<PAGE>   1
                       SECURITIES AND EXCHANGE COMMISSION
                             WASHINGTON, D.C. 20549
                                    FORM 10-Q


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


       FOR THE QUARTER ENDED SEPTEMBER 30, 1999 COMMISSION FILE NO. 1-7949

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


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

729 South Federal Hwy., Suite 307, Stuart, Fl.                   34994
----------------------------------------------                   -----
  (Address of principal executive offices)                     (Zip Code)

10842 Old Mill Road, # 5B, Omaha, NE                             68154
------------------------------------                             -----
 (Address of administrative offices)                          (Zip Code)

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

   Registrant's Telephone Number (administrative office), including Area Code:
                                 (402-330-7460)
                                 --------------


         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
                                ---             ---

         Indicate the number of shares outstanding of each of the Issuer's
classes of common stock, as of the latest practicable date.

$.40 Par Value Common Stock - Issued 12,743,516 shares with 4,052,825 shares in
Treasury as of September 30, 1999.

<PAGE>   2


                                TABLE OF CONTENTS

<TABLE>
<CAPTION>

                                                                                PAGE
                                                                                ----
<S>                                                                             <C>
PART I -  FINANCIAL INFORMATION

Item 1.           Financial Statements                                            3
Item 2.           Management's Discussion and Analysis of Financial
                  Condition And Results of Operations                            15


PART II - OTHER INFORMATION

Item 1.           Legal Proceedings                                              20
Item 2.           Changes in Securities and Use of Proceeds                      20
Item 3.           Defaults Upon Senior Securities                                20
Item 4.           Submission of Matters to a Vote of Security Holders            20
Item 5.           Other Information                                              21
Item 6.           Exhibits and Reports on Form 8-K                               21

</TABLE>


                                       2
<PAGE>   3


REGENCY AFFILIATES, INC.

PART 1 - FINANCIAL INFORMATION

ITEM 1.    FINANCIAL STATEMENTS


           The following pages contain the information required by Part I, Item
           1.



                                       3

<PAGE>   4

                    REGENCY AFFILIATES, INC. AND SUBSIDIARIES
                           CONSOLIDATED BALANCE SHEETS
<TABLE>
<CAPTION>



                                                                            SEPTEMBER 30, 1999      DECEMBER 31, 1998
                                                                            ------------------     -------------------
                                                                               (UNAUDITED)
CURRENT ASSETS
<S>                                                                         <C>                     <C>
      Cash and cash equivalents                                             $        2,536,487      $       2,168,541
      Accounts receivable                                                            2,086,853                752,861
      Inventory                                                                      1,765,167                806,006
      Other current assets                                                             399,084                130,375
                                                                            -------------------     ------------------
             Total current assets                                                    6,787,591              3,857,783

PROPERTY, PLANT AND EQUIPMENT, NET                                                   4,178,330              1,980,063

INVESTMENTS
      Partnership investment                                                        18,854,775             15,799,631
      Rental property, net                                                                   -                108,512
                                                                            -------------------     ------------------
             Total investments                                                      18,854,775             15,908,143

OTHER ASSETS
      Aggregate inventory                                                              841,319                843,049
      Goodwill, net of amortization                                                    769,076                631,788
      Debt issuance costs, net of amortization                                         750,280                869,643
      Other                                                                             93,434                 36,947
                                                                            -------------------     ------------------
             Total other assets                                                      2,454,109              2,381,427
                                                                            -------------------     ------------------
                                                                            $       32,274,805      $      24,127,416
                                                                            ===================     ==================

</TABLE>


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




                                       4
<PAGE>   5



                    REGENCY AFFILIATES, INC. AND SUBSIDIARIES
                           CONSOLIDATED BALANCE SHEETS
<TABLE>
<CAPTION>


                                                                             SEPTEMBER 30, 1999      DECEMBER 31, 1998
                                                                             -------------------     -----------------
                                                                                 (UNAUDITED)
<S>                                                                          <C>                     <C>
CURRENT LIABILITIES
      Current portion of long-term debt                                      $           66,086      $          38,300
      Current portion of serial preferred stock
        subject to mandatory redemption                                                 242,964                163,600
      Notes payable                                                                   1,239,509                464,200
      Accounts payable                                                                1,097,462                282,945
      Accrued expenses                                                                  772,336                276,165
                                                                             -------------------     ------------------
             Total current liabilities                                                3,418,357              1,225,210

