible assets,
stock-based compensation, non-cash interest expense including the amortization
of debt discounts, changes in operating assets and liabilities, and the change
in the fair value of derivative instruments) of approximately $1,351,434.

                                       18
<PAGE>

Operating cash flows used during the quarter ended June 30, 2006, reflect our
net loss of ($5,840,647) and increased working capital requirements, partially
offset by non-cash charges related to the changes in operating assets and
liabilities and amortization of debt discounts of approximately $5,328,820.

INVESTING ACTIVITIES

Investing cash flows using during the quarter ended June 30, 2007, reflect
($23,101) of cash used for purchase of fixed assets and other assets.

FINANCING ACTIVITIES

Financing cash flows provided during the quarter ended June 30, 2007, reflect
proceeds from exercise of stock options of $26,745.

CRITICAL ACCOUNTING POLICIES

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

The methods, estimates, and judgment we use in applying our most critical
accounting policies have a significant impact on the results we report in our
financial statements. The SEC has defined "critical accounting policies" as
those accounting policies that are most important to the portrayal of our
financial condition and results, and require us to make our most difficult and
subjective judgments, often as a result of the need to make estimates of matters
that are inherently uncertain. Based upon this definition, our most critical
estimates are described below under the heading "Revenue Recognition." We also
have other key accounting estimates and policies, but we believe that these
other policies either do not generally require us to make estimates and
judgments that are as difficult or as subjective, or it is less likely that they
would have a material impact on our reported results of operations for a given
period. For additional information see Note 1, "Summary of Organization and
Significant Accounting Policies" in the notes to our audited financial
statements appearing elsewhere in this report. Although we believe that our
estimates and assumptions are reasonable, they are based upon information
presently available, and actual results may differ significantly from these
estimates.

IMPAIRMENT OF LONG-LIVED AND INTANGIBLE ASSETS

The Company has adopted Statement of Financial Accounting Standards ("SFAS") No.
144 ("SFAS 144"). The Statement requires that long-lived assets and certain
identifiable intangibles held and used by the Company be reviewed for impairment
whenever events or changes in circumstances indicate that the carrying amount of
an asset may not be recoverable. Events relating to recoverability may include
significant unfavorable changes in business conditions, recurring losses, or a
forecasted inability to achieve break-even operating results over an extended
period. The Company evaluates the recoverability of long-lived assets based upon
forecasted undercounted cash flows. Should impairment in value be indicated, the
carrying value of intangible assets will be adjusted, based on estimates of
future discounted cash flows resulting from the use and ultimate disposition of
the asset. SFAS No. 144 also requires assets to be disposed of be reported at
the lower of the carrying amount or the fair value less costs to sell.

REVENUE RECOGNITION

Product sales - For revenue from product sales, the Company recognizes revenue
in accordance with Staff Accounting Bulletin No. 104, Revenue Recognition
("SAB104"), which superseded Staff Accounting Bulletin No. 101, Revenue
Recognition in Financial Statements ("SAB101"). SAB 101 requires that four basic
criteria must be met before revenue can be recognized: (1) persuasive evidence
of an arrangement exists; (2) delivery has occurred; (3) the selling price is
fixed and determinable; and (4) collectibility is reasonably assured.
Determination of criteria (3) and (4) are based on management's judgments
regarding the fixed nature of the selling prices of the products delivered and
the collectibility of those amounts. Provisions for discounts and rebates to
customers, estimated returns and allowances, and other adjustments are provided
for in the same period the related sales are recorded.

                                       19
<PAGE>

Construction contracts - In accordance with Statement of Position 81-1
"Accounting for Performance of Construction-Type and Certain Production-Type
Contracts", the Company uses the percentage completion method for the
recognition of revenue received in connection with it's engineering, equipment
sale and installation contracts. In making the estimate of the percentage of
revenue to recognize, the Company compares costs to the total projected cost of
the contract. Accordingly, the Company recognizes that portion of the revenue
and record the balance of the cash received as deferred revenues, which is
included within accrued liabilities on the accompanying balance sheet.

