UNITED STATES SECURITIES AND EXCHANGE COMMISSION
                             Washington, D.C. 20549

                                    FORM 10-Q

               X QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d)
                     OF THE SECURITIES EXCHANGE ACT OF 1934

                  For the quarterly period ended March 31, 2001

                                       OR

              __ TRANSITION REPORT UNDER SECTION 13 OR 15(d) OF THE
                         SECURITIES EXCHANGE ACT OF 1934


                For the transition period from ______ to _______

                          COMMISSION FILE NUMBER 1-7949

                            REGENCY AFFILIATES, INC.
             (Exact name of registrant as specified in its charter)


        Delaware                                          72-0888772
(State or other jurisdiction of             (IRS Employer Identification Number)
 incorporation or organization)


729 South Federal Highway, Suite 307, Stuart, Florida             34994
(Address of principal executive offices)                         (Zip Code)


Registrant's Telephone Number, including Area Code  (561) 220-7662
                                                    --------------


     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 _____


     As of March 31,  2001 there were  17,251,619  shares of the $ .40 Par Value
Common Stock  outstanding,  including  4,040,375 shares held by an approximately
50% owned subsidiary.

<PAGE>




                    Regency Affiliates, Inc. and Subsidiaries

                                      Index


                                                                   Page Number

Part I - Financial Information (Unaudited)

      Item 1.   Financial Statements

                Consolidated Balance Sheets...........................  3-4

                Consolidated Statements of Operations.................   5

                Consolidated Statements of Cash Flows.................   6-7

                Notes to Consolidated Financial Statements............  8-12

      Item 2.   Management's Discussion and Analysis of Financial
                Condition and Results of Operations  ................. 12-15


Part II - Other Information (Unaudited)

      Item 1.   Legal Proceedings ......................................  15

      Item 2.   Changes in Securities and Use of Proceeds ..............  15

      Item 3.   Defaults Upon Senior Securities ........................  15

      Item 4.   Submission of Matters to a Vote of Security Holders ....  15

      Item 5.   Other Information   ....................................  15

      Item 6.   Exhibits and Reports on  Form 8-K  .....................  16

Signatures        ......................................................  16




<PAGE>



Part I - Financial Information (Unaudited)

          Item 1.   Financial Statements

                    Regency Affiliates, Inc. and Subsidiaries
                           Consolidated Balance Sheets
                                   (Unaudited)

<PAGE>
<TABLE>
<CAPTION>

                                                                                             March 31,            December 31,
                                                                                               2001                  2000
<S>                                                                                     <C>                   <C>
Assets

  Current Assets

      Cash and Cash Equivalents                                                          $     1,205,973      $    928,636
      Accounts receivable, net of allowance                                                    1,410,514         2,553,589
      Income taxes receivable                                                                     52,372            24,556
      Inventory                                                                                2,308,783         2,243,726
      Other current assets                                                                       350,491           127,728
                                                                                               ---------         ---------
         Total current assets                                                                  5,328,133         5,878,235

  Property, Plant and Equipment, Net                                                           4,312,966         4,343,170

  Investment in partnerships                                                                  25,801,277        24,575,881

  Other Assets

      Aggregate inventory                                                                        834,675           834,675
      Goodwill, net of amortization                                                              804,364           820,774
      Debt issuance costs, net of amortization                                                   504,085           551,343
      Other                                                                                        4,150            12,751
                                                                                               ---------         ---------
         Total other assets                                                                    2,147,274         2,219,543
                                                                                              ----------        ----------
                                                                                         $    37,589,650      $ 37,016,829
                                                                                          ===============     ============

</TABLE>


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

<PAGE>
<TABLE>
<CAPTION>

                    Regency Affiliates, Inc. and Subsidiaries
                           Consolidated Balance Sheets (continued)



                                                                                                 March 31,       December 31,
                                                                                                   2001             2000
<S>                                                                                     <C>                 <C>
  Current Liabilities

      Current portion of long-term debt                                                   $      122,106    $      128,510
      Notes Payable - Banks                                                                      429,231           692,174
      Notes payable - Related Party                                                              949,503           776,000
      Accounts payable                                                                           833,907         1,080,904
      Accrued expenses                                                                         1,874,838           899,837
      Taxes payable                                                                              107,156            78,820
                                                                                               ---------         ---------
         Total current liabilities                                                             4,316,741         3,656,245

  Long term debt, net of current portion                                                      12,548,267        13,072,341

