UNITED
      STATES


SECURITIES
      AND EXCHANGE COMMISSION


Washington,
      D.C. 20549





FORM
      10-Q





x QUARTERLY
      REPORT UNDER SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF
      1934


For
      the
      quarterly period ended June 30, 2008.





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





Commission
      File Number: 000-254888





RG
      GLOBAL LIFESTYLES, INC.


(Exact
      Name of issuer as specified in its charter)





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





1200
                N. Van Buren St., Suite A, Anaheim, CA
            
            92807(Address
                of principal executive offices)
            
            (Zip
                Code)





Issuer’s
      telephone number: (714) 630-1805





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





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





Large
      accelerated filer o         Accelerated
      filer o





Non-accelerated
      filer o   (Do
      not
      check if a smaller reporting company)  Smaller
      reporting company x





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


Yes o No x





As
      of
      June 30, 2008, there were 44,307,792 shares of the Registrant’s common stock
      issued and outstanding.





**INDEX**





**Page****PART
                I - FINANCIAL INFORMATION**Item
                1.
            Financial
                Statements
            3Consolidated
                Balance Sheets -June 30, 2008 and March 31, 2008
            3Consolidated
                Statements of Operations For
                the Three Months ended June 30, 2008 and 2007
            3Consolidated
                Statements of Cash Flows For
                the Three Months ended June 30, 2008 and 2007
            3Notes
                to Financial Statements
            6Item
                2.
            Management’s
                Discussion and Analysis of Financial Condition and Results
                of Operations
            13Item
                3.
            Quantitative
                and Qualitative Disclosures About Market Risk
            20Item
                4
            Controls
                and Procedures
            20**PART
                II - OTHER INFORMATION**Item
                1.
            Legal
                Proceedings
            21Item
                2.
            Unregistered
                Sales of Equity Securities and Use of Proceeds
            21Item
                3.
            Defaults
                Upon Senior Securities
            21Item
                4.
            Submission
                of Matters to a Vote of Security Holders
            21Item
                5.
            Other
                Information
            21Item
                6.
            Exhibits
            21SIGNATURES
            22




2


**PART
      I — FINANCIAL INFORMATION**





**Item
      1. Financial Statements**




**RG
        Global Lifestyles, Inc.**
 **Consolidated
        Balance Sheets**
 **(unaudited)**
 
 **As of June 30,**
              
              **As of March 31,****2008**
              
              **2008****Assets**Current
                  assets:Cash
                  and cash equivalents
              
              $
              1,036
              
              $
              12,319Accounts
                  receivable
              
              
              -
              
              
              6,087Inventory
              
              
              72,567
              
              
              86,864Federal
                  income tax refund receivable
              
              
              143,775
              
              
              143,775Prepaids
                  and other current assets
              
              
              37,045
              
              
              -Total
                  current assets
              
              
              254,423
              
              
              249,045Property
                  and equipment, net
              
              
              2,905,658
              
              
              3,060,884Intangible
                  assets, net
              
              
              4,112,843
              
              
              4,195,645Other
                  assets
              
              
              260,865
              
              
              252,613**Total
                  Assets**
              
              $
              7,533,789
              
              $
              7,758,187**Liabilities
                  and Stockholders' Equity**Current
                  liabilities:Accounts
                  payable
              
              $
              1,184,192
              
              $
              954,500Accrued
                  liabilities
              
              
              621,482
              
              
              459,273State
                  income taxes payable
              
              
              97,890
              
              
              97,890Convertible
                  notes payable
              
              
              725,185
              
              
              864,074Notes
                  payable - related party
              
              
              102,700
              
              
              102,700Notes
                  payable
              
              
              410,500
              
              
              410,500Total
                  current liabilities
              
              
              3,141,949
              
              
              2,888,937Asset
                  Retirement Obligation
              
              
              70,000
              
              
              70,000Total Liabilities
              
              
              3,211,949
              
              
              2,958,937Stockholders'
                EquityPreferred stock, $0.001 par value, 10,000,000 shares authorized,
                none
                issued and outstandingCommon
                  stock, $0.001 par value, 100,000,000 shares authorized, 44,307,792
                  issued,
                  42,876,329 outstanding as of June 30, 2008; 36,400,410 issued,
                  34,500,410
                  outstanding as of March 31, 2008
              
              
              42,877
              
              
              34,501Common
                  stock to be issued
              
              
              250,000
              
              
              2,113,904Additional
                  paid-in capital
              
              
              35,134,561
              
              
              32,159,232Accumulated
                  deficit
              
              
              (31,105,598
              )
              
              (29,508,387
              )Total Stockholders Equity
              
              
              4,321,840
              
              
              4,799,250**Total
                  Liabilities and Stockholders' Equity**
              
              $
              7,533,789
              
              $
              7,758,187
  The
        accompanying notes are an integral part of these financial
        statements.
  3
  **RG
        Global Lifestyles, Inc.**
 **Consolidated
        Statements of Operations**
 **(unaudited)**
 For****the****Three****Months****EndedJune
                    302008
                
                2007Revenue:Product
                    sales
                
                $
                29,618
                
                $
                78,048Water
                    treatment related
                
                
                90,419
                
                
                209,159Total
                    revenues
                
                
                120,037
                
                
                287,207Cost
                    of revenues:Product
                    sales
                
                
                29,435
                
                
                65,356Water
                    treatment related
                
                
                218,052
                
                
                195,380Total
                    cost of revenue
                
                
                247,487
                
                
                260,736Gross
                    profit (loss)
                
                
                (127,450
                )
                
                26,471Expenses:General
                    and administrative, including stock-based compensation of $560,888
                    and
                    $822,406 in 2008 and 2007, respectively
                
