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 September 30, 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 November 1, 2001 there were 19,398,773  shares of the $ .40 Par Value
Common Stock outstanding.

<PAGE>


                    Regency Affiliates, Inc. and Subsidiaries
                        Index to the Financial Statements





                                                                           Page

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  ...................................12-18

Part II - Other Information (Unaudited)

    Item 1.  Legal Proceedings...............................................18

    Item 2.  Changes in Securities and Use of Proceeds ......................18

    Item 3.  Defaults Upon Senior Securities ................................18

    Item 4.  Submission of Matters to a Vote of Security Holders  ...........18

    Item 5.  Other Information   ............................................18

    Item 6.  Exhibits and Reports on  Form 8-K  .............................18

Signatures...................................................................18




<PAGE>
<TABLE>
<CAPTION>


                    Regency Affiliates, Inc. and Subsidiaries
                           Consolidated Balance Sheets


Part I - Financial Information (Unaudited)

Item 1. Financial Statements

                                                                                September 30,        December 31,
                                                                                   2001                2000
                                                                                ----------------  --------------
<S>                                                                         <C>                   <C>
Assets
   Current Assets
      Cash and Cash Equivalents                                                 $   3,074,735      $    928,636
      Accounts receivable, net of allowance                                         2,213,346         2,553,589
      Income taxes receivable                                                         162,359            24,556
      Inventory                                                                     2,176,942         2,243,726
      Other current assets                                                            287,918           127,728
                                                                                ---------------  ----------------
               Total current assets                                                 7,915,300         5,878,235

   Property, Plant and Equipment, Net                                               4,070,349         4,343,170

   Investment in partnerships                                                      28,774,971        24,575,881

   Other Assets
         Aggregate inventory                                                          834,364           834,675
         Goodwill, net of amortization                                                772,919           820,774
         Debt issuance costs, net of amortization                                     409,569           551,343
         Other                                                                          4,180            12,751
                                                                                ----------------  ----------------
               Total other assets                                                   2,021,032         2,219,543
                                                                                ----------------  ----------------

                                                                                $  42,781,652      $ 37,016,829
                                                                                ================  ================

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

</TABLE>


<PAGE>


                    Regency Affiliates, Inc. and Subsidiaries
                           Consolidated Balance Sheets
<TABLE>
<CAPTION>


                                                                                           September 30,      December 31,
                                                                                               2001              2000
                                                                                          --------------    --------------
<S>                                                                                     <C>                 <C>
 Current Liabilities
              Current portion of long-term debt                                         $     353,562       $   128,510
              Notes Payable - Banks                                                         1,913,150           692,174
              Notes payable - Related Parties                                               1,211,503           776,000
              Accounts payable                                                                784,597         1,080,904
              Accrued expenses                                                              1,938,616           899,837
              Taxes payable                                                                   151,549            78,820
                                                                                         ---------------    --------------
                       Total current liabilities                                            6,352,977         3,656,245

     Long term debt, net of current portion                                                14,269,711        13,072,341

     Deferred income taxes                                                                    444,142           402,048
     Minority interest in consolidated subsidiaries                                         3,890,546         3,810,143
     Shareholders' equity
              Serial preferred stock not subject to mandatory
                redemption (maximum liquidation preference
                $24,975,312 in 2001 and 2000, respectively)                                 1,052,988         1,052,988
              Common stock, par value $.40 authorized 25,000,000
                shares; issued and outstanding 17,251,619
                shares in 2001 and 2000                                                     6,900,659         6,900,659
              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                                                            12,832,025        10,915,990
              Accumulated other comprehensive income                                         (261,251)          (93,440)
              Treasury stock, 4,052,825 shares in 2001 and 2000                            (3,338,033)       (3,338,033)
                                                                                      ----------------  ----------------
                       Total shareholders' equity                                          17,824,276        16,076,052
                                                                                      ----------------  ----------------
                                                                                     $     42,781,652   $    37,016,829
                                                                                     ================   ================

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

</TABLE>


<PAGE>

<TABLE>
<CAPTION>
                    Regency Affiliates, Inc. and Subsidiaries
                      Consolidated Statements of Operations
             Three and Nine Months Ended September 30, 2001 and 2000
                                   (Unaudited)