  Deferred income taxes                                                                          380,230           402,048
  Minority interest in consolidated subsidiaries                                               3,842,603         3,810,143
  Shareholders' equity
      Serial preferred stock not subject to mandatory redemption                               1,052,988         1,052,988
         (maximum liquidation preference $24,975,312 in 2000 and 1999,
         respectively
      Common stock, par value $.40 authorized 25,000,000 shares; issued                        6,900,659         6,900,659
        and outstanding 17,251,619 shares in 2001 and 2000
      Additional paid-in capital                                                               2,308,484         2,308,484
      Readjustment resulting from quasi-reorganization at December 31, 1987                  (1,670,596)       (1,670,596)
      Retained earnings                                                                       11,370,002        10,915,990
      Accumulated other comprehensive income                                                   (121,695)          (93,440)
      Treasury stock, 4,052,825 shares in 2001 and 2000                                      (3,338,033)       (3,338,033)
                                                                                             -----------       -----------
         Total shareholders' equity                                                           16,501,809        16,076,052

                                                                                          $   37,589,650    $   37,016,829
                                                                                            ============      ============

</TABLE>


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

<PAGE>
<TABLE>
<CAPTION>
                    Regency Affiliates, Inc. and Subsidiaries
                      Consolidated Statements of Operations
                   Three Months Ended March 31, 2001 and 2000
                                   (Unaudited)


                                                                                 2001              2000

<S>                                                                           <C>               <C>
Costs and expenses

Net Sales                                                                $    3,385,072     $    2,139,499
                                                                              ---------          ---------
  Costs of goods sold                                                         2,572,388          1,536,092
  Selling and administrative                                                  1,187,923            989,616
                                                                              ---------          ---------
                                                                              3,760,311          2,525,708

Income (loss) from operations                                                  (375,239)          (386,209)
Income from equity investment in partnerships                                 1,225,396          1,130,517
Other income, net                                                                24,583             28,748
Interest expense                                                               (314,345)          (279,265)
                                                                               ---------         ----------
Income before income tax expense, and minority interest                         560,395            493,791
Income tax expense                                                              (68,923)           (65,895)
Minority interest                                                               (37,460)           (34,644)
                                                                               ---------         ----------
Net income                                                                $     454,012      $     393,252
                                                                               =========         ==========
Net income per common share:
  Basic                                                                   $        0.03      $        0.03
                                                                               =========         ==========
 Diluted                                                                  $        0.03      $        0.03
                                                                          ==============      =============


</TABLE>

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


<PAGE>
<TABLE>
<CAPTION>

                    Regency Affiliates, Inc. and Subsidiaries
                      Consolidated Statements of Cash Flows
                   Three Months Ended March 31, 2001 and 2000
                                   (Unaudited)



                                                                                                           2001              2000
<S>                                                                                              <C>
Cash flows from operating activities
  Net income                                                                                     $                  $       393,252
                                                                                                          454,012
  Adjustments to reconcile net income to net cash
      from (used by) operating activities
         Depreciation and amortization                                                                    166,889           107,632
         Change in deferred income taxes                                                                  (21,818)           30,131
         Minority interest                                                                                 32,460            34,644
         Stock issued for services rendered                                                                     -           101,113
         Income from equity investment in partnerships                                                 (1,225,396)       (1,130,517)
         Interest amortization on long-term debt                                                          210,771           220,637
         Changes in operating assets and liabilities
            Accounts receivable                                                                         1,143,075           979,319
            Inventory                                                                                     (65,057)         (130,944)
            Other current assets                                                                         (250,579)          (35,499)
            Accounts payable                                                                             (246,997)         (143,688)
            Accrued expenses                                                                            1,003,337           (76,357)
                                                                                                        ---------        ----------
                Net cash from (used by) operating activities                                            1,200,697           349,723

Cash flows from investing activities

  Capital expenditures                                                                                    (73,017)         (108,033)
  Other                                                                                                     8,601          (106,095)
                                                                                                       -----------       -----------
                Net cash (used by) investing activities                                                   (64,416)         (214,128)

Cash flows from (used by) financing activities
  Net short-term borrowings (payments)                                                                    (89,440)         (808,262)
  Repayment of long-term borrowings                                                                      (741,249)          (22,642)
  Redemption of Series E preferred stock                                                                        -          (159,300)
  Other                                                                                                         -           (81,405)
                                                                                                        ---------       -----------

                Net cash from (used) by financing activities                                             (830,689)       (1,071,609)

Foreign currency translation adjustment                                                                   (28,255)          (31,654)
Increase (decrease) in cash and cash equivalents                                                          277,337          (967,668)
Cash and cash equivalents - beginning                                                                     928,636         2,348,989
                                                                                                        ---------         ---------
Cash and cash equivalents - ending                                                               $      1,205,973   $     1,349,667
                                                                                                   ===============    ==============