                
                1,216,709
                
                
                1,318,017Selling
                    and marketing
                
                
                32,920
                
                
                60,739Project
                    cost
                
                
                178,169
                
                
                -Total
                    expenses
                
                
                1,427,798
                
                
                1,378,756Operating
                    loss
                
                
                (1,555,248
                )
                
                (1,352,285
                )Other
                    income (expense):Interest
                    income
                
                
                -
                
                
                3,018Interest
                    income (expense) - related party
                
                
                -
                
                
                (2,752
                )Interest
                    expense
                
                
                (48,931
                )
                
                (189,536
                )Change
                    in fair value of derivative liabilities
                
                
                -
                
                
                942,085Fair
                    value of common stock issued in excess of notes notes payable
                    satisfied
                
                
                -
                
                
                (1,242,500
                )Other
                    income (expense)
                
                
                6,967
                
                
                -Total
                    other income (expense)
                
                
                (41,964
                )
                
                (489,685
                )Net
                    loss before provision for income taxes
                
                
                (1,597,212
                )
                
                (1,841,970
                )Provision
                    for income taxes
                
                
                -
                
                
                -Net
                    loss before minority interest
                
                
                (1,597,212
                )
                
                (1,841,970
                )Minority
                    interest
                
                
                -
                
                
                -Net
                    loss
                
                $
                (1,597,212
                )
                $
                (1,841,970
                )Weighted
                    average number of common shares:Basic
                
                
                43,142,043
                
                
                26,557,323Diluted
                
                
                43,142,043
                
                
                26,557,323Net
                    loss per share:Basic
                
                $
                (0.04
                )
                $
                (0.07
                )Diluted
                
                $
                (0.04
                )
                $
                (0.07
                )
 The
          accompanying notes are an integral part of these financial
          statements.
  4
 **RG
            Global Lifestyles, Inc.**
 **Consolidated
            Statements of Cash Flows**
 **(unaudited)**
 For****the****Three****Months****EndedJune
                    302008
                
                2007**Cash
                    flows from operating activities:**Net
                    loss
                
                $
                (1,597,212
                )
                $
                (1,841,970
                )Adjustments
                    to reconcile net loss tonet
                    cash used in operating activities:Amortization
                    of debt discounts related to beneficialconversion
                    features and warrants
                
                
                11,111
                
                
                149,589Change
                    in fair value of derivative liabilities
                
                
                -
                
                
                (942,085
                )Stock
                    issued for services
                
                
                127,179
                
                
                -Fair
                    value of common stock in excess of notes payable
                
                
                14,913
                
                
                1,242,500Depreciation
                    and amortization
                
                
                238,028
                
                
                79,024Stock-based
                    compensation
                
                
                433,708
                
                
                822,406Accounts
                    receivable
                
                
                6,087
                
                
                -Inventory
                
                
                14,297
                
                
                -Prepaid
                    expenses
                
                
                (37,044
                )
                
                122,011Accounts
                    payable
                
                
                229,693
                
                
                68,617Accrued
                    liabilities
                
                
                162,209
                
                
                265,841Deferred
                    revenues
                
                
                -
                
                
                1,681Net
                    cash used in operating activities
                
                
                (397,031
                )
                
                (32,386
                )**Cash
                    flows from investing activities:**Purchase
                    of fixed assets
                
                
                -
                
                
                (2,871
                )Other
                    assets
                
                
                (8,252
                )
                
                (20,230
                )Net
                    cash used in investing activities
                
                
                (8,252
                )
                
                (23,101
                )**Cash
                    flows from financing activities:**Cash
                    received for stock to be issued
                
                
                250,000
                
                
                -Proceeds
                    from issuing stock for cash
                
                
                144,000
                
                
                -Proceeds
                    from exercise of stock options
                
                
                -
                
                
                26,745Net
                    cash provided by financing activities
                
                
                394,000
                
                
                26,745Net
                    decrease in cash
                
                
                (11,283
                )
                
                (28,742
                )Cash
                    - beginning of period
                
                
                12,319
                
                
                502,278Cash
                    - ending of period
                
                $
                1,036
                
                $
                473,536**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 payableand
                    accrued interest
                
                $
                164,913
                
                $
                175,000
 The
          accompanying notes are an integral part of these financial
          statements.
  5





**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, 2008
      included in the Company's annual report on Form 10-KSB. The Company follows
      the
      same accounting policies in the preparation of interim reports. The financial
      statements for the three months ended June 30, 2008, are not necessarily
      indicative of the results expected for the full year.





**Estimates**





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





**Concentrations**





*Customers*


During
      the quarter ended June 30, 2008, 100% of water treatment revenues and 75% of
      all
      revenues were generated from one customer. The loss of this customer could
      have
      a significant impact on the Company’s financial statements.





*Vendors*


During
      the quarter ended June 30, 2008, 50% of the equipment for used to generate
      water
      treatment revenues was manufactured by one vendor. The loss of this vendor
      could
      have a significant impact on the Company’s financial statements.





**Inventory**




At
      June
      30, 2008, the Company had inventory consisting of chemicals, flavorings, and
      bottles related to the OC Energy Drink, Inc. segment of the Company. Inventory
      valued at cost in the amount of $72,567. Inventory is recorded at lower of
      cost
      (first-in, first-out) or net realizable market value.