LONG-TERM DEBT, net of current portion                                               12,626,347             11,519,930

DEFERRED INCOME TAXES                                                                   358,504                      -

MINORITY INTEREST IN CONSOLIDATED SUBSIDIARIES                                        3,226,657                 89,576

SERIAL PREFERRED STOCK SUBJECT TO MANDITORY
  REDEMPTION (liquidation preference and redemption
  value $247,800), net of current portion                                                     -                 73,650

SHAREHOLDERS' EQUITY
      Serial preferred stock not subject to mandatory
        redemption (maximum liquidation preference
        $24,957,326 in 1999 and 1998)                                                 1,052,988              1,052,988
      Common stock, par value $.40, authorized
        25,000,000 shares;  issued 16,743,516 shares in
        1999 and 12,644,549 in 1998                                                   6,697,407              5,057,831
      Additional paid-in capital                                                      2,012,124                270,510
      Readjustment resulting from quasi-reorganization
        at December 31, 1987                                                         (1,670,596)            (1,670,596)
      Treasury stock, 4,052,825 shares in 1999
        and 12,460 shares in 1998                                                    (3,338,033)               (10,702)
      Retained earnings                                                               7,891,050              6,519,019
                                                                             -------------------     ------------------
             Total shareholders' equity                                              12,644,940             11,219,050
                                                                             -------------------     ------------------
                                                                             $       32,274,805      $      24,127,416
                                                                             ===================     ==================
</TABLE>


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





                                       5
<PAGE>   6


                    REGENCY AFFILIATES, INC. AND SUBSIDIARIES
                      CONSOLIDATED STATEMENTS OF OPERATIONS
         THREE MONTHS AND NINE MONTHS ENDED SEPTEMBER 30, 1999 AND 1998
                                   (UNAUDITED)
<TABLE>
<CAPTION>

                                                  ______Three Months_____                 ______Nine Months_____
                                                       1999                1998                1999               1998
                                                -----------------   -----------------   -----------------  -----------------
<S>                                             <C>                 <C>                 <C>                <C>
NET SALES                                       $      1,164,941    $      1,177,352    $      3,041,117   $      2,527,735

COST AND EXPENSES
      Cost of goods sold                                 626,620             802,814           2,150,587          1,678,167
      Selling and administrative                         822,828             565,412           1,835,020          1,515,059
                                                -----------------   -----------------   -----------------  -----------------
                                                       1,449,448           1,368,226           3,985,607          3,193,226
                                                -----------------   -----------------   -----------------  -----------------

INCOME (LOSS) FROM OPERATIONS                           (284,507)           (190,874)           (944,490)          (665,491)

INCOME FROM EQUITY INVESTMENT
  IN PARTNERSHIP                                       1,044,355             970,497           3,156,470          2,934,685

OTHER INCOME                                             112,446              45,008             210,139             67,314

INTEREST EXPENSE                                        (330,504)           (270,644)           (922,658)        (1,079,248)
                                                -----------------   -----------------   -----------------  -----------------

INCOME BEFORE INCOME TAX
  EXPENSE AND MINORITY INTEREST                          541,790             553,987           1,499,461          1,257,260

INCOME TAX EXPENSE                                       (36,290)            (23,375)            (77,598)           (49,475)

MINORITY INTEREST                                        (15,395)               (567)            (11,218)            (9,108)

                                                =================   =================   =================  =================
NET INCOME                                      $        490,105    $        530,045    $      1,410,645   $      1,198,677
                                                =================   =================   =================  =================

NET INCOME ATTRIBUTABLE TO
COMMON SHAREHOLDERS
  (after accrued preferred stock dividends of
  $7,982 and $24,049 in 1999 and $8,034
  and $24,099 in 1998, and preferred
  stock accretion of $4,855 and $14,564 in
  1999 and $4,487 and $13,462 in 1998)          $        477,268    $        517,525    $      1,372,032   $      1,161,116
                                                =================   =================   =================  =================

NET INCOME PER COMMON SHARE
      Basic                                     $           0.04    $           0.04    $           0.11   $           0.09
                                                =================   =================   =================  =================