</TABLE>

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

<PAGE>
<TABLE>
<CAPTION>

                    Regency Affiliates, Inc. and Subsidiaries
                Consolidated Statements of Cash Flows (continued)
                   Three Months Ended March 31, 2001 and 2000
                                   (Unaudited)


                                                                                                        2001                  2000
<S>                                                                                           <C>                     <C>
Supplemental disclosures of cash flow information:
  Cash paid during the year for:
      Income taxes                                                                            $         86,695         $      80,020
                                                                                                        ======                ======
      Interest                                                                                           6,478                85,423
                                                                                                        ======                ======
Supplemental disclosures of noncash investing and financing activities:

  In 2000, the Company issued 95,877 shares of common stock in exchange for 885
     shares of Series E preferred stock.

  In  2000, the Company issued 114,000 shares of common stock as payment for
     costs in connection with acquisition of Glas-Aire.

  In  2000,  the  Company  issued   147,254  shares  of  common  stock  for  to
      an  investor   relations   company  in  return  for services.

  In 2000, accrued compensation in the amount of $650,000 payable to an officer
      was converted to debt.

</TABLE>

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



<PAGE>

                    Regency Affiliates, Inc. and Subsidiaries
                   Notes to Consolidated Financial Statements

Note 1.  Basis of Presentation and Summary of Significant Accounting Policies

     A.   Basis  of  Presentation  -  The   accompanying   unaudited   condensed
          consolidated  financial  statements  have been  prepared in accordance
          with generally  accepted  accounting  principles for interim financial
          information  and with the  instructions to Form 10-Q and Article 10 of
          Regulation  S-X.  Accordingly,   they  do  not  includes  all  of  the
          information and footnotes  required by generally  accepted  accounting
          principles  for  complete  financial  statements.  In the  opinion  of
          management,  all adjustments (consisting of normal recurring accruals)
          considered  necessary  for a fair  presentation  have  been  included.
          Operating results for the three-month  period ended March 31, 2001 are
          not necessarily indicative of the results that may be expected for the
          year ended  December 31, 2001. For further  information,  refer to the
          consolidated  financial  statements and footnotes  thereto included in
          the Registrant  Company and  Subsidiaries'  annual report on Form 10-K
          for the year ended December 31, 2000.

     B.   Principals of Consolidation  and Nature of Business - The consolidated
          financial statements include the accounts of Regency Affiliates,  Inc.
          (the  "Company"),   its  wholly  owned  subsidiaries,   Rustic  Crafts
          International,  Inc. ("Rustic  Crafts"),  its 80% owned  subsidiaries,
          National Resource Development  Corporation ("NRDC"),  Transcontinental
          Drilling  Company  ("Drilling")  and RegTransco,  Inc. ("RTI") and its
          approximately 50% owned subsidiary,  Glas-Aire  Industries Group, Ltd.
          ("Glas-Aire").  All significant intercompany balances and transactions
          have been eliminated in consolidation.

     C.   Earnings Per Share - Basic earnings per share are computed by dividing
          net income attributable to common shareholders by the weighted average
          number of common shares  outstanding during the year. Diluted earnings
          per share  computations  assume the conversion of Series B, and Junior
          Series D preferred  stock during the period that the  preferred  stock
          issues were outstanding. If the result of these assumed conversions is
          dilutive,  the dividend  requirements  and periodic  accretion for the
          preferred stock issues are reduced.  The shares of the Company held by
          Glas-Aire  were  treated as  treasury  shares for  earnings  per share
          computations.

     D.   Inventory  -  Inventories  are  stated  at the lower of cost or market
          using the first-in, first-out (FIFO) method. Inventory is comprised of
          the following at March 31, 2001:


            Raw materials and supplies               $     1,120,763
            Work-in-process                                  251,842
            Finished products                                936,178
                                                           ---------
                                                     $     2,308,783
                                                      ==============

     E.   Aggregate  Inventory - Inventory,  which consists of 70+ million short
          tons is stated at lower of cost or market. The Company is also subject
          to a royalty agreement which requires the payment of certain royalties
          to a  previous  owner  of the  aggregate  inventory  upon  sale of the
          aggregate.  The Company has made only  casual  sales of the  inventory
          during the periods.