                                                          Three Months Ended                     Nine Months Ended
                                                   September 30,      September 30,      September 30,      September 30,
                                                        2001               2000              2001               2000
                                                  -----------------   ---------------   ----------------  ---------------
<S>                                             <C>                   <C>              <C>              <C>
                   Net Sales                    $    3,358,715        $ 4,268,915      $   9,953,146    $     9,379,262

              Costs and expenses
                  Costs of goods sold                2,498,605          3,095,179          7,213,058          6,863,669
              Selling and administrative             1,148,741          1,263,602          3,759,649          3,455,326
                                                  -----------------   ---------------   ----------------  ---------------
                                                     3,647,346          4,358,781         10,972,707         10,318,995
                                                  -----------------   ---------------   ----------------  ---------------

         Income (loss) from operations               (288,631)            (89,866)        (1,019,561)          (939,733)
         Income from equity investment
           in partnerships                          1,450,983           1,179,122          4,199,089          3,502,804
         Other income (expense), net                   64,350              48,052             81,152             80,972
         Interest expense                            (363,854)           (314,619)          (985,868)          (891,198)
                                                  -----------------   ---------------   ----------------  ---------------
         Income before income tax expense,            862,848             822,689          2,274,812          1,752,845
            and minority interest
         Income tax expense                          (112,892)           (145,741)          (218,211)          (210,935)
         Minority interest                            (79,784)            (91,925)          (140,566)          (124,286)
                                                  -----------------   ---------------   ----------------  ---------------
         Net income                             $     670,172         $   585,023       $  1,916,035      $   1,417,624
                                                  =================   ===============   ================  ===============

         Net income per common share:
                         Basic                  $       0.05          $      0.04       $       0.15      $        0.11
                                                  -----------------   ---------------   ----------------  ---------------
                        Diluted                 $       0.05          $      0.04       $       0.15      $        0.11
                                                  =================   ===============   ================  ===============


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


<PAGE>
<TABLE>
<CAPTION>
                    Regency Affiliates, Inc. and Subsidiaries
                      Consolidated Statements of Cash Flows
                  Nine Months Ended September 30, 2001 and 2000
                                   (Unaudited)

                                                                                                September 30,      September 30,
                                                                                                    2001               2000
                                                                                              ----------------    --------------
<S>                                                                                        <C>                       <C>
Cash flows from operating activities
         Net income                                                                        $        1,916,035     $    1,417,624
         Adjustments to reconcile net income to net cash
                  used by operating activities
                           Depreciation and amortization                                              532,365            367,054
                           Change in deferred income taxes                                             42,094             30,131
                           Minority interest                                                          140,566            124,286
                           Stock issued for services rendered                                               -            292,134
                           Income from equity investment in partnerships                           (4,199,089)        (3,502,804)
                           Distribution of equity earnings in partnership                                   -            106,250
                           Interest amortization on long-term debt                                    650,764            708,331
                           Changes in operating assets and liabilities
                                 Accounts receivable                                                  340,243          (141,444)
                                   Inventory                                                           67,095          (714,411)
                                   Other current assets                                              (297,993)           59,191
                                   Accounts payable                                                  (296,307)           41,357
                                   Accrued expenses                                                 1,051,344            88,269
                                                                                              ----------------  -----------------
                                          Net cash from (used by) operating activities                (52,883)       (1,124,032)
                                                                                              ----------------  -----------------

Cash flows from investing activities
         Capital expenditures                                                                         (69,915)          (175,458)
         Other                                                                                          8,571             5,089
                                                                                              ----------------  -----------------
                                          Net cash used by investing activities                       (61,344)          (170,369)
                                                                                              ----------------  -----------------

Cash flows from financing activities
         Net short-term borrowings (payments)                                                       1,656,479            41,895
         Net  long-term borrowings (payments)                                                         771,658           (99,208)
         Redemption of Series E preferred stock                                                             -          (159,300)
         Other                                                                                              -           (23,410)
         Dividends paid                                                                                     -            (5,000)
                                                                                              ----------------  -----------------
                                          Net cash from (used) by financing activities              2,428,137          (240,023)
                                                                                              ----------------  -----------------
Foreign currency translation adjustment                                                              (167,811)         (100,059)
Increase (decrease) in cash and cash equivalents                                                    2,146,099        (1,639,483)
Cash and cash equivalents - beginning                                                                 928,636         2,348,989
                                                                                              ----------------  -----------------
Cash and cash equivalents - ending                                                            $     3,074,735   $       709,506
                                                                                              ================  =================