**Net
      Loss Per Share**




Net
      loss
      per share is provided in accordance with 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 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, 2008 and 2007:




6




**RG
        GLOBAL LIFESTYLES, INC.**
 **NOTES
        TO CONSOLIDATED FINANCIAL STATEMENTS**
 (unaudited)




2008
            
            2007Common
                stock options
            
            
            7,903,579
            
            
            8,311,230Common
                stock warrants
            
            
            15,950,440
            
            
            15,403,940Secured
                convertible notes
            
            
            -
            
            
            4,412,232Totals
            
            
            23,854,019
            
            
            28,127,402





**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 financial statements,
      the Company during the quarter ended June 30, 2008 incurred an operating loss
      before income taxes of $1,597,212 and used cash from operations of $397,031.
      As
      of June 30, 2008, the Company had a working capital deficit of $2,887,526.
      These
      conditions raise substantial doubt about the Company's ability to continue
      as a
      going concern.





The
      future of the Company is dependent upon its ability to obtain equity and/or
      debt
      financing and ultimately achieving profitable operations from the development
      of
      its new business opportunities. During the quarter ended June 30, 2008, the
      Company funded operations through equity offerings. The Company does not have
      any commitments or assurances for additional capital. In addition, if needed
      the
      Company would potentially sell it’s only existing water treatment plant and move
      to a more royalty based revenue stream to generate cash to continue operations.
      There can be no assurance that the revenue from the sale of the plant will
      be
      sufficient for the Company to achieve profitability in its operations, and
      it is
      possible that additional equity or debt financing may be required to continue
      as
      a going concern. Without such additional capital, there is some doubt as to
      whether the Company will continue as a going concern. The Company estimates
      the
      current cash reserves are expected to fund operations through the second quarter
      of fiscal 2008.





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.





**Note
      3 – Property and Equipment**





Property
      and equipment as of June 30, 2008 and March 31, 2008 consisted of the following:


June
                  30,
              
              March
                  312008
              
              2008Water
                  treatment plant
              
              $
              3,016,261
              
              $
              -Office
                  equipment, computersoftware,
                  and furniture and fixtures
              
              
              57,974
              
              
              57,974Construction
                  in progress
              
              
              -
              
              
              3,016,261Accumulated
                  depreciation
              
              
              (168,577
              )
              
              (13,351
              )Total
              
              $
              2,905,658
              
              $
              3,060,884




7


**RG
        GLOBAL LIFESTYLES, INC.**
 **NOTES
        TO CONSOLIDATED FINANCIAL STATEMENTS**
 (unaudited)




During
      the three months ended June 30, 2008 and 2007, the Company recorded depreciation
      expense of $154,690 and $1,002, respectively.





*Asset
      Retirement Obligation*





The
      Company recognizes asset retirement costs under SFAS 143 in the period in which
      they are incurred. Under a water treatment contract with a customer, the
      Company’s owns the building and equipment but does not own the land. At the term
      of the contract, the Company is required to return the land to its original
      condition. At June 30, 2008, the balance of the Company’s asset retirement
      obligation was $70,000.





**Note
      4 – Catalyx Technology**





The
      Company entered into a series of agreements with Catalyx Fluid Solutions, Inc.
      (“Catalyx”) pursuant to which the Company acquired certain technology, know-how,
      and patent rights related to water treatment for use in the oil and gas
      industry. In
      addition, per the terms of the acquisition agreement the initial $200,000 paid
      will be offset against future royalties of $0.01 per barrel of water treated
      and
      5% of equipment sold based on the Catalyx technology. Royalties earned by
      Catalyx during the three months ended June 30, 2008 were $4,566 and were offset
      against the prepaid.





During
      the three month period ended June 30, 2008 and 2007, the Company recorded
      amortization expense of $78,877 and $78,020, respectively.





**Note
      5 – Other Assets**





At
      June
      30, 2008, the Company had deposits with various vendors comprised of the
      following:


June
                  30,
              
              March
                  31,2008
              
              2008Rental
                  deposits
              
              $
              32,309
              
              $
              32,557Deposit
                  future Catalyx royalty
              
              
              195,434
              
              
              200,000Other
              
              
              33,122
              
              
              20,056$
              260,865
              
              $
              252,613




**Note
      6 – Notes Payable**





*2007
      Notes Payable*


On
      January 12, 2007, the company entered into a note agreement with an accredited
      investor for proceeds totaling $350,000. This note matured on January 12, 2008
      and is currently in default as the holder had demanded payment. In connection
      with the default, the interest rate increased to 11% per annum. As of June
      30,
      2008, accrued interest recorded in accrued liabilities related to this note
      was
      $45,193. See Note 9 for discussion of a lawsuit filed by holder of the note
      against the Company. See Note 9 for discussion of payment of accrued interest
      by
      Company in connection with the note.





*$600,000
      Promissory Note*


In
      connection with the settlement of the $2,000,000 secured convertible notes
      in
      fiscal 2008, the Company issued a $600,000 promissory note with an interest
      rate
      of 10%, with payments due in 12 equal $50,000 monthly payments commencing on
      March 3, 2008. In addition, the Company issued 2,000,000 shares of common stock
      to an escrow account in which secures the promissory note. The promissory note
      can be paid in cash or the Company’s common stock at the election of the
      Company. If paid in common stock, the common stock will be issued at a equal
      to
      $55,000 divided by the lesser of the weighted average price (“VWAP”) over the
      five days preceding the due date of payment or the day on which the note is
      transmitted to the escrow agent. If the VWAP is lower than $0.10 or the there
      are insufficient shares in escrow the Company cannot settle the monthly
      obligation in common shares.




8


**RG
        GLOBAL LIFESTYLES, INC.**
 **NOTES
        TO CONSOLIDATED FINANCIAL STATEMENTS**
 (unaudited)




Since
      the
      $600,000 promissory note does not incur interest the Company recorded a discount
      of $44,444 to the promissory notes. During the three months ended June 30,
      2008,
      the Company amortized $11,111 of the discount to interest expense. As of June
      30, 2008, the remaining discount was $24,815.