     F.   Income Taxes - The Company utilizes Statement of Financial  Accounting
          Standards No. 109 ("SFAS 109"),  "Accounting  for Income Taxes," which
          requires an asset and liability  approach to financial  accounting and
          reporting  for income  taxes.  The  difference  between the  financial
          statement  and tax  basis of  assets  and  liabilities  is  determined
          annually.  Deferred income tax assets and liabilities are computed for
          those temporary  differences that have future tax  consequences  using
          the  current  enacted  tax laws and rates that apply to the periods in
          which they are expected to

<PAGE>

                    Regency Affiliates, Inc. and Subsidiaries
                   Notes to Consolidated Financial Statements

Note 1.  Basis of Presentation and Summary of Significant Accounting Policies
        (Continued)

          affect  taxable  income.  In some  situations  SFAS  109  permits  the
          recognition  of expected  benefits of utilizing net operating loss and
          tax credit  carryforwards.  Valuation allowances are established based
          upon management's  estimate,  if necessary.  Income tax expense is the
          current tax payable or refundable for the period plus or minus the net
          change in the deferred tax assets and liabilities.

     G.   Change in Reporting  Period - Prior to December 31, 2000 Glas-Aire had
          a fiscal year end of January 31. As a result, the Company's  condensed
          statement  of  operations  for the three month  period ended March 31,
          2000  included the  financial  activity of Glas-Aire for the months of
          February and March 2000 only.

          Had the financial  activity of Glas-Aire for the month of January 2000
          been included, the Company's loss from operations would be as follows:


          Net Sales                                           $   3,074,027
          Costs and expenses
          Costs of goods sold                                     2,148,234
          Selling and administrative                              1,206,559
                                                                  ---------
                                                                  3,354,793
                                                                  ---------
          Loss from operations                                $    (280,766)
                                                                ===========

Note 2.  Investment in Partnership

          In November 1994, the Company purchased a limited partnership interest
          in  Security  Land  and  Development   Company   Limited   Partnership
          ("Security"),  which owns and operates an office complex.  The Company
          has limited  voting  rights and is entitled to be allocated 95% of the
          profit and loss of the  Partnership  until October 31, 2003 (the lease
          termination  date of the sole  tenant of the office  complex)  and 50%
          thereafter.  The Company is to receive certain limited cash flow after
          debt service,  and a contingent  equity  build-up  depending  upon the
          value of the project  upon  termination  of the lease.  The Company is
          also  entitled  to receive  certain  management  fees  relating to the
          partnership

          Security  was  organized to own and operate two  buildings  containing
          approximately  717,000  net  rentable  square  feet  consisting  of  a
          two-story office building and a connected  six-story office tower. The
          building  was  purchased  by  Security  in  1986  and  is  located  on
          approximately 34.3 acres of land which is also owned by Security.  The
          building  has been  occupied  by the  United  States  Social  Security
          Administration's Office of Disability and International Operations for
          approximately  24 years  under a lease  between  the United  States of
          America,  acting by and through the  General  Services  Administration
          ("GSA"). Effective November 1, 1994, Security and the GSA entered into
          a nine-year lease (the "Lease") for 100% of the building. Security has
          received an opinion of the Assistant  General  Counsel to the GSA that
          lease payments are not subject to annual  appropriation  by the United
          States  Congress  and  the  obligations  to  make  such  payments  are
          unconditional general obligations of the United States Government.

          The Company  accounts for the  investment in partnership on the equity
          method,  whereby the carrying  value of the investment is increased or
          decreased  by the  Company's  allocable  share of income or loss.  The
          investment in partnership  included in the Consolidated Balance Sheets
          at March 31, 2001  $25,801,277.  The income from the Company's  equity
          investment  in the  Partnership  for the three  months ended March 31,
          2001 was $1,225,396.

<PAGE>

                    Regency Affiliates, Inc. and Subsidiaries
                   Notes to Consolidated Financial Statements

Note 2.  Investment in Partnership (Continued)

          Summarized  operating  data for  Security  for the three  months ended
          March 31, 2001, and March 31, 2000, is as follows:

<TABLE>
<CAPTION>

                                                                         2001             2000

<S>                                                            <C>                  <C>
         Revenues                                              $      3,352,823     $  3,314,485
         Operating Expenses                                             982,451          904,881
         Depreciation and Amortization                                  716,067          710,067
         Interest Expense, Net                                          364,444          509,519
                                                                      ---------        ---------
             Net Income                                        $      1,289,861     $  1,190,018
                                                                     -----------     -----------

</TABLE>

Note 3.  Notes Payable - Banks

          The Company's subsidiary,  Rustic Crafts, has established a $1,000,000
          line of credit  with PNC Bank.  The line of credit  expires on May 18,
          2001 and bears  interest  at the  Bank's  prime  rate  minus  one-half
          percent (9% at March 31, 2001). The accounts receivable, inventory and
          other assets,  such as property and  equipment,  of Rustic Crafts have
          been pledged as collateral  to secure the line of credit.  The line of
          credit is  guaranteed  by the Company.  At March 31, 2001,  the amount
          outstanding under the line of credit was $353,231.

