BUSINESS
Form
and Year of Organization
R.G.
Global Lifestyles, Inc. (the “Company”), was originally incorporated in
California on July 12, 1985 as International Beauty Supply Ltd. The name of
the
corporation was changed on May 28, 1993 to L.L. Knickerbocker Co., Inc., and
thereafter on January 9, 2003 to the present name, R.G. Global Lifestyles,
Inc.
Bankruptcy
Since
its
inception, the Company, under prior management teams, was involved in several
businesses and engaged in various consumer, retail and commercial ventures,
which ultimately proved unsuccessful. On August 15, 2002, the Company’s Chapter
11 Debtor in Possession reorganization plan with the US Bankruptcy Court,
Central District of California was approved after an involuntary petition was
filed by certain of the Company’s creditors. The Company liquidated its assets
in full satisfaction of its creditors’ claims and was discharged from the
bankruptcy on September 6, 2002. The Company ceased filing reports with the
Securities and Exchange Commission in 2001 and became delinquent in its filing
obligations after its September 30, 2001 quarterly financial
report.
Reverse
Merger
Subsequent
to the bankruptcy reorganization, the Company sought alternative business
opportunities and worked to develop the Company’s new business plan through
merger and consolidation with other entities. In furtherance of this plan,
in
July of 2004, the Company entered into an Agreement and Plan of Reorganization,
(the “Plan of Reorganization”), among Amerikal International Holding, Inc.
(“AIH”), the Company, Horst Geicke, and the shareholders of Amerikal
International Holding, Inc. (the “AIH Shareholders”). Pursuant to the Plan of
Reorganization, the Company acquired all of the outstanding shares of AIH from
the AIH
Shareholders
in exchange for the issuance by the Company to the AIH Shareholders of an
aggregate of 1,934,880 shares of the Company’s Common Stock (“Common Stock”).
The Plan of Reorganization also provided for the transfer by an entity
controlled by Horst Geicke to the AIH Shareholders of an aggregate of 16,630,607
shares of the Company’s Common Stock held by the entity in exchange for nominal
consideration. Prior to the consummation of the transactions contemplated by
the
Plan of Reorganization, Horst Geicke beneficially held 90% of the outstanding
Common Stock of the Company. Immediately following the transactions, the Company
had an aggregate of 21,462,000 shares of Common Stock issued and outstanding,
and the AIH Shareholders held an aggregate of 18,530,607 shares, or 86.34%,
of
the Company’s Common Stock issued and outstanding. Thus, at the close of the
transactions, the former shareholders of AIH controlled the voting power of
a
majority of the Company’s Common Stock. The Common Stock issued in the course of
the reverse merger transaction was recorded at the net book value of the
Company’s assets on the acquisition date. As a result of the reverse merger, the
Company caused AIH to be acquired by the Company pursuant to a Certificate
of
Ownership filed with the California Secretary of State on August 12, 2004 and
Articles of Merger filed with the Nevada Secretary of State on August 17, 2004.
The Company continued as the surviving entity in the reverse merger, and held
AIH as a wholly owned subsidiary (“Amerikal”).
Aquair,
Inc.
In
October, 2004 the Company formed Aquair, Inc. as a wholly owned subsidiary
and
California corporation (“Aquair”). Aquair was formed to fulfill the Company’s
mission to distribute environmentally friendly water generating equipment that
creates purified drinking water from air for residential and commercial uses,
distribute anti-microbial and anti-scaling technology worldwide, and to pursue
other water-related technologies and opportunities.
Reinstatement
on OTC Bulletin Board
In
January 2005, the Company received clearance for quotation of its Common Stock
on the over-the counter Bulletin Board (“OTC Bulletin Board”), under the symbol
“RGBL.”