      Diluted                                   $           0.03    $           0.03    $           0.10   $           0.08
                                                =================   =================   =================  =================
</TABLE>


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




                                       6
<PAGE>   7


                    REGENCY AFFILIATES, INC. AND SUBSIDIARIES
                      CONSOLIDATED STATEMENTS OF CASH FLOWS
                  NINE MONTHS ENDED SEPTEMBER 30, 1999 AND 1998
                                   (UNAUDITED)
<TABLE>
<CAPTION>

                                                                                        1999                   1998
                                                                                 ------------------     -------------------
<S>                                                                              <C>                    <C>
CASH FLOWS FROM OPERATING ACTIVITIES
      Net Income                                                                 $       1,410,645      $        1,198,677
      Adjustments to reconcile net income to net
      cash used by operating activities:
         Depreciation and amortization                                                     175,139                  68,555
         Minority interest                                                                  11,218                   9,108
         Stock issued in lieu of cash compensation                                          45,000                 129,960
         Income from equity investment in partnership                                   (3,156,470)             (2,934,685)
         Distribution of equity earnings from partnership                                  101,326                 102,278
         Undistributed earnings of equity investment                                      (114,961)               -
         Interest amortization on long-term debt                                           711,371                 788,336
         Gain on disposal of rental properties                                             (19,250)               -
         Changes in operating assets and liabilities:
             Accounts receivable                                                           186,268                (188,363)
             Inventory                                                                    (155,396)               (386,356)
             Other current assets                                                          (36,044)                (61,123)
             Accounts payable                                                             (449,927)                 12,015
             Accrued expenses                                                              399,658                  61,719
                                                                                 ------------------     -------------------
               Net cash used by operating activities                                      (891,423)             (1,199,879)

CASH FLOWS USED FOR INVESTING ACTIVITIES
      Capital expenditures                                                                (589,290)             (1,629,211)
      Acquisition of business, net of $595,995 of cash acquired                           (736,624)               -
      Other assets                                                                         (57,855)                (45,119)
      Proceeds from sale of rental properties                                              126,565                -
                                                                                 ------------------     -------------------
               Net cash used for investing activities                                   (1,257,204)             (1,674,330)

CASH FLOWS FROM FINANCING ACTIVITIES
      Net short-term borrowings                                                            110,800                 479,000
      Proceeds from long-term borrowings                                                   489,644              10,709,667
      Repayment of long-term borrowings                                                    (27,782)             (5,186,786)
      Issuance of common stock                                                           1,967,960                -
      Debt issuance costs                                                                 -                       (949,673)
      Dividends paid                                                                       (24,049)                (24,099)
                                                                                 ------------------     -------------------
               Net cash from financing activities                                        2,516,573               5,028,109
                                                                                 ------------------     -------------------

INCREASE (DECREASE) IN CASH AND CASH EQUIVALENTS                                           367,946               2,153,900

CASH AND CASH EQUIVALENTS - BEGINNING                                                    2,168,541                 252,354
                                                                                 ------------------     -------------------

CASH AND CASH EQUIVALENTS - ENDING                                               $       2,536,487      $        2,406,254
                                                                                 ==================     ===================
</TABLE>


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


                                       7
<PAGE>   8


                                                            1999        1998
                                                            ----        -----

Supplemental disclosures of cash flow information:
Cash paid during the period for:
     Income taxes                                       $  82,075   $    65,500
     Interest                                             206,969       561,000


Supplemental disclosure of non cash investing and
  financing activities:

     In September 1999, the Company issued 10,828 shares of common stock in
     exchange for 88.5 shares of Series E mandatory redeemable preferred stock
     and 47,736 shares of common stock as compensation for directors.

     In 1999, the Company issued 1,580,425 shares of its common stock, a
     promissory note in the amount of $650,000 and paid cash of $1,332,619 for
     51.3% of the outstanding common stock of Glas-Aire Industries Group, Ltd.
     The following is a summary of net cash paid:

         Fair value of assets acquired including goodwill     $   5,061,303
         Less:
              Liabilities assumed                                 1,814,344
              Promissory note issued                                650,000
              Common stock issued                                 1,264,340
              Cash acquired                                         595,995
                                                              -------------

              Net paid, Net of Cash of $595,995 acquired      $     736,624
                                                              -------------


     In 1998 the Company issued 187,000 shares of treasury stock as compensation
     for services rendered.