          The  Company's  subsidiary,  Glas-Aire,  has  established  a  Canadian
          $3,000,000 (U.S.  $2,040,000) line of credit with a Canadian bank. The
          line of credit is collateralized by accounts  receivable and inventory
          and bears interest at the rate of the Canadian  bank's prime rate plus
          one-half  percent  (6.6% at March 31,  2001).  At March 31, 2001,  the
          amount outstanding under the line of credit was zero.

          On October 24, 2000,  the Company  obtained a  commitment  for a short
          term loan of $100,050  from a bank bearing  interest at the prime rate
          plus 3/4%,  adjusted monthly.  As of March 31, 2001,  $76,000 remained
          outstanding;   the  interest  rate  was  10.25%.  This  obligation  is
          guaranteed by two  shareholders,  one of whom is a former  officer and
          director of the Company.

Note 4.  Related Parties

          The Company has outstanding  $186,000 of demand notes bearing interest
          at  10%  payable  to  a  shareholder.  Additionally  the  Company  has
          outstanding a $763,503 demand note bearing interest at a rate of prime
          minus 1% to its  President.  These  obligations  are  secured  by  the
          shares of Glas-Aire owned by the Company.

Note 5.  Long-Term Debt

          KBC Bank Loan - On June 24, 1998, the Company refinanced the long-term
          debt previously  outstanding  with Southern Indiana  Properties,  Inc.
          ("SIPI") and entered into a Loan  Agreement (the "Loan") with KBC Bank
          N.V.  ("KBC").  Under the terms of the Loan  Agreement,  KBC  advanced
          $9,383,320.  The  due  date of the  Loan is  November  30,  2003  with
          interest at the rate of 7.5% compounded  semi-annually  on each June 1
          and December 1, commencing  December 1, 1998. The interest may be paid
          by the Company in cash on these  semi-annual  dates or the Company may
          elect  to  add  the  interest  to  the  principal  of  the  Loan  then
          outstanding.  As of March 31, 2001, the amount  outstanding  under the
          Loan is  $11,239,283,  including  $210,771 of  interest  for the three
          months ended March 31, 2001.

<PAGE>

                    Regency Affiliates, Inc. and Subsidiaries
                   Notes to Consolidated Financial Statements

Note 5.  Long-Term Debt (Continued)

          The Company  purchased a residual value insurance policy which secures
          the repayment of the outstanding  principal and interest when due with
          a maximum liability of $14 million. The costs related to the insurance
          along with legal fees and other costs  associated  with  obtaining the
          Loan  have  been  capitalized  as debt  issuance  costs  and are being
          amortized  over the  life of the Loan  using  the  effective  interest
          method.

          Mortgage Loan - On March 25, 1998,  Rustic Crafts purchased a building
          of 126,000 square feet located in Scranton, Pennsylvania. The purchase
          of this  facility was funded in part by a first  mortgage term loan in
          the amount of  $960,000.  The first  mortgage  term loan is payable in
          consecutive  monthly  installments  over  10  years  with  a  20  year
          amortization.

          Equipment Loans - In connection with the purchase of the building, PNC
          Bank loaned the Company a total of $767,000 to finance the acquisition
          of new  equipment  and to  install  such  equipment  in the  facility.
          Principal  payments on one loan of  $604,000  began March 2000 for 120
          months in amounts sufficient to amortize the outstanding  balance over
          twenty  years from March  2000.  In March 2000 the  interest  rate was
          changed to the average weekly yield on U.S.  Treasury Bills,  plus 200
          basis points. The remaining loan in the original amount of $163,500 is
          payable in equal monthly installments of $2,518.

          Miscellaneous   Loan  -  In  June  1999,  Rustic  Crafts  obtained  an
          additional  loan from PNC Bank for the  purpose of funding  additional
          equipment purchases and working capital in the amount of $156,000. The
          loan is payable in equal monthly installments, including principal and
          interest, of $3,153.

          The interest  rates on the mortgage  loan,  the equipment loan and the
          miscellaneous  loan range from 7.52% to 8.25% at March 31,  2001.  The
          outstanding balance on these loans is $1,730,400 at March 31, 2001.