Amerikal
Nutraceutical Corporation
On
October 1, 2005 the Company distributed its wholly owned subsidiary Amerikal
to
a group of founding AIH shareholders in exchange for approximately 7,500,000
million shares of Common Stock of the Company. The distribution reduced the
outstanding shares of the Company at that time from approximately 25 million
to
approximately 17 million, and allowed management to concentrate its efforts
on
implementing and executing its Aquair business plan. As part of the
distribution, the purchasing shareholders set aside 315,561 shares of Company
Common Stock into an escrow account as a reserve against any unforeseen
liabilities arising from the distribution. The Company does not anticipate
recognition of gain or loss as a result of the distribution.
On
Line Surgery, Inc.
In
January 2005, the Company issued 200,000 shares of its restricted Common Stock
to acquire rights to an Internet portal known as On Line Surgery. Subsequently,
in the quarter ended June 30, 2005, the Company formed On Line Surgery, Inc.
as
a wholly owned subsidiary and California Corporation (“On Line Surgery”), to
develop the advertising potential of this web portal for the Company’s then
existing nutraceutical product line, as well as to generate advertising revenue
from physicians and other potential customers.
During
the quarter ending December 31, 2005, the Company sold its rights to the url
“www.onlinesurgery.com”, the sole asset related to On Line Surgery, for $20,000.
On Line Surgery never commenced operations, and was dissolved by the Company
during the fourth quarter of the fiscal year ended March 31, 2006.
Business
of Issuer
Aquair
After
the
distribution of Amerikal and sale of assets related to Online Surgery during
the
fiscal year March 31, 2006, the Company only has remaining operations in its
sole subsidiary Aquair.
Aquair
distributes licensed environmentally-friendly atmospheric 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 plans to distribute (i) “anti-microbial” water technology; (ii)
“anti-scaling” water technology; (iii) potable bottled water generated from
commercial and industrial water generation and filtration technologies; (iv)
potable water via mobile air to water units in geographic regions where no
solution exists for purified drinking water; and (v) other water-related
technologies.
Aquair’s
marketing strategy will focus on customers in medical related businesses, home
shoppers via television and internet, pharmaceutical related businesses, large
businesses within office buildings, large construction companies, maritime
vessels and offshore rigs, and large restaurant and grocery store chains.
Additionally, the Company will pursue government agencies through its agent
Policy Impact.
Principal
Products and Services, and Distribution Methods
After
the
distribution of Amerikal and sale of assets related to Online Surgery during
the
fiscal year March 31, 2006, the Company only has remaining products and
services, and distribution methods in its sole subsidiary Aquair
Aquair
markets and distributes atmospheric water generators that precipitate drinking
water from air for residential and/or small office uses. The water generating
machine has been tested in various locations. As of March 31, 2006, the Company
has sold units to customers in the U.S. and Asia, and anticipates further sales.
Aquair continues to search for new manufacturers of similar and/or improved
atmospheric water generators and may add different suppliers or switch suppliers
altogether in the future as opportunities arise.
Aquair
has acquired the right to distribute and sell Munters Corp. (“Munters”)
atmospheric water generating equipment products to the commercial and
residential building industry, government agencies, shipping industry and the
oil and gas industry. Additionally, Aquair has the right to bottle potable
water
generated by Munters new patented technology. This agreement is effective
worldwide, with the exclusion of Thailand, Indonesia, Singapore and Malaysia.
Aquair
had distributed its atmospheric water generation products directly to customers,
but plans to utilize strategic partners, and redistribution and/or reseller
channels to increase sales volume.
In
furtherance of this plan, Aquair has: (1) contracted with Locke Media whereby
Locke is the exclusive distributor in Vietnam for the Company’s home/office
model of atmospheric water generators; (2) entered into a relationship with
Entech Sales and Service, whereby Entech will work in conjunction with Aquair
and Munters in the engineering, design and bidding on sales of total water
solutions using Aquair licensed products and technology; and (3) entered into
a
strategic alliance with Hendrx Corp. to share in the manufacture and marketing
of advanced reverse osmosis filtration systems, air-to-water technology, and
anti-scaling technology.