STOCK-BASED COMPENSATION

On December 16, 2004, the FASB published Statement of Financial Accounting
Standards No. 123 (Revised 2004), "Share-Based Payment" ("SFAS 123R"). SFAS 123R
requires that compensation cost related to share-based payment transactions be
recognized in the financial statements. Share-based payment transactions within
the scope of SFAS 123R include stock options, restricted stock plans,
performance-based awards, stock appreciation rights, and employee share purchase
plans. The provisions of SFAS 123R were effective as of the first interim period
that begins after December 15, 2005.

The Company has adopted SFAS 123R, which requires disclosure of the fair value
and other characteristics of stock options, and SFAS 148 "Accounting for
Stock-Based Compensation -- Transition and Disclosure," which requires more
prominent disclosure about the effects of an entity's accounting policy
decisions with respect to stock-based compensation on reported net loss. The
Company has reflected the expense of such stock based compensation based on the
fair value at the grant date for awards consistent with the provisions of SFAS
No. 123R. There were no options issued to employees as of March 31, 2006, all
other options and warrants had been accounted for at fair value using the Black
Scholes valuation model. Thus, the impact of adopting SFAS 123R was immaterial
to the Company's financial statements.

In connection with the adoption of SFAS 123R, we estimate the fair value of our
share-based compensation utilizing the Black-Scholes pricing model. The fair
value of the options granted is amortized as compensation expense on a straight
line basis over the requisite service period of the award, which is generally
the vesting period. The fair value calculations involve significant judgments,
assumptions, estimates and complexities that impact the amount of compensation
expense to be recorded in current and future periods. The factors include: (1)
The time period our stock-based compensation awards are expected to remain
outstanding based upon the average of the original award period and the
remaining vesting period in accordance with SEC Staff Accounting Bulletin 107
simplified method. Our Company's stock trading history has been relatively short
(since January 2005). Our expected term assumption for awards issued during the
year ended March 31, 2007 was five years. As additional evidence develops from
our stock's trading history, the expected term assumption will be refined to
capture the relevant trends. (2) The future volatility of our stock has been
estimated based upon our entire trading history from inception to the reporting
date. (3) A dividend yield of zero has been assumed for awards issued during the
quarter ended June 30, 2007 based upon our actual past experience and the fact
that we do not anticipate paying a dividend on our shares in the near future.
(4) We have based our risk-free interest rate assumption for awards issued
during the quarter June 30, 2007 based upon the weighted-average yield of 5.25%
available on US Treasury debt instruments with an equivalent expected term. (5)
Forfeiture rates for awards issued during these periods have not yet been
estimated as the Company has only recently issued share based awards and no
forfeiture data has been available to the Company as a result.

The Company's accounting policy for equity instruments issued to consultants and
vendors in exchange for goods and services follows the provisions of Emerging
Issues Task Force ("EITF") 96-18, "Accounting for Equity Instruments That are
Issued to Other Than Employees for Acquiring, or in Conjunction with Selling,
Goods or Services". The measurement date for the fair value of the equity
instruments issued is determined at the earlier of (i) the date at which a
commitment for performance by the consultant or vendor is reached or (ii) the
date at which the consultant or vendor's performance is complete. In the case of
equity instruments issued to consultants, the fair value of the equity
instrument is recognized over the term of the consulting agreement.

                                       20
<PAGE>

RECENT ACCOUNTING PRONOUNCEMENTS

In June 2006, the FASB issued Interpretation No. 48, "Accounting for Uncertainty
in Income Taxes, an interpretation of FASB Statement 109" ("FIN 48"). FIN 48
prescribes a recognition threshold and measurement attribute for the financial
statement recognition and measurement of a tax position taken or expected to be
taken in a tax return. FIN 48 is effective for fiscal years beginning in years
beginning after December 15, 2006. The adoption of FIN 48 did not have a
significant impact on the consolidated financial statements.