During
      the three months ended June 30, 2008, the Company issued 468,537 of common
      stock
      from the escrow account to satisfy payments for April, May and June 2008
      totaling $150,000. As of June 30, 2008, 1,431,463 shares of common stock are
      held in escrow.





*Note
      Payable to Vendor*


On
      January 29, 2008, the Company the issued a promissory note to a vendor in
      settlement of $780,500 in accounts payable. The vendor manufactured and
      installed the Company’s water treatment facility. The note bears interest at 10%
      per annum and is secured by the Company’s contract with Yates Petroleum
      Corporation and the equipment that was manufactured by the vendor. The note
      calls for an initial payment of $270,000 due on February 1, 2008 with monthly
      principal payments of $100,000 due each month until paid off. The balance due
      on
      this note at June 30, 2008 was $410,500 with accrued interest of $19,303. The
      Company did not make its April, May or June 2008 payment and is in default
      on
      this note.





**Note
      7 – Stockholders’ Deficit**





During
      the three months ended June 30, 2008, the Company sold 479,998 shares of common
      stock to accredited investors at a price of $0.30 per share for total net cash
      proceeds of $144,000. As of June 30, 2008, the Company has not issued 833,333
      shares of common stock related to subscriptions of $250,000. Thus, the proceeds
      received are recorded as “common stock to be issued” on the accompanying balance
      sheet. In addition, for each dollar invested the investor received a warrant
      to
      purchase one share of the Company’s common stock at an exercise price of $0.40
      per share. The warrants vest immediately and expire in five years. The warrants
      were valued at $164,628 based upon the Black Scholes valuation model using
      the
      following weighted average estimates: 3.34% risk free rate, 303% volatility,
      an
      expected life of five years and no dividends.





During
      the three months ended June 30, 2008, the Company issued 380,800 shares of
      common stock for services rendered by consultants and employees. The services
      related to general corporate duties and equipment purchased for the Yates plant.
      The Company valued the shares on the date of issuance as there were no future
      performance conditions. The shares were valued at $127,179 based on the closing
      market price of the Company’s common stock on the date of issuance.





During
      the three months ended June 30, 2008, the Company issued 468,537 shares of
      common stock for payment on notes payable due to the NIR Group. The shares
      were
      valued at $164,913 based on the closing market price of the Company’s common
      stock on the date of issuance which resulted in interest expense of $14,913.





See
      Notes
      6and 8 for discussion of common stock issuances and other items impacting
      stockholders’ deficit during the three month periods ending June 30, 2008 and
      2007.




9


**RG
        GLOBAL LIFESTYLES, INC.**
 **NOTES
        TO CONSOLIDATED FINANCIAL STATEMENTS**
 (unaudited)


**Note
      8 – Options and Warrants**





**Options**




On
      May 3,
      2006 and December 26, 2006, the Company’s Board of Directors adopted the 2006
      and 2007 Incentive and Non-statutory Stock Option Plan (“2006 Plan”) for
      issuance of stock options to employees and others. Compensation expense for
      these plans recorded during the three months ended June 30, 2008 and 2007 was
      $433,708 and $647,122, respectively.





The
      following is a summary of activity of outstanding stock option activity for
      the
      three months ended June 30, 2008:




Numberof
                SharesBalance,
                March 31, 2008
            
            
            7,903,579Options
                granted
            
            
            300,000Options
                exercised
            
            
            -Options
                cancelled or forfeited
            
            
            (300,000
            )Balance,
                June 30, 2008
            
            
            7,903,579





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**





Along
      every dollar received from an investor for the purchase of its common stock,
      the
      Company grants the investor a warrant to purchase an additional share of the
      Company’s common stock. The warrants, which have an exercise price of $0.40 per
      share and a vesting period of two to three years, have an expiration date of
      five years after the date of issuance. The following is a summary of activity
      of
      outstanding common stock warrants for the three months ended June 30,
      2008:





NumberOf
                SharesBalance,
                March 31, 2008
            
            
            17,163,344Warrants
                granted
            
            
            394,000Warrants
                exercised
            
            
            (1,606,904
            )Balance,
                June 30, 2008
            
            
            15,950,440





**Note
      9 – Commitments and Contingencies**





**Legal
      Proceedings**





On
      June
      11, 2008, the Company and Grant King was served a lawsuit from one of its note
      holders claiming that the Company defaulted on repayment on a note payable
      in
      the amount of $350,000 plus interest at 8%. The complaint asks for payment
      of
      these amounts plus damages. On August 12, 2008, the parties agreed to stipulated
      order whereby Grant King was dismissed from the lawsuit and the Company was
      granted a 90-day extension to respond to the complaint (until November 10,
      2008)
      in exchange the Company paid $49,530 which represents the interest due on the
      note through July 18, 2008. No amounts for damages have been accrued in the
      accompanying consolidated financial statement other than the note payable and
      accrued interest.




10


**RG
        GLOBAL LIFESTYLES, INC.**
 **NOTES
        TO CONSOLIDATED FINANCIAL STATEMENTS**
 (unaudited)


On
      July
      11, 2008, the Company received notice that one of the Company’s vendors used in
      the construction of the Company’s water treatment facility for Yates filed a
      lien against the project for past due amounts. As of June 30, 2008, the vendor
      is due $140,310, which is included in accounts payable.





**Water
      Treatment Contracts**





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





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 of operation. In
      addition, YPC will receive credits on current billings for future repairs and
      maintenance to the inflow pond of which there were none during the three month
      period ended June 30, 2008.