Status
of Publicly Announced New Products and Services
On
April
10, 2006, Aquair announced that it is the sole worldwide distributor and
marketer to the proprietary air to water filtration products using Peltier
technology manufactured by M&T Technologies LLC. The first product to be
manufactured will be the home/office model atmospheric water generator.
Initially Aquair will market and distribute the products as manufactured by
M&T; at a later date, Aquair will be granted a license by M&T to
manufacture, market and distribute the newly developed products using the
Peltier technology.
As
previously announced in the Company’s Form 10-QSB as of December 31, 2005,
Aquair is still in ongoing negotiations to partner with Roam Chemie, a
privately-held industrial chemical company located in Belgium, to enter into
a
definitive agreement to distribute and market a select group of their
proprietary chemical compounds and unique water treatment products worldwide.
The parties have executed a non-binding letter of intent, and anticipate an
executed definitive agreement in the following quarter.
As
previously announced in a press release dated March 10, 2006, Aquair is engaged
in continued negotiations to retain Farrah Fawcett as a celebrity spokesperson
for Aquair products. At that time the parties had entered into a non-binding
letter of intent, however, Aquair is uncertain whether a definitive agreement
will be reached.
Competition
After
the
distribution of Amerikal and sale of assets related to Online Surgery during
the
fiscal year March 31, 2006, the Company only has remaining competition in
relation to the operations, products and markets of its sole subsidiary
Aquair.
The
international market for water generation, water treatment and bottled water
is
substantial. Our key competitors in the bottled water industry include Nestle,
Danone, Coca-Cola, and PepsiCo. Our key competitors in the residential and
small
office water generation sector are Nestle and DS Waters. Our key competitors
in
the water filtration market include Kinetico, Culligan, Rainsoft and
Oasis.
Many
of
these competitors have established histories of operation and greater financial
resources than the Company, enabling them to finance acquisitions and
development opportunities, to pay higher prices for the same opportunities,
and
to develop and support their own operations. In addition, many of these
companies have greater name recognition. These companies might be willing to
sacrifice profitability to capture a greater portion of the market for products
similar to those manufactured or distributed by the Company or pay higher prices
than the Company would for the same expansion and development opportunities.
Consequently, the company may encounter significant competition in its efforts
to achieve its growth objectives.
Principal
Suppliers
After
the
distribution of Amerikal and sale of assets related to Online Surgery during
the
fiscal year March 31, 2006, the Company only has remaining principal suppliers
that relate to the products of its sole subsidiary Aquair.
During
the fiscal year ended March 31, 2006, the Company was supplied with its
atmospheric water generator products by Munters and Dong Yang. However, moving
forward the Company intends to have Munters and Hendrx be the principal
suppliers of the Company’s atmospheric water generation products, as well as any
other suppliers that the Company deems appropriate for this product sector
and
its other planned technologies.
Dependence
on One or a Few Major Customers
After
the
distribution of Amerikal and sale of assets related to Online Surgery during
the
fiscal year March 31, 2006, the Company’s sole remaining sale activity involved
the sale of water generator equipment in the United States and Asia through
its
Aquair subsidiary. During the fiscal year ended March 31, 2006, the Company’s
sales were showed the following concentrations: export sales as a percentage
of
revenues were 84.4% and 100% for the twelve months ended March 31, 2006, and
2005 respectively. During the twelve months ended March 31, 2006 and 2005,
for
continuing operations, sales to a single customer were 84.4% and 100% of total
sales, respectively. For discontinued operations (Amerikal Nutraceutical
Corporation), during the twelve months ended March 31, 2006 and 2005, sales
to a
single customer were 58.5% and 80.6%, respectively.
Intellectual
Property
After
the
distribution of Amerikal and sale of assets related to Online Surgery during
the
fiscal year March 31, 2006, the Company only has remaining intellectual property
issues in relation to its sole subsidiary Aquair. The Company did not have
any
intangible assets on its balance sheet as of March 31, 2006; however, the
Company owns several live trademarks, including the word mark
“Aquair.”.