          Rustic  Craft's  real  and  personal  property,   equipment,  accounts
          receivable,  inventory  and other general  intangibles  are pledged as
          security for the loans.  The loans are also guaranteed by the Company.
          The security  agreement  requires  Rustic  Crafts to maintain  certain
          financial ratios.  Rustic Crafts was in compliance with such ratios at
          March 31, 2001.

          Lease  Obligations - Glas-Aire has two long-term lease  obligations to
          purchase  equipment.  These  obligations were five year capital leases
          and have been  recorded as a capital  asset and  long-term  debt.  The
          equipment is pledged as  collateral  for the leases.  The terms of the
          leases  required  equal  monthly   installment  of  $7,484   including
          principal and interest over a five year period.  Interest rates on the
          leases range from 6.5% to 8.6%. The total outstanding balance of these
          lease obligations is $111,461 at March 31, 2001.

<PAGE>

                    Regency Affiliates, Inc. and Subsidiaries
                   Notes to Consolidated Financial Statements

Note 6.  Income Taxes

          As referred to in Note 1, the Company  utilizes SFAS 109,  "Accounting
          For Income  Taxes."  The  deferred  taxes are the result of  long-term
          temporary  differences  between financial  reporting and tax reporting
          for depreciation,  earnings from the Company's partnership  investment
          in Security Land and Development  Company Limited  Partnership related
          to  depreciation  and  amortization  and the recognition of income tax
          carryforward items.

          For regular federal income tax purposes, the Company has remaining net
          operating  loss  carryforwards  of  approximately  $27,982,000.  These
          losses can be carried  forward to offset future taxable income and, if
          not  utilized,  will expire in varying  amounts  beginning in the year
          2001.

          For the three months ended March 31, 2001, and 2000, the tax effect of
          net operating  loss  carryforwards  reduced the current  provision for
          regular Federal income taxes by approximately  $154,000, and $115,000,
          respectively.  The Company provided $68,923 and $65,895, for Canadian,
          state income and the alternative minimum tax in the three months ended
          March 31,2001 and 2000, respectively.


Note 7.  Redemption of Series E Preferred Stock

          On January  31,  2000,  the  holders of the Series E  preferred  stock
          either  converted their preferred shares to the Company's common stock
          or received  cash equal to the par value of the shares,  plus  accrued
          dividends.  The Company issued 95,877 of its common shares in exchange
          for 885  shares of  preferred  stock  and paid  cash in the  amount of
          $159,300 for 1,593 shares.


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

General.

          Regency  Affiliates,  Inc. (the  "Company")  is the parent  company of
          several subsidiary  business  operations.  The Company is committed to
          develop and/or  monetize these business  operations for the benefit of
          its  shareholders and continues to commit both financial and personnel
          resources  to an active  merger  and  acquisition  program in order to
          enhance  common  stockholders'  values.  The  Company's  Shareholders'
          Equity at March 31, 2001 was $16,501,809 as compared to $14,178,411 at
          March 31, 2000, an increase of $2,323,398  for the twelve months ended
          March 31, 2001.


   Liquidity and Capital Resources.

          The  investment  in Security is  estimated to provide the Company with
          management fees of approximately $100,000 per annum until 2003. In the
          period  ending March 31, 2001,  the  Company's  income from its equity
          investment in the  Partnership (as well as its interest in its General
          Partner, 1500 WoodLawn L.P.) was $1,225,396. These funds, however, are
          presently committed for the amortization of the outstanding  principal
          balance on Security's  real estate  mortgage and,  while the Company's
          equity  investment in the  Partnership  has increased to  $25,801,277,
          neither  provides  liquidity  to the Company in excess of the $100,000
          annual  management fee. The Company has,  however,  been successful in
          obtaining financing with respect to this investment.

<PAGE>

Item 2. Management's  Discussion and Analysis of Financial Condition and Results
        of Operations. (Continued)

          On March 15,  1998,  Rustic  Crafts  purchased  a building  of 126,000
          square  feet   located   near  the  current   facility  in   Scranton,
          Pennsylvania.  The  purchase  of  this  facility  was  funded  by  new
          borrowings  from PNC Bank in the form of a first mortgage term loan in
          the amount of  $960,000.  Rustic  Crafts also  obtained  financing  of
          approximately  $923,000  from  PNC  Bank to  equip  the  facility  and
          purchase new equipment.  The move to the new facility was completed in
          1999  and has  significantly  increased  the  operating  capacity  and
          enabled Rustic Crafts to more  efficiently fill its current orders and
          increase  its customer  base.  On the date of  acquisition  of the new
          facility,  a tenant was renting 23,000 square feet of this facility at
          a base rent of $17,400  per year plus an  allocable  share of the real
          estate taxes. The Company intends to maintain this tenant relationship
          on an ongoing basis and has rented an additional 28,000 square feet to
          another  tenant at an annual  minimum rent of $71,680.  Rustic  Crafts
          also has a $1 million line of credit which expired on May 18, 2001 and
          is being renegotiated.