**Note
      10 – Segment Reporting and Concentrations**





The
      Company’s segments consist of the sale of energy drinks and the licensing of
      water treatment technology. Currently, the Company operates in a single
      geographical segment.





The
      following is a summary of revenues generated by segment for the three months
      ended June 30, 2008 and 2007:




Water
                  treatment revenues:
              
              $
              29,618
              
              $
              78,048Energy
                  drink sales:
              
              
              90,419
              
              
              209,159Total
              
              $
              120,037
              
              $
              287,207





During
      the three months ended June 30, 2008 and 2007, one customer accounted for 100%
      of water treatment revenues.





A
      summary
      of operating loss by segment for the quarter ended June 30, 2008 and 2007 is
      as
      follows:





Water
                treatment segment
            
            $
            (305,802
            )
            $
            (161,119
            )OC
                energy drink segment
            
            
            (156,546
            )
            
            (92,067
            )Corporate
                segment
            
            
            (1,092,900
            )
            
            (1,099,099
            )Total
            
            $
            (1,555,248
            )
            $
            (1,352,285
            )





A
      summary
      of the net assets as of June 30, 2008 related to the Company’s segments, after
      eliminating all inter-company assets, are as follows:




Water
                treatment segment
            
            $
            7,005,481OC
                energy drink segment
            
            
            351,366Corporate
                segment
            
            
            176,942Total
            
            $
            7,533,789




11


**RG
        GLOBAL LIFESTYLES, INC.**
 **NOTES
        TO CONSOLIDATED FINANCIAL STATEMENTS**
 (unaudited)




**Note
      11 – Related Party Transactions**





On
      February 11, 2008, Grant King, Chief Executive Officer, made a payment of
      $100,000 towards a note from a vendor and recorded it as a loan payable to
      a
      related party. On March 4, 2008, the Company repaid Grant King $30,000 against
      the loan. On March 14, 2008, the Company received an additional $32,700 from
      Grant King for operating purposes. The loan accrues interest at 11% and is
      due
      upon demand. Interest expense accrued on this loan for the three months ended
      June 30, 2008 was $3,073. The total loan outstanding from Grant King as of
      June
      30, 2008 is $102,700 and accrued interest of $3,073.





During
      the fiscal year ended March 31, 2008, the Company issued a purchase order to
      Catalyx Fluid Solutions, Inc. (“Catalyx”), for the purchase of resin, at the
      approximate cost of $756,000, needed for the operation of the Company’s
      wastewater treatment plant in Wyoming. Catalyx is partially owned by Juzer
      Jangbarwala, a Company Director and its Chief Technology Officer. In addition,
      from time to time Catalyx has paid for various costs related to the wastewater
      treatment plant on behalf of the Company, for which the Company has reimbursed
      Catalyx. As of June 30, 2008, amounts due to Catalyx included in accounts
      payable were $300,000.





In
      July
      2007, the Company entered into a lease agreement with Catalyx Engineering,
      Inc.
      (“CEI”), a company that is owned in part by Juzer Jangbarwala, a Company
      Director and its Chief Technology Officer, to sub-lease approximately 7,000
      square feet to serve as its new corporate office in Anaheim, California. The
      term
      of the lease is 18 months at a base monthly rent of $7,200. During the three
      months ended June 30, 2008, payments to CEI for rent were $21,600.





The
      Company utilized CEI for engineering services related to the design and
      construction of its water treatment plant in Wyoming. The agreement is verbal
      and provides engineering services at $75 per hour, which represents a 37.5%
      discount off of normal CEI rates. Total expenses incurred by the Company with
      CEI during the three months ended June 30, 2008 were $3,569. As of June 30,
      2008, amounts due to CEI included in accounts payable were $13,224.





In
      previous periods, the Company utilized Fusion Solutions (“Fusion”) for
      manufacturing of product and promotional items for it OC Energy drink products.
      Fusion is partially owned by Mariano Fusco, a former owner and former CEO of
      the
      Company’s subsidiary, OC Energy and Albert Guerra, a partial owner of OC Energy.
      As of June 30, 2008, amounts due to Fusion included in accounts payable were
      $98,957.





During
      the three months ended June 30, 2008, the Company utilized Glaser Corporation
      (“Glaser”) for the rental of office space and equipment, as well as for
      accounting and administrative services for it OC Energy subsidiary. Glaser
      is
      owned by Robert Glaser, a partial owner and President of OC Energy. For the
      three months ended June 30, 2008, amounts expensed under this arrangement were
      $14,999. As of June 30, 2008, amounts due to Glaser included in accounts payable
      were $26,984.





**Note
      12 – Subsequent Events**





Subsequent
      to June 30, 2008, the Company generated $97,000 of additional cash from the
      sales of 323,333 shares of common stock to 10 accredited investors. In addition,
      the Company also issued warrants to purchase 97,000 shares of common stock
      at an
      exercise price of $0.40.





On
      August
      12, 2008, an officer and director of the Company loaned $5,000 to the Company
      for operations.





Subsequent
      to June 30, 2008, the Company issued 740,060 shares of common stock out of
      escrow in lieu of its payments of $100,000 due on its note obligation to
      NIR.