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


<PAGE>
<TABLE>
<CAPTION>

                    Regency Affiliates, Inc. and Subsidiaries
                Consolidated Statements of Cash Flows (continued)
                  Nine Months Ended September 30, 2001 and 2000
                                   (Unaudited)

                                                                                                September 30,       September 30,
                                                                                                    2001                 2000
                                                                                              ---------------      -----------------

<S>                                                                                            <C>                <C>
                    Supplemental  disclosures of cash flow information: Cash
                                  paid during the year for:
                                                Income taxes                                   $      211,960     $     399,786
                                                Interest                                              155,940           197,531


</TABLE>

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
            services.

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

          In 2001, accrued  compensation in the amount of $113,503 was converted
            to debt.

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


<PAGE>



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

Note 1.  Bases 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
               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 and nine month  periods  ended  September  30, 2000 and
               September 30, 2001 are not necessarily  indicative of the results
               that may be expected  for the years ended  December  31, 2000 and
               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  subsidiary,
               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:


                                                                   September 30,
                                                                       2001
                                                               ----------------
             Raw materials and supplies                        $     944,354
                  Work-in-process                                    222,967
                  Finished products                                  959,621
                                                                ---------------
                                                               $   2,126,942
                                                               ================

          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 affect taxable income. In

<PAGE>


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


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

               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 exchange 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 nine month period ended
               September 30, 2000  included the financial  activity of Glas-Aire
               for the months of February through September 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                                   $  6,060,205
                                                              ----------
               Costs and expenses
                        Costs of goods sold                   4,380,632
                        Selling and administrative            2,407,946
                                                              ----------
                                                              6,788,578
                                                              ----------
               Loss from operations                        $  (728,373)
                                                              ==========

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
               entitled to receive  operating  income in the form of  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.

               Effective November 30, 2000 the Company invested $10,000 for a 5%
               limited   partnership   interest   in   1500   Woodlawn   Limited
               Partnership, the general partner of Security.

               The Company  accounts for the investment in  partnerships  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   partnerships   included  in  the
               Consolidated Balance Sheets at September 30, 2001 is $28,774,971.

<PAGE>



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

Note 2.  Investment in Partnership (Continued)

               The  income  from  the   Company's   equity   investment  in  the
               Partnerships  for the nine months  ended  September  30, 2001 was
               $4,199,089.

               Summarized  operating  data for  Security  for the three and nine
               months ended  September  30, 2001 and  September  30, 2000, is as
               follows:

<TABLE>
<CAPTION>


                                                                       Three Months Ended                   Nine Months Ended
                                                             -----------------------------------  ----------------------------------
                                                             September 30,       September 30,     September 30,      September 30,
                                                                   2001              2000               2001               2000
                                                             -----------------  ----------------  -----------------  ---------------
<S>                                                         <C>                <C>                 <C>               <C>
                       Revenue                              $    3,433,245     $   3,314,136       $ 10,246,680      $   9,944,759
                                                             -----------------  ----------------  -----------------  ---------------
                       Operating Expenses                          860,172           866,222          2,585,613          2,640,078
                       Depreciation and Amortization               664,160           710,067          2,096,294          2,130,201
                       Interest Expense, Net                       431,367           496,666          1,294,101          1,487,318
                                                             -----------------  ----------------  -----------------  ---------------
                               Net Income                   $    1,477,546     $   1,241,181       $  4,270,672      $   3,687,162
                                                             -----------------  ----------------  -----------------  ---------------
</TABLE>

Note 3.  Notes Payable - Banks

               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 three-fourths  percent,  adjusted monthly.  As of
               September  30, 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.

               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, 2002 and bears  interest  at the Bank's  prime
               rate minus one-half percent. 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
               September  30,  2001,  the amount  outstanding  under the line of
               credit was $994,921.

               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.  At September  30, 2001,  the
               amount outstanding under the line of credit was $842,229.