In September 2006, the FASB issued SFAS No. 157, "Fair Value Measurements"
("SFAS 157"). SFAS 157 provides accounting guidance on the definition of fair
value and establishes a framework for measuring fair value and requires expanded
disclosures about fair value measurements. SFAS 157 is effective for financial
statements issued for fiscal years beginning after November 15, 2007. We plan to
adopt the provisions of SFAS 157 on April 1, 2008 and we are currently assessing
the impact of the adoption of SFAS 157 on our results of operations and
financial condition.

In February 2007, the FASB issued SFAS No. 159, "The Fair Value Option for
Financial Assets and Financial Liabilities--Including an amendment of FASB
Statement No. 115" ("SFAS 159"). SFAS 159 permits entities to choose to measure
financial instruments and certain other items at fair value. The objective is to
improve financial reporting by providing entities with the opportunity to
mitigate volatility in reported earnings caused by measuring related assets and
liabilities differently without having to apply complex hedge accounting
provisions. SFAS 159 is effective for financial statements issued for fiscal
year beginning after November 15, 2007. We are currently assessing the impact of
adopting SFAS 159 on our results of operations and financial condition.

OFF-BALANCE SHEET ARRANGEMENTS

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

FACTORS THAT MAY AFFECT OUR RESULTS OF OPERATIONS

RISKS RELATING WITH OUR BUSINESS AND MARKETPLACE

Our business, financial condition and operating results can be impacted by a
number of factors, any of which could cause our actual results to vary
materially from recent results or from our anticipated future results. You
should carefully consider the following risk factors that may affect the
Company. The risks and uncertainties described below are those that we currently
deem to be material and that we believe are specific to our Company. If any of
these or other risks actually occur, our business, financial condition and
results of operations could be materially and adversely affected, which in turn
could materially and adversely affect the trading price of our common stock.

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.

THE COMPANY HAS REDIRECTED ITS BUSINESS PLAN AND IS FOCUSING ON OC ENERGY DRINKS
AND CFS TECHNOLOGY.

The Company has redirected its focus on its OC Energy drinks and CFS Technology,
and maintains a reduced focus on the sale of atmospheric water generators. While
management believes the potential for revenue growth remains better in its
current business plan, there can be no guarantees that the anticipated results
will occur.

                                       21
<PAGE>

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,
to support operations, 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.

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.

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.

OUR INDEPENDENT AUDITORS HAVE ISSUED A REPORT IN WHICH THEY EXPRESSED DOUBT
ABOUT OUR ABILITY TO CONTINUE AS A GOING CONCERN.

The report of our independent auditors on our financial statements for the
fiscal year ended March 31, 2007 contains an explanatory paragraph which
indicates that we have an accumulated deficit and loss from operations in that
year. This report states that, because of these issues, there may be a
substantial doubt about our ability to continue as a going concern. This report
and the existence of this accumulated deficit and loss from operations may make
it more difficult for us to raise additional debt or equity financing needed to
run our business and is not viewed favorably by investors. We urge potential
investors to review this report before making a decision to invest in us.

RISKS FACTORS RELATING TO OUR COMMON STOCK

IF THE SELLING STOCKHOLDERS ALL ELECT TO SELL THEIR SHARES OF OUR COMMON STOCK
AT THE SAME TIME, THE MARKET PRICE OF OUR SHARES MAY DECREASE.

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It is possible that the Selling Stockholders will offer all of the shares for
sale. Further because it is possible that a significant number of shares of our
Common Stock could be sold at the same time hereunder, the sales, or the
possibility thereof, may have a depressive effect on the market price for our
Common Stock. The closing price of our Common Stock on July 9, 2007 was $1.10.
Significant downward pressure on our stock price caused by the sale of stock
registered in this offering could encourage short sales by third parties that
would place further downward pressure on our stock price.

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:

     o    Deliver to the customer, and obtain a written receipt for, a
          disclosure document;
     o    Disclose certain price information about the stock;
     o    Disclose the amount of compensation received by the broker-dealer or
          any associated person of the broker-dealer;
     o    Send monthly statements to customers with market and price information
          about the penny stock; and
     o    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.

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.