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 OC Energy Drink product lines and CFS wastewater
                treatment technology, and meet or exceed its return on shareholders’
                equity target, which will depend on the Company’s ability to manage its
                capital needs and the effect of business and/or
                acquisitions;·
            If
                acquisitions are made, the costs and successful integration of
                acquisitions;·
            Barriers
                in trade with foreign countries or tariff regulations and other United
                States and foreign laws;·
            Loss
                of customers or sales weakness;·
            Effect
                of environmental regulations in the field of wastewater treatment
                associated with coal bed methane mining;·
            Inability
                to achieve future sales levels or other operating
                results;·
            Ability
                to locate suitable new products for distribution within our business
                sector, and retain licensing rights to such new products on acceptable
                terms;·
            The
                continuation of favorable trends, including the drop in affordable
                potable
                water globally;·
            Outcomes
                and costs associated with litigation and potential compliance
                matters;·
            Inadequacies
                in the Company’s internal control over financial reporting, which could
                result in inaccurate or incomplete financial reporting;·
            Dilution
                to Shareholders from convertible debt or equity
                financings;·
            Loss
                of key management or other unanticipated personnel
                changes;·
            The
                unavailability of funds for capital expenditures; and·
            Operational
                inefficiencies in distribution or other
                systems.





The
      following discussion should be read in conjunction with the historical financial
      statements and related notes thereto of R.G. Global Lifestyles, Inc., including
      Form 10-KSB as of March 31, 2008.





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





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




13


OVERVIEW





CFS
      TECHNOLOGY





The
      Company operates CFS as a division. CFS manufactures plants that utilize its
      proprietary wastewater treatment technology ("CFS Technology") based on an
      ion-exchange process for the treatment and reclamation of wastewater associated
      with the production of methane in coal bed applications. The CFS Technology
      removes sodium and other pollutants from such wastewater allowing it to be
      returned to the environment within local, state and federal environmental
      compliance regulations. The successful removal of the treated wastewater in
      turn
      allows energy companies to harvest and sell methane associated with coal beds.
      The Company receives a royalty from the customer for every barrel of water
      treated and purified.





In
      April
      of 2008, CFS finished construction and successfully tested its first CFS
      Technology plant in Wyoming in connection with an agreement with Yates
      Petroleum, Inc. This agreement is structured on a “build, own and operate”
economic model whereby CFS provides a “turnkey” plant to Yates Petroleum and
      charges a royalty per barrel of cleaned wastewater. The Company receives a
      fixed
      royalty for every barrel of water treated and purified and maintains ownership
      of the equipment under a five year contract. Previously, CFS had commenced
      the manufacturing process of a CFS Technology plant for direct sale to Black
      Diamond Energy, Inc., another methane producer in Wyoming. Under the contract,
      the Company was responsible for the manufacture and installation of the
      equipment. However this project has halted due to a suspension in payment by
      the
      customer.





CFS
      is
      currently pursuing additional opportunities with other energy companies in
      the
      US and internationally, for the lease or sale, construction, use and/or support
      of the CFS Technology.





OC
      ENERGY DRINKS





The
      Company operates OC Energy Drink, Inc. as a majority owned subsidiary. OC Energy
      Drink has launched its 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. The energy drinks are
      low in natural sugar and high in vitamins and minerals, and come in
      custom-designed bottles.





Because
      the Company has a controlling interest in OC Energy Drink, Inc., its results
      of
      operations are included in the Company’s consolidated financial statements. The
      percentage of equity interest that is not owned by the Company is shown as “Minority
      interest in subsidiary” in the consolidated balance sheets and consolidated
      statements of operations. The change in value of the minority interest in
      subsidiary is reflected as other income in the attached consolidated statements
      of operations.




14


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





RESULTS
      OF OPERATIONS FOR THE THREE-MONTH PERIOD ENDED JUNE 30, 2008 AND
      2007.





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





Three
                Months Ended June 302008
            
            2007INCOME
                STATEMENT DATARevenue
            
            $
            120,037
            
            $
            287,207Gross
                profit (loss)
            
            $
            (127,450
            )
            $
            26,471Loss
                from operations
            
            $
            (1,555,
                248
            )
            $
            (1,352,285
            )Net
                loss
            
            $
            (1,597,212
            )
            $
            (1,841,970
            )Net
                loss per weighted average common share
            
            $
            (0.04
            )
            $
            (0.07
            )As of
            
            
            As ofJune 30, 2008
            
            
            March 31, 2008BALANCE
                SHEET DATATotal
                assets
            
            $
            7,533,789
            
            $
            7,758,187Total
                liabilities
            
            $
            3,211,949
            
            $
            2,958,937Stockholders'
                deficit
            
            $
            4,321,840
            
            $
            4,799,250





REVENUES





For
                the quarter ended June 30
            
            Increase/(Decrease)2008
            
            2007
            
            $
            
            %Revenues
            
            $
            120,037
            
            $
            287,207
            
            $
            (167,170
            )
            
            (58
            )%





During
      the quarter ended June 30, 2008, royalty revenue associated with the Company's
      water treatment technology accounted for 75% of its total revenues. These
      revenues related solely to the treatment and purification of approximately
      450,000 barrels of waste water at the Yates plant. The company recorded $29,618
      sales of OC Energy Drink products during the quarter. During the quarter ended
      June 30, 2007, the Company’s primary source of revenues was sales of its water
      treatment technology, which accounting for $209,159 of total revenue. The
      decrease in water treatment sales was due to one of the Company’s current
      customers (Black Diamond Energy) request that the construction of its plant
      be
      delayed until it could obtain additional funding. In addition, the Company
      shut
      down the Yates plant after its first initial testing to make adjustments and
      modifications deemed necessary to reduce unexpected amounts of residual waste
      produced during the filtration of the waste water. The decrease in energy drink
      revenues was due to a lack of sales at OC Energy resulting from its inability
      to
      market the product or obtain any contracts to place its products with
      retailers.