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



                                       8
<PAGE>   9

                    REGENCY AFFILIATES, INC. AND SUBSIDIARIES
                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS


NOTE 1. BASIS OF PRESENTATION AND SUMMARY OF SIGNIFICIANT 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 include 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 and nine-month
     periods ended September 30, 1999 are not necessarily indicative of the
     results that may be expected for the year ended December 31, 1999. 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, 1998.

B.   Principles of Consolidation - The consolidated financial statements include
     the accounts of Regency Affiliates, Inc. (the "Company"), its wholly-owned
     subsidiary, Rustic Crafts International, Inc. ("Rustic Crafts") and its 80%
     owned subsidiaries National Resources Development Corporation ("NRDC"),
     Transcontinental Drilling Company ("Drilling") and RegTransco, Inc. ("RTI")
     and, since September 23, 1999, its 51.3% owned subsidiary Glas-Aire
     Industries Group, Ltd. (See Note 6). All significant inter-company 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 (net income less preferred stock
     dividend requirements and periodic accretion) by the weighted average
     number of common shares outstanding during the relevant period. Diluted
     earnings per share computations assume the conversion of Series E, Series
     B, and Junior Series D preferred stock during the period that the preferred
     stock issues were outstanding. If the results of these assumed conversion
     is dilutive, the dividend requirements and periodic accretion for the
     preferred stock issues are reduced.

D.   Inventory - Inventories are stated at the lower of cost or market using the
     first-in, first-out method ("FIFO"). Inventory is comprised of the
     following at September 30, 1999 and December 31, 1998.
                                                  1999               1998
                                                  -----              ----
        Raw materials and supplies           $    806,751          $379,672
        Work in process                           206,083           120,416
        Finished products                         752,333           305,918
                                             ------------          --------
                                             $  1,765,167          $806,006
                                             ------------          --------


                                       9
<PAGE>   10


E.   Aggregate Inventory - Aggregate inventory is stated at lower of cost or
     market. Liens have been attached to the aggregate inventory by the holders
     of the zero coupon bonds, having a face value of $542,200 and a carrying
     value of $445,975 at September 30, 1999. NRDC is also subject to a royalty
     agreement, which requires the payment of certain royalties to a previous
     owner of the aggregate upon sales of the aggregate.

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 period in which they are expected to
     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 on 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.


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. The Company can
compel the sale of the property after December 31, 2004.

         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 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.


                                       10
<PAGE>   11

          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 Sheet at September 30, 1999 was
$18,854,775. The income from the Company's equity investment in the partnership
for the three months and nine months ended September 30, 1999 was $1,044,355 and
$3,156,470, respectively.

         Summarized operating data for Security for the three months and nine
months ended September 30, 1999, and September 30, 1998, is as follows:
<TABLE>
<CAPTION>

                                             Three Months                        Nine Months
                                    ------------------------------     -----------------------------
                                        1999             1998              1999            1998
                                    ------------------------------     -----------------------------
<S>                                 <C>             <C>                <C>            <C>
Revenues                            $   3,295,565   $    3,290,147     $   9,892,679  $    9,861,932
Operating Expenses                        844,892          811,235         2,540,448       2,423,648
Depreciation and Amortization             709,123          707,550         2,127,369       2,122,040
Interest Expense, Net                     642,229          749,722         1,902,261       2,226,719
                                    -------------    -------------     -------------  --------------
     Net Income                     $   1,099,321    $   1,021,640     $   3,322,601  $    3,089,525
                                    -------------    -------------     -------------  --------------
</TABLE>



NOTE 3. NOTES PAYABLE

         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, 2000 and
bears interest at the Bank's prime rate minus one-half percent (7.75% at
September 30, 1999). At September 30, 1999 the amount outstanding under the line
of credit was $581,000.

         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. Rustic Crafts has agreed to maintain certain net worth, current
ratio and debt service coverage requirements and is in compliance with these
requirements. The line of credit is guaranteed by the Company.