Note 4.  Notes Payable - Related Parties

               The Company has  outstanding  $448,000  of demand  notes  bearing
               interest at 10% payable to a principal 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

<PAGE>


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

Note 5.  Long-Term Debt (Continued)

               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 September  30, 2001,  the amount  outstanding
               under the Loan is $11,961,658, including $649,850 of interest for
               the nine months ended September 30, 2001.

               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 approximately 7.25% to 8.25% at
               September  30, 2001.  The  outstanding  balance on these loans is
               $1,677,381 at September 30, 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.

               Glas-Aire's  long term debt  amounts to $984,234 and is comprised
               of  capital  leases of $97,317  and  installment  obligations  of
               $886,917.

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
               $27,000,000. 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. 11


<PAGE>

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


Note 6.  Income taxes (Continued)

               For the three and nine months ended September 30, 2001, and 2000,
               the tax effect of net operating  loss  carryforwards  reduced the
               current   provision   for  regular   Federal   income   taxes  by
               approximately  $163,000 and $424,000,  respectively.  The Company
               provided $210,935 and $145,741 for Canadian, state income and the
               alternative  minimum  tax in the  three  and  nine  months  ended
               September 30,2001 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.


Note 8.  Subsequent Events

               Pursuant to an agreement  entered into on September  17, 2001 and
               amended  on  October 1, 2001,  the  Company  exchanged  1,215,105
               shares of common stock of Glas-Aire,  representing  approximately
               50% of the  issued  and  outstanding  shares  of  Glas-Aire,  for
               $2,500,000  plus 4,040,375  shares of Regency's  common stock, or
               approximately  23%  of  the  issued  and  outstanding  shares  of
               Regency.  As a result of the  transaction,  neither  Regency  nor
               Glas-Aire owns any stock of the other.

               The exchange rate was based on  negotiations  between the parties
               and  confirmed  as to fairness by  independent  valuation  firms,
               hired  by  respective  committees  of  each  of  the   Boards  of
               Directors of Regency and Glas-Aire.

               The former  president of Glas-Aire  has  commenced  litigation in
               British Columbia, Canada against Glas-Aire and the Company, among
               others  asserting,   among  other  things,  that  the  Regency  -
               Glas-Aire transaction is in breach of bank agreements, securities
               law and fiduciary duties owed to Glas-Aire and its  shareholders.
               The defendants are vigorously defending this litigation.

               On October 15, 2001, Statesman Group, Inc. exercised an option to
               acquire  6,100,000  shares of the  Company's  common  stock.  The
               exercise  price was $.40 per share (par  value)  rather  than the
               formula price in the option, which would have yielded the Company
               approximately  25% less.  Statesman  Group issued its  $2,440,000
               five year note to the Company as payment, secured (in addition to
               the  shares  purchased)  by  the  20%  stock  interest  owned  by
               Statesman in NRDC, the Company's 80% owned subsidiary.



<PAGE>


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  September  30,  2001 was
     $17,824,276  as compared to  $15,308,128 at September 30, 2000, an increase
     of $2,516,148 for the twelve months ended September 30, 2001. 12

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  September 30, 2001,  the  Company's  income from its equity
     investment  in the  Partnership  (as  well as its  interest  in  Security's
     General Partner, 1500 WoodLawn L.P.) was $4,199,089.  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  Partnerships  has  increased  to  $28,774,971,  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.

     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.

     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 or thereafter  to  commercialize  the
     inventory of previously quarried and stockpiled  aggregate at the Groveland
     Mine in cooperation with an experienced aggregate supply company.

     In October 2001, the Company  announced that it had completed a transaction
     for the  disposition  of its interest in its  partially  owned  subsidiary,
     Glas-Aire  Industries Group Ltd.  ("Glas-Aire").  Prior to the transaction,
     each corporation owned a substantial  percentage of the common stock of the
     other, and they had certain  officers and directors in common.  Pursuant to
     an agreement  entered into on September 17, 2001 closed on October 1, 2001,
     Regency   exchanged   1,215,105   shares  of  common  stock  of  Glas-Aire,
     representing  approximately  50% of the  issued and  outstanding  shares of
     Glas-Aire,  for $2,500,000 plus 4,040,375 shares of Regency's common stock,
     or approximately 23% of the issued and outstanding shares of Regency.  As a
     result of the transaction,  neither Regency nor Glas-Aire owns any stock of
     the other. Regency's cash position improved as a result of the transaction.
     However,  it is  still  mot  able  to  generate  positive  cash  flow  from
     operations,  and the  Glas-Aire  transaction  will  not  have an  immediate
     positive impact on cash flow.