GROSS
      PROFIT (LOSS)





For
                the quarter ended June 30
            
            Increase/(Decrease)2008
            
            2007
            
            $
            
            %Gross
                profit (loss)
            
            $
            (127,450
            )
            $
            26,471
            
            $
            (153,921
            )
            
            (581)
            %




15





During
      the quarter ended June 30, 2008, gross profit (loss) associated with the
      Company's water treatment technology was $(127,633) and the gross profit from
      OC
      Energy Drink products was $183. During the quarter ended June 30, 2008, the
      Company was unable to operate the plant at full capacity. Included in its cost
      of sales were labor costs and depreciation expense of approximately $150,000.
      The miniscule profit from its OC Energy Drink products was due to the Company
      selling some of its inventory at cost before it would need to be destroyed
      due
      to it being past its shelf life. The gross profit from the Company’s results for
      the quarter ended June 30, 2007 was primarily the result from deferred revenue
      recorded on the Black Diamond project and profitable sales of its OC Energy
      Drink products.





TOTAL
      OPERATING EXPENSES





For
                the quarter ended June 30
            
            Increase/(Decrease)2008
            
            2007
            
            $
            
            %Total
                Operating Expenses
            
            $
            1,427,798
            
            $
            1,378,756
            
            $
            49,042
            
            
            3
            %





Total
      operating expenses include management and administrative personnel costs
      (including non-cash stock-based compensation), corporate office costs,
      accounting fees, legal expense, information systems expense, and product
      marketing and sales expense. The increase in total operating expenses in the
      quarter ended June 30, 2008 as compared to the quarter ended June 30, 2007
      was
      primarily the result of increases in salaries and wages and consulting
      expenses.




OTHER
      INCOME (EXPENSE)




For
                the quarter ended June 30
            
            Increase/(Decrease)2008
            
            2007
            
            $
            
            %Other
                Income (Expense)
            
            $
            (41,964
            )
            $
            (489,685
            )
            $
            (447,721
            )
            
            (91)
            %





The
      decrease in other income during the quarter ended June 30, 2008 as compared
      to
      the quarter ended June 30, 2007 resulted primarily from reduced interest expense
      for notes converted to stock in 2007, a reduction in the change in the fair
      value of common stock issued in connection with convertible notes in 2007and
      a
      reduction in the change in fair value of derivative liabilities in 2007.




LIQUIDITY
      AND CAPITAL RESOURCES





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





The
      Company’s principal sources of liquidity consist of cash and cash equivalents,
      cash generated from product sales and construction contracts, and the issuance
      of equity and/or debt securities. In addition to funding operations, the
      Company’s principal short-term and long-term liquidity needs have been, and are
      expected to be, the debt service requirements of its notes payable, capital
      expenditures and general corporate expense expenses. In addition, as its sales
      and operations continue to increase, the Company anticipates significant
      increases in purchases of equipment for the construction of plants utilizing
      the
      CFS Technology. As of June 30, 2008, the Company had $1,036 cash or cash
      equivalents, accounts payable of $1,184,192, accrued liabilities of $621,482
      and
      notes payable outstanding of $1,238,385.





The
      Company believes that cash expected to be generated from the issuance of debt
      and equity securities will be sufficient to fund its operations, anticipated
      capital expenditures, working capital and other financing requirements through
      September 30, 2008. The Company will need to continue a focused program of
      capital expenditures to effectuate its CFS Technology project constructions
      and
      OC Energy drink production capacity expansion. In order to fund capital
      expenditures or increase working capital above the current plan, or complete
      any
      acquisitions, the Company may seek to obtain additional debt or equity
      financing. It may also need to obtain additional debt or equity financing if
      it
      experiences downturns or cyclical fluctuations in its business that are more
      severe or longer than anticipated, or if the Company fails to achieve
      anticipated revenue, experiences significant increases in the costs associated
      with products sales, or if it engages in additional strategic transactions.
      The
      Company cannot provide assurance that such financing will be available to it
      on
      favorable terms, or at all. If, after utilizing the existing sources of capital
      available to the Company, further capital needs are identified and the Company
      is not successful in obtaining the financing, it may be forced to curtail its
      existing or planned future operations.


16




In
      addition, if needed the Company would potentially sell it’s only existing water
      treatment plant and move to a more royalty based revenue stream to generate
      cash
      to continue operations. There can be no assurance that the revenue from the
      sale
      of the plant will be sufficient for the Company to achieve profitability in
      its
      operations.





For
      the
      three-month period ended June 30, 2008, the Company funded operations primarily
      through sales of its common stock to investors in the amount of $394,000.





OPERATING
      ACTIVITIES





Operating
      cash flows used during the three months ended June 30, 2008, amounted to
      $397,031. The primary use of operating cash was to pay consultants and salaries
      and wages. This was the result of a net loss of $1,597,212 offset by non-cash
      and non-operating items (depreciation, amortization of intangible assets,
      stock-based compensation and interest expense from the amortization of debt
      discounts) totaling $824,939 and net changes in current assets and liabilities
      of $375,242.





INVESTING
      ACTIVITIES





Investing
      cash flows used during the three months ended June 30, 2008, amounted to $8,252
      used primarily for Minor fixed asset acquisitions.





FINANCING
      ACTIVITIES





Financing
      cash flows during the three months ended June 30, 2008, amounted to $394,000
      and
      consisted entirely of, sales of its common stock to investors.





CRITICAL
      ACCOUNTING POLICIES





We
      prepare our consolidated financial statements in accordance with accounting
      principles generally accepted in the United States of America (US GAAP). 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 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 in our
      annual report on Form 10-KSB. 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.


17





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) collectability 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 collectability 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 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
      June
      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 June 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.
      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.


18





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 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, 2008 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, 2008
      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.