         In connection with the purchase of the common shares of Glas-Aire (see
Note 6) the Company issued the following promissory notes:

         Promissory note in the amount of $650,000 to the seller of the shares,
         7.5% interest, due January 1, 2000, secured by a first priority
         interest in 200,000 shares of Glas-Aire.

         Promissory note in the amount of $1,213,000 to an affiliate of
         Statesman Group, Inc., a significant shareholder of the Company; 7.5%
         interest due on demand and unsecured. This note was repaid on August
         26, 1999 with proceeds from the sale of common shares to Glas-Aire.


                                       11
<PAGE>   12

NOTE 4. LONG TERM DEBT

         KBC Bank Loan. On June 24, 1998, the Company refinanced its previously
outstanding long-term debt with a loan from KBC Bank N.V. ("KBC"). The loan
matures on November 30, 2003, with interest compounded semi-annually on June 1
and December 1 of each year during the term of the loan. The interest may be
paid on these semi-annual dates or the Company may elect to add the interest to
the principal of the loan then outstanding. As of September 30, 1999, the amount
outstanding under the loan was $10,317,431, including $192,888 and $560,733 of
interest reflected in the accompanying Statement of Operations for the three
months and nine months ended September 30, 1999, respectively.

         The Company incurred debt issuance costs in connection with the above
referenced KBC loan and purchased a residual value insurance policy to secure
the repayment of the outstanding principal and interest when due. These costs
are shown as Debt Issuance Costs and are being amortized over the life of the
loan using the effective interest method. Such amortization of $39,787 and
$119,363 for the three months and nine months ended September 30, 1999 is
included in Interest Expense in the accompanying Statement of Operations.

         Rustic Crafts Mortgage. In March 1998, Rustic Crafts purchased a
126,000 square foot building on seven acres of land in Scranton, Pennsylvania
for approximately $1.2 million. PNC Bank provided a first mortgage term loan in
the amount of $960,000 and a convertible line of credit of $410,000, both
carrying an interest rate of PNC's prime rate less one-half percent. PNC has
also provided equipment financing of $400,000, also at PNC's prime rate less
one-half percent. In June 1999, Rustic Crafts secured an additional business
loan in the amount of $600,000 at PNC's prime rate less one-half percent. The
principal is due on March 25, 2010, with interest payments due monthly. At
September 30, 1999, the aggregate principal amount outstanding on these loans
was $1,835,325.


NOTE 5. 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 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.


                                       12
<PAGE>   13


         At September 30, 1999, the Company's net deferred tax asset, utilizing
a 34% effective tax rate, consists of:

     Deferred tax assets:
       Investment partnership earnings                       $     2,384,000
       Net operating loss carryforwards                           10,588,000
       Alternative minimum tax credits                               394,000
                                                             ---------------
     Total deferred tax assets before valuation allowance         13,366,000
     Valuation allowance                                         (13,366,000)
                                                             ---------------
       Net deferred tax asset                                $        -0-
                                                             ---------------


         The valuation allowance was established to reduce the net deferred tax
asset to the amount that will more likely than not be realized. This reduction
is necessary due to uncertainty of the Company's ability to utilize the net
operating loss and tax credit carryforwards before they expire.

         For regular federal income tax purposes, the Company has remaining net
operating loss carryforwards of approximately $31,600,000. 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 and nine months ended September 30, 1999, the tax
effect of net operating loss carryforwards reduced the current provision for
federal income taxes by approximately $145,000 and $425,000, respectively. The
Company provided $25,575 and $66,885 for state income and the alternative
minimum tax in the three months and nine months ended September 30, 1999,
respectively.


NOTE 6. INVESTMENT IN GLAS-AIRE INDUSTRIES GROUP, LTD.

         On April 22, 1999, the Company acquired 513,915 shares of the common
stock of Glas-Aire Industries Group, Ltd. ("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 is guaranteed by Mr. William Ponsoldt, Sr., President of the
Company and $1,213,000 in cash. The cash was obtained from an affiliate of
Statesman Group, Inc. through the issuance of an unsecured demand note at 7.5%
per annum. The Company also purchased 3,000 shares of the common stock of
Glas-Aire on the open market.

         On August 2, 1999, the Company acquired 41,600 shares of the common
stock of Glas-Aire on the open market for $119,619. The funds were provided by
an affiliate of Statesman Group, Inc. on an unsecured basis.