The
Company distributes Munters products under licenses granted by Munters. The
technology underlying Aquair’s products licensed from Munters is protected by
three patents owned by Munters and others pending.
Government
Approval
After
the
distribution of Amerikal and sale of assets related to Online Surgery during
the
fiscal year March 31, 2006, the Company only has remaining government approval
issues in relation to the products of its sole subsidiary Aquair
For
Aquair, government approval was not applicable during the fiscal year ended
March 31, 2006, however the Company plans on distributing certain water
“anti-microbial” technologies which may require, depending on product usage,
certain approvals, licensing and/or permits from the United States Food and
Drug
Administration or their similar counterpart agencies overseas.
Effect
of Any Existing or Proposed Government Regulations
None.
Research
and Development Costs
For
the
fiscal year ended March 31, 2006, the Company spent $4,086 on laboratory work
and product development expenses in testing of the Aquair products.
Cost
and Effects of Compliance with Environmental Laws and
Regulations
Not
applicable.
Employees
As
of
March 31, 2006, the Company employed three employees comprised of the Company’s
Chief Executive Officer, Chief Financial Officer and Vice President of Sales.
The Company retains consultants on an as needed basis, and may need to hire
additional employees during the fiscal year ending March 31, 2007.
Property
On
October 1, 2004, Aquair entered into a month-to-month rental agreement with
Pinnacle International, Inc., a California corporation which is wholly owned
by
Louis Knickerbocker (“Pinnacle”), the Chief Executive Officer and Chairman of
the Board of Directors of the Company. The agreement is for 3,000 square feet
of
office space located at 30021 Tomas, Suite 200, Rancho Santa Margarita,
California 92688 and office support services at a fair market rate of $6,000
per
month. During the fiscal year ended March 31, 2006, the Company expensed $72,177
of rent to related party under this agreement.
Legal
Proceedings
On
August
30, 2005 the Company was served with a lawsuit filed as Case No. 05CC09548
in
Orange County, California Superior Court. In the complaint, Universal
Communications Systems, Inc. and its subsidiary Atmospheric Water Technologies,
Inc. allege defamation, interference with prospective economic advantage, and
false advertising, and seek compensatory and punitive damages, and costs against
the Company. The Board of Directors believes these claims to be without merit,
and has engaged legal counsel to strongly defend these claims. Through our
legal
counsel, the Company has caused the appropriate legal pleadings to be filed
to
dismiss the Complaint in this case. The Company believes that any liability
it
may incur in connection with this case will not have a material adverse effect
upon its financial condition or its results of operations.
On
July
7, 2006, the Company was served with a lawsuit for “injunctive, declaratory
relief and damages” filed by plaintiffs H2O Liquid Air, LLC and H2O Liquid Air
of Florida, LLC on June 10, 2006 in the United States District Court, Southern
District of Florida, Miami Division against the Company and eight other
defendants. The complaint alleges ten “counts”, although only three counts are
directed at the Company: unfair competition under common law, statutory
infringement under section 32 of the Lanham Act, and interference with a
distribution agreement. The Board of Directors believes these claims to be
without merit, and will be defended by legal counsel engaged by co-defendant
Munters Corp. to strongly defend these claims. Through our legal counsel, the
Company will cause the appropriate legal pleadings to be filed to dismiss the
Company from the case. The Company believes that any liability it may incur
in
connection with this case will not have a material adverse effect upon its
financial condition or its results of operations.
Other
than the foregoing, presently, neither the Company nor its wholly owned
subsidiaries are party to any litigation and the Company is not aware of
litigation, either pending or threatened. Neither the Company nor its
subsidiaries has been the defendant or plaintiff in any litigation, since the
discharge from bankruptcy of the Company attributable to its predecessor L.L.
Knickerbocker Company, Inc.
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