          The Company has had discussions with several  companies  regarding the
          possible sale of its interest in NRDC. To facilitate  the  discussions
          concerning a possible sale, the NRDC zero coupon bonds (secured by the
          aggregate inventory),  were retired in 1999 by the issuance of 121,000
          shares of the Company's common stock. Following the termination of the
          1999 NRDC Plan of Merger with Cotton Valley Resources Corporation, the
          Company installed limited aggregate crushing and marketing  operations
          at the  Groveland  Mine in an  informal  joint  venture  with  another
          company. The Company is also exploring the possibility of establishing
          a permanent  infrastructure  during the year 2001 to commercialize the
          inventory  of  previously  quarried  and  stockpiled  aggregate at the
          Groveland Mine in cooperation  with an  experienced  aggregate  supply
          company.

          On April 22, 1999,  the Company  acquired  513,915 shares (35%) of the
          outstanding  common stock of Glas-Aire  ("Glas-Aire") for the issuance
          of a promissory  note of $650,000 due January 1, 2000,  at an interest
          rate of 7.5% per  annum,  which  note was  guaranteed  by Mr.  William
          Ponsoldt,  Sr.,  President of the Company and $1,213,000 in cash. Said
          cash and additional  funds necessary for the purchase of shares in the
          open market were provided by Liberty Group.  Inc.,  Interswiss Trading
          Co., Ltd., Isla  International  Corp.,  and National Trust Co., former
          affiliaes of the Statesman  Group.  Additional  shares were  purchased
          through a common  stock  exchange  agreement  between  the Company and
          certain  shareholders  of Glas-Aire.  Under the common stock  exchange
          agreement,  the  Company  issued  1,188,000  shares of its  restricted
          common stock in exchange for 288,000  Glas-Aire  common shares held by
          the shareholders. The Company also sold 2,852,375 shares of its common
          stock to  Glas-Aire  for  cash of  $1,967,960  and  86,000  shares  of
          Glas-Aire  common  stock.  The proceeds were used to repay the funding
          provided by the former  affiliates of Statesman  named above and other
          general corporate  requirements.  As of September 23, 1999 Regency had
          acquired 51.3% of the common stock of Glas-Aire.

          The  Company  is  indebted  to  the  Statesman  Group  (a  significant
          shareholder  of the  Company)  in the amount of  $186,000 at March 31,
          2001 pursuant to a series of secured demand notes bearing  interest at
          10% per  annum.  Such  funds are used for  working  capital  purposes.
          Statesman has agreed to provide the Company with an aggregate of up to
          $300,000 in financing on a similar  basis.  No assurances can be given
          that the Company  will be able to find  additional  financing on terms
          acceptable to it if the Company fully utilizes the financing available
          from Statesman.

Results of Operations

          In September  1999,  the Company  acquired a 51% interest in Glas-Aire
          which manufacturers  automotive accessories.  The financial statements
          for March 1, 2001 include the results of Glas-Aire.  The operations of
          the Company also include the  operations  of Rustic  Crafts,  which is
          engaged in the manufacturing of decorative fireplaces, heater logs and
          related accessories.

<PAGE>

Item 2. Management's  Discussion and Analysis of Financial Condition and Results
        of Operations. (Continued)

2001 Compared to 2000

          Net sales increased $1,245,573 in 2001 over the similar period in 2000
          of which $934,528 is attributable to Glas-Aire's change in fiscal year
          from  January 31 year end to December  31.  Results  for 2000  include
          only two months of operations for Glas-Aire. The remaining increase is
          due to $465,711 of additional sales of sales from Glas-Aire, offset by
          a decrease  in sales at Rustic  Crafts of  $154,666.  The  decrease at
          Rustic Crafts was due to smaller backlogs at December 31, 2000 and the
          decrease in sales of low margin products.

          Gross margin  increased  $209,277 of which $269,278 is attributable to
          Glas-Aire's  change in fiscal year.  The remaining  decrease is due to
          decrease  in gross  margins  from  Glas-Aire  of $9,222  and of Rustic
          Crafts of $50,779.

          Selling  and  administrative  expenses  increased  $198,307 in 2001 as
          compared  to  2000,   which  increase  is  largely   attributable   to
          Glas-Aire's change in year end.