         On August 14, 1999, the Company sold 2,852,375 shares of the Company's
common stock to Glas-Aire for cash of $1,967,960 and 86,000 shares of Glas-Aire
common stock for an aggregate consideration of $2,281,900.


                                       13
<PAGE>   14

         On September 23, 1999 the Company closed a common stock exchange
agreement with certain shareholders of Glas-Aire. Under the agreement, Regency,
in a private transaction, issued 1,188,000 shares of its restricted common stock
to such shareholders in exchange for 288,000 Glas-Aire common shares held by the
shareholders. With the closing of the agreement, the Company owns 51.3% of the
currently outstanding common shares of Glas-Aire.

         At the Glas-Aire annual shareholders' meeting on November 4, 1999,
William Ponsoldt, Sr. and Marc Baldinger, directors of the Company were elected
to the Glas-Aire board of directors. The Company also proposed two other
nominees who were elected to the six-member board of Glas-Aire.

         Glas-Aire is a leading designer, developer, manufacturer and marketer
of automotive parts and accessories to automobile manufacturers worldwide. The
following unaudited pro forma consolidated results of operations assumes that
the transactions discussed above all occurred at the beginning of 1998.

<TABLE>
<CAPTION>

                                              Three Months                          Nine Months
                                    ------------------------------        ------------------------------
                                          1999            1998                 1999               1998
                                    ------------------------------        ------------------------------
<S>                                 <C>              <C>                  <C>              <C>
Net sales                           $   3,616,247    $   2,837,157        $   9,604,414    $   7,507,147
Net income                                570,215          577,075            1,604,056        1,339,767
Net income applicable to
  common stock                            557,378          564,555            1,562,542        1,275,388
Net income per common share
     Basic                                    .04              .04                  .12              .10
     Diluted                                  .04              .04                  .11              .09
</TABLE>




                                       14
<PAGE>   15


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 stockholder value. The
Company's Stockholders' Equity at September 30, 1999 was $12,644,940 as compared
to $10,632,800 at September 30, 1998, an increase of $2,012,140 for the twelve
months ending September 30, 1999.

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. For the nine
months ended September 30, 1999, the Company's income from its equity investment
in the Partnership was $3,156,470. 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 has increased to
$18,854,775, the partnership does not provide 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.

         The Company sold 2,459,950 shares of its common stock to Glas-Aire for
cash of $1,967,940 in connection with the acquisition of Glas-Aire common stock.
The proceeds from this sale were used to repay promissory notes and will provide
cash for working capital or future acquisitions.

         On March 15, 1998, Rustic Crafts purchased a building of 126,000 square
feet located near the current facility in Scranton, Pennsylvania. The cost of
acquiring and equipping this facility of approximately $2 million is being
funded by new borrowings from PNC Bank in the form of a first mortgage in the
amount of $960,000, a construction line of credit of $410,000 and equipment
financing of $400,000. Rustic Crafts also obtained an additional business loan
in 1999 in the amount of $600,000 with a maturity date of March 2010. This new
facility has significantly increased the operating capacity and enabled Rustic
Crafts to more efficiently meet its current order backlog 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.


                                       15
<PAGE>   16

         For several months during 1999 the Company installed aggregate crushing
and marketing operations at the Groveland Mine in an informal joint venture with
another company. The Company plans to establish a permanent infrastructure in
the year 2000 to commercialize the inventory of previously quarried and
stockpiled aggregate at the Groveland Mine in cooperation with an experienced
aggregate supply company. The Company has also had discussions with several
companies regarding the possible sale of its interest in NRDC, the owner of the
aggregate. At this time there is no assurance that any such commercialization or
sale will occur.

         The Company is continuing to explore opportunities for the acquisition
of companies with operations that will provide additional liquidity and cash.
The Company anticipates that such acquisitions would be financed by borrowings
secured by the assets acquired and by the proceeds of its KBC bank loan. The
Company also recently began efforts to secure the private placement of up to
$10,000,000 through the sale of a new series of preferred stock. There can be
no assurance that any such acquisitions or transactions will come to fruition.