WE DO NOT EXPECT TO PAY DIVIDENDS AND INVESTORS SHOULD NOT BUY OUR COMMON STOCK
EXPECTING TO RECEIVE DIVIDENDS.

We have never declared or paid any cash dividends on our Common Stock. We intend
to retain our earnings, if any, to finance the growth and development of our
business and therefore do not anticipate paying any cash dividends on our Common
Stock in the foreseeable future. Although dividends are not limited currently by
any agreements, it is anticipated that future agreements, if any, with
institutional lenders or others may limit our ability to pay dividends on our
Common Stock. Any future determination to pay cash dividends will be at the
discretion of our Board of Directors and will be dependent upon our financial
condition, results of operations, capital and legal requirements and such other
factors as our Board of Directors deems relevant.

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<PAGE>

SHARES OF OUR TOTAL OUTSTANDING COMMON STOCK THAT ARE RESTRICTED FROM IMMEDIATE
RESALE BUT MAY BE SOLD INTO THE MARKET IN THE FUTURE COULD CAUSE THE MARKET
PRICE OF OUR COMMON STOCK TO DROP SIGNIFICANTLY, EVEN IF OUR BUSINESS IS DOING
WELL.

As of June 30, 2007, we had 27,317,092 shares of Common Stock issued and
outstanding of which approximately 14,389,485 shares are restricted shares. Rule
144 provides, in essence, that a person holding "restricted securities" for a
period of one year may sell only an amount every three months equal to the
greater of (a) one percent of a company's issued and outstanding shares, or (b)
the average weekly volume of sales during the four calendar weeks preceding the
sale.

The amount of "restricted securities" which a person who is not an affiliate of
our company may sell is not so limited, since non-affiliates may sell without
volume limitation their shares held for two years if there is adequate current
public information available concerning our company. In such an event,
"restricted securities" would be eligible for sale to the public at an earlier
date. The sale in the public market of such shares of Common Stock may adversely
affect prevailing market prices of our Common Stock.

Item 3. Controls and Procedures

As required by SEC rules, the Company regularly evaluates the effectiveness of
disclosure controls and procedures and report its conclusions about the
effectiveness of the disclosure controls quarterly on our Forms 10-QSB and
annually on our Forms 10-KSB.

In the course of the quarter ended June 30, 2007, our chief executive officer
and chief financial officer concluded that our disclosure controls and
procedures were not effective in ensuring that material information relating to
the Company required to be disclosed by the Company in reports that it files or
submits under the Exchange Act is recorded, processed, summarized and reported
within the time periods specified in the SEC's rules and forms and that such
information is accumulated and communicated to management, including the chief
executive officer and the chief financial officer, as appropriate, to allow
timely decisions regarding required disclosure.

The Company's management has concluded that the consolidated financial
statements included in this report on Form 10-QSB for the quarter ended June 30,
2007 fairly state, in all material respects, the Company's financial condition,
results of operations and cash flows for the periods presented in conformity
with generally accepted accounting principles. The reason for this conclusion is
that the Company ascertained the errors associated with the presentation of the
financial information in the course of the review of its consolidated financial
statements for the quarter ended June 30, 2007.

PLAN FOR REMEDIATION OF MATERIAL WEAKNESSES

The Company's Audit Committee has met, reviewed the internal controls over
financial reporting and has made certain recommendations regarding the use of
qualified independent accounting consultants to assist in the review of
financial statements and the calculation and presentation of complex financial
transactions.

CHANGES IN INTERNAL CONTROLS

Changes in our internal controls are currently being designed and reviewed and
will be implemented on an ongoing basis.

LIMITATIONS ON THE EFFECTIVENESS OF CONTROLS

Our management, including our chief executive officer and chief financial
officer, does not expect that our disclosure controls and internal controls will
prevent all error and all fraud. A control system, no matter how well conceived
and operated, can provide only reasonable, and not absolute assurance that the
objectives of the control system are met. Further, the design of a control
system must reflect the fact that there are resource constraints, and the
benefits of controls must be considered relative to their costs. Due to the
inherent limitations in all control systems, no evaluation of controls can
provide absolute assurance that all control issues and instances of fraud, if
any, within the Company have been detected. These inherent limitations include
the realities that judgments in decision making can be faulty, and that
breakdowns can occur because of simple error or mistake. Additionally, controls
can be circumvented by the individual acts of some persons, by collusion of two
or more people, or by management override of the control.