          Income from equity in partnerships increased $94,879. This increase is
          due to a  decrease  in  interest  expense  resulting  from  payment of
          principal offset by increases in operating expenses for the quarter as
          to  Security  and  income  resulting  from the  Company's  5%  limited
          partnership interest in Woodlawn, L.P.

          Interest expense  increased by $35,080 and is largely  attributable to
          increased interest expense on the KBC loan.

          Net income  increased  $60,760  in 2001  compared  to 2000.  Glas-Aire
          earnings of $36,200,  after  minority  interests and increased  equity
          earnings from  partnerships were offset by additional losses at Rustic
          Crafts.

Forward-Looking Statements

     Certain  statements  contained  in this  Quarterly  Report  on  Form  10-Q,
     including,  but not  limited to those  regarding  the  Company's  financial
     position,  business  strategy,  acquisition  strategy  and other  plans and
     objectives  for future  operations  and any other  statements  that are not
     historical facts constitute "forward-looking statements" within the meaning
     of  the   Private   Securities   Litigation   Reform  Act  of  1995.   Such
     forward-looking  statements involve known and unknown risks,  uncertainties
     and  other   important   factors  that  could  cause  the  actual  results,
     performance or  achievements  expressed or implied by such  forward-looking
     statements to differ  materially  from any future  results,  performance or
     achievements  expressed  or  implied  by such  forward-looking  statements.
     Although  the Company  believes  that the  expectations  reflected in these
     forward-looking  statements are reasonable,  there can be no assurance that
     the actual  results or  developments  anticipated  by the  Company  will be
     realized  or,  even if  substantially  realized,  that  they  will have the
     expected  effect  on its  business  or  operations.  These  forward-looking
     statements  are  made  based  on  management's   expectations  and  beliefs
     concerning   future  events  impacting  the  Company  and  are  subject  to
     uncertainties and factors  (including,  but not limited to, those specified
     below) which are  difficult to predict and, in many  instances,  are beyond
     the control of the Company. As a result,  actual results of the Company may
     differ materially from those results  contemplated by such  forward-looking
     statements which include, but are not limited to:

     (i)  The Company's current operations do not generate  sufficient cash flow
          at the parent company level to cover corporate  operating expenses and
          thus the Company must rely on external sources to fund these expenses.

<PAGE>

Item 2.  Management's Discussion and Analysis of Financial Condition and Results
         of Operations. (Continued)

     (ii) The Company  currently lacks the necessary  infrastructure at the site
          of the  Groveland  Mine to permit the Company to make more than casual
          sales of the aggregate.

     (iii)An  uncured  default  in  the  Lease  or  sudden  catastrophe  to  the
          Security West Building from  uninsured acts of God or war could have a
          materially  adverse  impact upon the Company's  investment in Security
          Land and  Development  Company  Limited  Partnership and therefore its
          financial position and results of operations.

     (iv) The failure of the Social Security  Administration  to renew its lease
          of the Security West Buildings upon its expiration on October 31, 2003
          could have a materially  adverse impact upon the Company's  investment
          in Security Land and Development Company Limited Partnership.

     (v)  The Company has significant tax loss and credit  carryforwards  and no
          assurance can be provided that the Internal  Revenue Service would not
          attempt  to  limit  or  disallow   altogether   the   Company's   use,
          retroactively  and/or  prospectively,  of such  carryforwards,  due to
          ownership  changes  or  any  other  reason.  The  disallowance  of the
          utilization of the Company's net operating loss would severely  impact
          the Company's  financial position and results of operations due to the
          significant  amounts of taxable  income  (generated  by the  Company's
          investment in Security) that have in the past been, and is expected in
          the  future  to  be,  offset  by  the  Company's  net  operating  loss
          carryforwards.

<PAGE>

PART II - OTHER INFORMATION


ITEM 1. LEGAL PROCEEDINGS.

None.

ITEM 2. CHANGES IN SECURITIES.

None.

ITEM 3. DEFAULTS UPON SENIOR SECURITIES

None.

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

None.

ITEM 5. OTHER INFORMATION.

None.


ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K.

None.


                                   SIGNATURES

     Pursuant  to the  requirements  of  Section  13 or 15(d) of the  Securities
Exchange  Act of 1934,  the  Company has duly caused this report to be signed on
its behalf by the undersigned thereunto duly authorized.



                                           REGENCY AFFILIATES, INC.
                                                 (Registrant)


Date: May 17, 2001                         /s/ Marc H. Baldinger
-------------------                        ----------------------
                                          (Chief Financial Officer and Director)