Results of Operations

Three Months Ended September 30, 1999 Compared to 1998
------------------------------------------------------

         The operations of the Company include the operations of Rustic Crafts,
its subsidiary, which is engaged in the manufacture of decorative fireplaces,
heater logs and related accessories. Operations also include the results of
Glas-Aire since September 23, 1999, the date the Company acquired 51.3% of
Glas-Aire's common stock.

         Net sales decreased $12,411 from the similar period in 1998. Sales of
$277,324 from Glas-Aire included in the statement of operations, were offset by
decreases of $264,683 at Rustic Crafts. The decrease was due to discontinuing
very low margin products to a major purchaser.

         Gross margins increased $163,783 over the similar period in 1998.
Margins were favorably affected by Glas-Aire operations and by a significant
increase in the gross margins at Rustic Crafts. Management at Rustic Crafts
concentrated its efforts on increasing prices and/or reducing reliance on high
volume, low margin customers.

         Selling and administrative expense increased $257,416 over the similar
period in 1998. Selling expenses at Rustic Crafts increased significantly
reflecting its efforts to advertise and promote its products more aggressively.
General and administrative expenses in 1999 also reflect higher consulting fees
due to the Glas-Aire acquisition and compensation for the board approved by the
shareholders in the third quarter. Selling, general and administrative expenses
of Glas-Aire of $42,514 are included in the statement of operations.


                                       16
<PAGE>   17


         Income from equity in partnership increased $73,858. This increase is
largely due to a decrease in interest expense resulting from payment of
principal by the partnership offset by increases in operating expenses for the
quarter.

         Other income increased $67,438 in 1999 over 1998 due primarily to the
equity earnings of $84,961 related to the Company's interest in Glas-Aire prior
to September 23, 1999, the date the Company acquired 51.3% of Glas-Aire common
stock.

         Interest expense increased $59,860 over the similar period in 1998. The
increase reflects interest expense on promissory notes issued in connection with
the acquisition of Glas-Aire common stock, higher principal amounts of the KBC
loan and additional borrowing by Rustic Crafts.

         Net income decreased $39,940 in 1999 over the same period in 1998. An
increase in the net loss from operations and increased interest expense was
offset by increased income from partnership and an increase in other income.

Nine Months Ended September 30, 1999 Compared to 1998
-----------------------------------------------------

         Total sales increased $513,382 or 20% compared to the same period in
1998. Sales at Rustic Crafts increased $318,754 or 13% in 1999 over 1998. Rustic
Crafts moved into a new manufacturing facility in early 1999 which increased
manufacturing efficiencies and reduced lead times and backlog. The statement of
operations also includes $277,324 in net sales of Glas-Aire since September 23,
1999, the date the Company acquired 51.3% of the Glas-Aire common stock.

         Gross margins from sales increased only $40,962 or 5% in 1999 over the
similar period in 1999, despite the contribution to gross margin of $91,109 from
Glas-Aire. Rustic Crafts gross margins were 28.2% of sales in 1999 compared to
30.6% in 1998. This reduction in gross margin resulted from an increase in sales
to high volume, low margin customers during the second quarter of 1999. Rustic
Crafts has since increased its prices to, and/or reduced its reliance on, these
customers.

         Selling and administrative expenses increased $319,961 in 1999 over
1998. Rustic Crafts significantly increased its selling and advertising expense
to promote its products through sales videos and printed materials. Rustic
Crafts believes this additional promotional expense will result in higher sales
in the fourth quarter and in 2000. Consulting fees, contract labor and board
compensation increased for the parent company reflecting the board compensation
package approved in July 1999 and increased merger and acquisition activity
involving the acquisition of Glas-Aire.

         Income from equity in partnership increased $221,785 in 1999 over 1998.
Partnership interest expense declined as a result of the continued reduction of
long-term debt in the partnership; this decline was partially offset by
increased operating and administrative expenses.


                                       17
<PAGE>   18

         Other income increased $142,825 in 1999 over 1998 due to a gain on
disposal of equipment, interest income and undistributed earnings of $114,961
from Glas-Aire which are included in the Statement of Operations, reflecting the
Company's pro-rata shares of their earnings prior to September 23, 1999.