<PAGE>


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

The Statesman Group, Inc.  exercised an option it has held since 1997 to acquire
6,100,000  shares of the Company's Common Stock on October 15, 2001. As a result
of  the  transaction,  the  Statesman  Group  owns  approximately  38.2%  of the
Company's common stock.

Pursuant to an  Agreement  dated June 3, 1997,  as amended and restated on March
24, 1998,  Statesman  Group,  Inc.  was granted  options to purchase 6.1 million
shares of Common  Stock.  Statesman  owned  approximately  25% of the  Company's
outstanding  common  stock prior to the issuance of these  options.

On October  15,  2001,  Statesman  exercised  the option in full  pursuant to an
agreement  that (1) provided for a purchase  price at $.40 per share (par value)
rather  than the  formula  price in the  option,  which  would have  yielded the
Company  approximately  25% less and (2) provided for  collateral  for the $2.44
million 5 year note  issued by  Statesman  to the  Company  (in  addition to the
shares  purchased) in the form of the 20% stock  interest  owned by Statesman in
National Resource Development Corporation, the Company's 80% owned subsidiary.

Statesman Group, Inc. is an international  business corporation  organized under
the  laws of the  Bahamas.  Statesman's  principal  business  is the  making  of
investments in the United States and elsewhere.  Both its principal business and
principal  office are  located at Bay Street,  Nassau,  Bahamas.  The  Statesman
Irrevocable  Trust dated April 15, 1991 is the controlling  person of Statesman.
The  Statesman  Trust is an  irrevocable  trust for the  benefit  of  William R.
Ponsoldt,  Jr., a director of the Company,  Tracey A. Ponsoldt,  now married and
sometimes known as Tracey A. Powers,  and Christopher J. Ponsoldt,  all children
of William R. Ponsoldt, Sr.

<PAGE>

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


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

The trustee of the Statesman Trust, dated April 15, 1991, is Liedenhall Bank and
Trust, Nassau,  Bahamas,  which has the sole right to control the disposition of
and vote the Company's securities acquired by Statesman.

The Transaction will not efect liquidity of the Company,  as no payments are due
on the note until maturity in five years.

Results of Operations

The following  discussion is of the Company's  historic results.  Going forward,
results will be materially affected by the disposition of Glas-Aire.

     As a result of the Glas-Aire transaction, the operations of Regency will no
     longer include the  operations of Glas-Aire as in the historical  financial
     statements  herein.  The Form 8-K/A  filed on  November  5, 2001 by Regency
     shows the pro forma  effects at June 30,  2001 of the removal of the assets
     and liabilities of Glas-Aire from the Regency balance sheet, as well as the
     elimination of Glas-Aire's  minority interest in Regency and the receipt of
     $2,500,000 from Glas-Aire.  The pro forma financial statements in Form 8K/A
     also  reflect,  for the period  ended  June 30,  2001,  the  removal of the
     results of operations of and minority  interest in the income of Glas-Aire.
     Readers  are urged to  review  those pro  forma  financial  statements  for
     information  as to how the sale of Glas-Aire is likely to affect Regency in
     the  immediate  future.  Similar  effects  would occur for the period ended
     September 30, 2001.  On a balance  sheet basis , the Glas-Aire  transaction
     will reduce assets by approximately  $4 million and stockholders  equity by
     approximately  $2 million.  On an income  statement  basis,  Glas-Aire  has
     represented over 75% of Regency's net revenues, although only approximately
     10-15% of Regency's  profits.  Regency's cash position improved as a result
     of the transaction. However, it is still not able to generate positive cash
     flow from  operations,  and the exchange  with  Glas-Aire  will not have an
     immediate positive impact on cash flow from operations.


    2001 Compared to 2000

      For the three-months ended September 30, 2001:

          Net sales  decreased  $910,200  over the similar  period in 2000.  The
          decrease is due to  $519,302 in  decreased  sales from  Glas-Aire  and
          $5,637  from  NRDC,  plus a  decrease  in sales at  Rustic  Crafts  of
          $385,261. 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 decreased $313,626.  The decrease is due to a decrease in
          gross margin from Glas-Aire of $104,226 and from NRDC of $3,993,  plus
          a decrease in gross margin from Rustic Crafts of $205,407.