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<PAGE>

The design of any system of controls is also based in part upon certain
assumptions about the likelihood of future events occurring. There can be no
assurance that any design will succeed in achieving its stated goals under all
potential future conditions; over time, a control may become inadequate because
of changes in conditions, or the degree of compliance with the policies or
procedures may deteriorate. Due to the inherent limitations in a cost-effective
control system, misstatements due to error or fraud may occur and not be
detected. Management of the Company is committed to continually review and
redesign its internal controls to ensure compliance by the Company with all
applicable rules and standards regarding disclosures and financial reporting.

                          PART II -- OTHER INFORMATION

ITEM 1. LEGAL PROCEEDINGS

On July 3, 2007, the Company and its subsidiary Aquair entered into a settlement
agreement with plaintiff Atmospheric Water Technologies, Inc. in the Orange
County Superior Court Case No. 05CC09548. Under the terms of the settlement, (i)
all parties will be released from liability, (ii) the Company and Aquair, as
well as the Company's late Chairman and CEO Louis Knickerbocker, will be
dismissed with prejudice from the lawsuit, (iii) plaintiff will issue a press
release announcing the dismissal of the case, and (iv) the Company, through its
insurer, will pay $15,000 to plaintiff.

The Company's ongoing litigation with it previous investors the NIR Group has
been remanded back to the New York Supreme Court, from the federal district
court, and is now titled AJW Partners LLC, AJW Offshore Ltd, AJW Qualified
Partners LLC, and New Millenium Capital Partners II LLC v. RG Global Lifestyles,
Inc. and Louis Knickerbocker, and is Case No. 600323/07. Recently, however,
plaintiffs agreed to voluntarily dismiss Louis Knickerbocker without prejudice
(therefore the caption will change upon the next round of pleadings).
Additionally, the parties have agreed to informally stay the proceeding for
thirty (30) days pending resolution of the Company's claim for $3 million in
insurance proceeds from its "key man" life insurance policy with AIG American
General it owned and is the beneficiary of.

Other than the foregoing lawsuits, the Company is not aware of any litigation,
either pending or threatened.

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<PAGE>

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

In April 2007, the Company entered into conversion and subscription agreements
with three individuals (accredited investors) who had received an assignment of
an aggregate of $175,000 of principal and interest thereon of a $300,000
promissory note which was due to be paid by the Company on March 31, 2007 to a
certain noteholder. In furtherance of these agreements, on April 19, 2007, the
assignees of the note agreed to cancel their respective assigned notes, and in
lieu of repayment, receive an aggregate of 875,000 shares of the Company's
restricted common stock, which represents a sale of restricted common stock at
$0.20 per share. The securities were sold to the three accredited investors in
reliance on Section 4(2) under the Securities Act of 1933, as amended.

ITEM 3. DEFAULTS UPON SENIOR SECURITIES

None.

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

None.

ITEM 5. OTHER INFORMATION

ITEM 6. EXHIBITS.

The following Exhibits are filed or incorporated by reference as part of this
Quarterly Report on Form 10-QSB:


EXHIBIT
NUMBER                           DESCRIPTION OF DOCUMENT
---------- ---------------------------------------------------------------------
31.1       Certification pursuant to Section 302 of the Sarbanes-Oxley Act
31.2       Certification pursuant to Section 302 of the Sarbanes-Oxley Act
32         Certifications pursuant to Section 906 of the Sarbanes-Oxley Act

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.

RG Global Lifestyles, Inc.


Signature                        Title                          Date
---------                        -----                          ----

/s/ Grant King
--------------
Grant King                        Chief Executive Officer       August 14, 2007


/s/ William C. Hitchcock
-------------------------
William C. Hitchcock             Chief Financial Officer        August 14, 2007


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