         Interest expense decreased $156,590 in 1999 from 1998. The period in
1998 includes approximately $336,000 of non-recurring costs associated with the
refinancing of the SIPI loan. Interest costs in 1999 include charges on the
financing associated with the new manufacturing facility, charges on the larger
balance of long-term debt with KBC Bank and costs of advances to purchase an
interest in Glas-Aire. Rustic Crafts has also increased its long-term debt as it
continues to improve its new manufacturing facility.

         Net income increased $211,968 for the nine months in 1999 compared to
1998. An increase in the loss from operations due to higher selling and
administrative expenses was offset by increased earnings from partnership, other
income and a decrease in interest expense.


Year 2000 Issues.

         The Company has determined that there will be no material effect on the
Company's business, results of operations or financial condition as a
consequence of its Year 2000 issues, considering the Company's efforts to avoid
any such consequences.


         Forward-Looking Statements

         This Form 10-Q contains forward-looking statements which are made
pursuant to the safe harbor provisions of the Securities Litigation Reform Act
of 1995. Statements as to what the Company "believes," "intends," "expects," or
"anticipates", and other similarly anticipatory expressions, are generally
forward-looking and are made only as of the date of this Form 10-Q. Readers of
the Form 10-Q are cautioned not to place undue reliance on such forward-looking
statements, as they are subject to risks and uncertainties which could cause
actual results to differ materially from those discussed in the forward-looking
statements and from historical results of operations. The Company is subject to
numerous contingencies, risks and uncertainties including, but not limited to,
the following that could have a severe impact on the Company;

         (i)      The Company currently does not generate positive cash flow
                  and, historically, the Company has had limited operating
                  activities and substantially all of its efforts have been
                  devoted to acquiring or developing profitable operations. The
                  Company's ability to continue in existence is partly dependent
                  upon its ability to attain satisfactory levels of operating
                  cash flows.


                                       18
<PAGE>   19

         (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)    As of September 30, 1999, the Company was dependent upon its
                  investment in Security Land and Development Company Limited
                  Partnership, the operations of Rustic Crafts International,
                  Inc. and its interest income for a material portion of its
                  cash flow and for a material portion of its reportable income.

         (iv)     The investment activities of the Company do not, in and of
                  themselves, generate sufficient cash flow to cover its
                  corporate operating expenses and thus the Company must rely on
                  its cash reserves to fund these expenses.

         (v)      An unsecured 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.

         (vi)     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.

         (vii)    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 affect 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.


                                       19
<PAGE>   20

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.

a)       Annual Meeting held on August 5, 1999.

b)       The following directors were elected at the Annual Meeting and comprise
         all of the directors of the Company

                  William R. Ponsoldt, Sr.           William R. Ponsoldt, Jr.
                  Stephanie Carey                    Frederic R. Lowe
                  Larry J. Horbach                   Donald D. Graham
                  Martin J. Craffey                  Marc H. Baldinger
                  Pamlyn Kelly, Phd

c)       The following table sets forth the matters voted upon at the meeting.
<TABLE>
<CAPTION>

                                                                Votes For    Votes Against   Abstaining
                                                                ---------    -------------   ----------
<S>                                                              <C>             <C>           <C>
              i)  Approve directors' compensation                10,379,636      198,719       379,997

              ii)   Ratify the appointment of Hausser
                    + Taylor LLP as independent
                    public accountants                           10,951,082        2,460         4,270

              iii)  Elect the following nominated Directors

                      William R. Ponsoldt, Sr.                   10,948,572           31
                      Stephanie Carey                            10,948,553           50
                      Larry J. Horbach                           10,929,228       19,375
                      Martin J. Craffey                          10,948,603            0
                      Pamlyn Kelly                               10,947,053        1,550
                      William R. Ponsoldt, Jr.                   10,919,922       28,681
                      Fredric R. Lowe                            10,948,603            0
                      Donald D. Graham                           10,948,553           50
                      Marc H. Baldinger                          10,948,603            0

</TABLE>

                                       20
<PAGE>   21


ITEM 5. OTHER INFORMATION.

     None.

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


   Form 8-K - Item 2. Acquisition or Disposition of Significant
                         Assets; filed October 5, 1999.

   Exhibit 27 - Financial Data Schedule.


                                       21
<PAGE>   22


                                   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)


November 18, 1999                 By  /s/ Douglas F. Long
-----------------                   ----------------------------------------
Date                                Douglas F. Long, Chief Financial Officer




                                       22