          Selling  and  administrative  expenses  decreased  $114,861 in 2001 as
          compared  to 2000.  These  include an  increase  of $2,415  related to
          Glas-Aire  offset by a net  reduction  of selling  and  administrative
          expenses  incurred by Regency,  Rustic  Crafts and NRDC  amounting  to
          $117,276.

          Income from equity in partnerships  increased $271,861.  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  acquisition of a
          5% limited partnership interest in Woodlawn, L.P.

          Interest expense  increased by $49,235 and is largely  attributable to
          increased interest expense on the KBC loan, increased  indebtedness of
          Glas-Aire,  indebtedness to related parties offset by borrowings costs
          of Rustic Crafts.

          Net  income  increased  $85,149  in 2001  compared  to  2000 of  which
          $271,861  represents  increased equity earnings from partnerships less
          losses from  operations  (net of income tax and minority  interest) of
          $186,712.

      For the nine months ended September 30, 2001:

          Net sales increased  $573,884 in 2001 over the similar period in 2000,
          of which  $273,569 and $5,206 is  attributable  to Glas-Aire and NRDC,
          respectively,  and $934,528 is attributable  to Glas-Aire's  change in
          fiscal  year Sales of Rustic  Crafts  decreased  $639,419  during this
          period.

          Gross margin  increased  $224,495 of which  $153,995 , ($258,609)  and
          $6,723  is   derived   from   Glas-Aire,   Rustic   Crafts  and  NRDC,
          respectively.  The remaining difference of $322,386 is attributable to
          Glas-Aire's change in fiscal year.

<PAGE>

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

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

          Selling  and  administrative  expenses  increased  $304,323  and  were
          incurred primarily by Glas-Aire  ($244,342),  a difference of $216,943
          attributable  to  Glas-Aire's  change in year end, and  decreases  for
          Regency of ($120,751) and Rustic Crafts ($36,211).

          Income from equity in partnerships  increased $696,285.  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  acquisition of a
          5% limited partnership interest in Woodlawn, L.P.

          Interest expense  increased by $94,670 and is largely  attributable to
          increased interest expense on the KBC loan, increased  indebtedness of
          Glas-Aire,  indebtedness to related parties offset by borrowings costs
          of Rustic Crafts.

          Net income increased $498,411,  of which $696,285 represents increased
          equity earnings from partnerships, less losses from operations (net of
          income tax and minority interest) of $197,874.

<PAGE>

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

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

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 to cover corporate  operating  expenses and thus the Company
               must  rely on  external  sources  to  fund  these  expenses.  The
               Company's  ability to continue in existence  is partly  dependent
               upon its ability to  generate  satisfactory  levels of  operating
               cash  flow,   notwithstanding   the  receipt  of  the  $2,500,000
               resulting  from the Glas Aire  transaction.

          (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 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.

          (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>

                    Regency Affiliates, Inc. and Subsidiaries

PART II - OTHER INFORMATION

      ITEM 1. LEGAL PROCEEDINGS.

          On September  13, 2001 in the Supreme Court of British  Columbia,  the
          former  president of Glas-Aire  has  commenced  litigation  in against
          Glas-Aire,  the Company,  Mr.  Ponsoldt and Mr.  Baldinger  asserting,
          among other  things,  that the Regency - Glas-Aire  transaction  is in
          breach of bank agreements, securities law and fiduciary duties owed to
          Glas-Aire  and  its   shareholders.   The  defendants  are  vigorously
          defending this litigation.

      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.

     On  October  16,  2001  the  Company  filed a  current  report  on Form 8-K
disclosing  the  exchange of shares with  Glas-Aire.  That filing was amended on
Form 8-K/A on November 5, 2001 to include pro forma financial information.

     On  October  25,  2001  the  Company  filed a  current  report  on Form 8-K
disclosing the exercise of the Statesman Group stock option.

<PAGE>


                                   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: November 19, 2001                         /s/ Marc H. Baldinger
-----------------------                         ----------------------
                                          (Chief Financial Officer and Director)