RECENT
      ACCOUNTING PRONOUNCEMENTS





In
      September 2007, 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, 2008. We plan
      to
      adopt the provisions of SFAS 157 on April 1, 2009 and are currently assessing
      the impact of the adoption of SFAS 157 on our results of operations and
      financial condition.





In
      February 2008, 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, 2008. We are currently assessing the impact
      of
      adopting SFAS 159 on our results of operations and financial
      condition.





In
      December 2007, the FASB issued SFAS No. 141(R), Business Combinations ("SFAS
      141(R)"), which replaces FAS 141. SFAS 141(R) establishes principles and
      requirements for how an acquirer in a business combination recognizes and
      measures in its financial statements the identifiable assets acquired, the
      liabilities assumed, and any controlling interest; recognizes and measures
      the
      goodwill acquired in the business combination or a gain from a bargain purchase;
      and determines what information to disclose to enable users of the financial
      statements to evaluate the nature and financial effects of the business
      combination. FAS 141(R) is to be applied prospectively to business
      combinations.





In
      December 2007, the FASB issued SFAS No. 160, "Noncontrolling Interests in
      Consolidated Financial Statements", which is an amendment of Accounting Research
      Bulletin ("ARB") No. 51. This statement clarifies that a noncontrolling interest
      in a subsidiary is an ownership interest in the consolidated entity that should
      be reported as equity in the consolidated financial statements. This statement
      changes the way the consolidated income statement is presented, thus requiring
      consolidated net income to be reported at amounts that include the amounts
      attributable to both parent and the noncontrolling interest. This statement
      is
      effective for the fiscal years, and interim periods within those fiscal years,
      beginning on or after December 15, 2008. Based on current conditions, the
      Company does not expect the adoption of SFAS 160
      to
      have a significant impact on its results of operations or financial
      position.


19




OFF-BALANCE
      SHEET ARRANGEMENTS





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





**Item
      3. Quantitative and Qualitative Disclosures About Market Risk** –
      Not
      Applicable





**Item
      4. Controls and Procedures**





During
      its year end procedures, the Company noted several weaknesses in its internal
      controls. No steps have been taken to address these control
      weaknesses.





As
      required by SEC Rule 13a-15 or Rule 15d-15, our Chief Executive and Principal
      Accounting Officers carried out an evaluation under the supervision and with the
      participation of our management, of the effectiveness of the design and
      operation of our disclosure controls and procedures as of the end of the period
      covered by this report. In the course of the previous fiscal quarter ended
      June
      30, 2008, our chief executive officer and principal accounting officer concluded
      that our disclosure controls and procedures were not effective in ensuring
      that
      material information relating to the Company required to be disclosed by the
      Company in reports that it files or submits under the Exchange Act is recorded,
      processed, summarized and reported within the time periods specified in the
      SEC's rules and forms and that such information is accumulated and communicated
      to management, including the chief executive officer and the Principal
      Accounting officer, as appropriate, to allow timely decisions regarding required
      disclosure.





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





Internal
      Control Over Financial Reporting





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





Based
      on
      the foregoing evaluation, the Company has concluded that there was no change
      in
      our internal control over financial reporting that occurred during the fiscal
      quarter ended June 30, 2008, that has materially affected, or is reasonably
      likely to materially affect, our internal control over financial
      reporting.




20




**PART
      II — OTHER INFORMATION**





**Item
      1. Legal Proceedings**





On
      June
      11, 2008, the Company and Grant King was served a lawsuit from one of its note
      holders claiming that the Company defaulted on repayment on a note payable
      in
      the amount of $350,000 plus interest at 8%. The complaint asks for payment
      of
      these amounts plus damages. On August 12, 2008, the parties agreed to stipulated
      order whereby Grant King was dismissed from the lawsuit and the Company was
      granted a 90 day extension to respond to the complaint (until November 10,
      2008)
      and in exchange the Company paid $49,530 which represents the interest due
      on
      the note through July 18, 2008. No amounts for damages have been accrued in
      the
      accompanying consolidated financial statement other than the note payable and
      accrued interest (see Note 9).





On
      July
      11, 2008, the Company received notice that one of the Company’s vendors filed a
      lien against the Company’s water treatment plant for past due amounts due to the
      vendor. As of June 30, 2008, the vendor is due $140,310, which is included
      in
      accounts payable.





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





**Item
      2. Unregistered Sales of Equity Securities and Use of
      Proceeds**





During
      the quarter ended June 30, 2008, the Company raised investor money through
      an
      offering of stock and warrants. The terms of this offering are a sale of common
      stock for $0.30 per share with the investor additionally receiving a warrant
      to
      purchase one share of common stock at $0.40 for every dollar invested. During
      the quarter, the Company raised $394,000 in this offering from 16 accredited
      investors, and, therefore, has incurred the obligation to issue 1,313,333 shares
      of common stock and warrants to purchase 394,000 shares of common stock. The
      securities were sold to the 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**





None.





**Item
      6. Exhibits** .





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




Exhibit
              Number
            
            Description of Document31.1
            
            Certification
                pursuant to Section 302 of the Sarbanes-Oxley Act31.2
            
            Certification
                pursuant to Section 302 of the Sarbanes-Oxley Act32.1
            
            Certification
                pursuant to Section 906 of the Sarbanes-Oxley Act32.2
            
            Certification
                pursuant to Section 906 of the Sarbanes-Oxley
                Act




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.


21




Signature
            
            Title
            
            Date/s/
                  Grant KingGrant
                King
            
            Chief
                Executive Officer
            
            August
                19, 2008/s/
                  Richard LambrightRichard
                Lambright
            
            Principal
                Accounting Officer
            
            August
                19, 2008


22