UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

WASHINGTON, D.C. 20549

FORM 10-Q/A

[X]

QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE

SECURITIES EXCHANGE ACT OF 1934

For the Quarterly Period Ended March 31, 2000

OR

[   ]

TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE

SECURITIES EXCHANGE ACT OF 1934

For the Transition Period from           to           

Commission File No. 0-4366

REGAN HOLDING CORP.

(Exact Name of Registrant as Specified in Its Charter)

California
(State or Other Jurisdiction of
Incorporation or Organization) 68-0211359
(I.R.S. Employer
Identification Number)

2090 Marina Avenue,

Petaluma, California 94954

(Address of Principal Executive Offices and Zip Code)

(707) 778-8638

(Registrant’s Telephone Number, Including Area Code)

Proceedings During The Preceding Five Years:

      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  [   ]

Applicable Only To Corporate Issuers:

      Indicate the number of shares outstanding of the registrant’s common stock, as of April 30, 2000:

Common Stock-Series A 25,684,156

Common Stock-Series B 589,734

Restatement of Financial Results

      In connection with a review of Regan Holding Corp.’s (the “Company’s”) stock option program, the Company re-evaluated its accounting for stock options granted to independent insurance producers. As a result, the Company has restated its 1999 and 2000 results (see Note 2 to the Condensed Consolidated Financial Statements).

      Financial statement information and related disclosures included in this amended filing reflect, where appropriate, changes as a result of the restatements.

      Except for the restatement of the financial results described above and the impact of the Company adopting SEC Staff Accounting Bulletin No. 101, Revenue Recognition in Financial Statements, no other significant modifications have been made to this amended filing, nor has other information presented in this document been updated since the original filing.

TABLE OF CONTENTS

PART I. FINANCIAL INFORMATION
	Item 1. Financial Statements
		Condensed Consolidated Balance Sheets
		Condensed Consolidated Statements Of Operations
		Condensed Consolidated Statement Of Shareholders’ Equity
		Condensed Consolidated Statements of Cash Flows
		Notes to Condensed Consolidated Financial Statements
	Item 2. Management’s Discussion and Analysis of Results of Operations and Financial Condition
PART II. OTHER INFORMATION
	Item 6. Exhibits and Reports on Form 8-K
	Signatures
Computation of Earnings Per Share-Basic

PART I. FINANCIAL INFORMATION

Item 1. Financial Statements

REGAN HOLDING CORP. AND SUBSIDIARIES

CONDENSED CONSOLIDATED BALANCE SHEETS

			March 31,			December 31,
			2000			1999
			(Unaudited and Restated)
Assets
	Cash and cash equivalents		$	5,779,373		$	1,094,759
	Investments			12,128,696			20,861,973
	Accounts receivable			1,994,216			2,625,867
	Prepaid expenses			977,824			516,759
	Income taxes receivable			2,309,462			2,893,701
	Deferred income taxes-current			710,261			895,841
	Marketing supplies inventory			795,359			706,418
		Total current assets		24,695,191			29,595,318
	Net fixed assets			13,105,734			12,168,135
	Deferred income taxes-non current			2,949,607			2,582,301
	Prepaid software licensing fees			897,416			779,375
	Other assets			1,493,582			2,018,575
		Total non-current assets		18,446,339			17,548,386
		Total Assets	$	43,141,530		$	47,143,704
Liabilities, Redeemable Common Stock, and Shareholders’ Equity
Liabilities
	Accounts payable		$	475,113		$	435,999
	Accrued sales convention costs			1,783,035			2,248,913
	Accrued liabilities			4,843,665			4,764,637
	Margin loan payable			—			3,088,918
	Other current liabilities			159,999			107,384
		Total current liabilities		7,261,812			10,645,851
	Loans payable			2,251,911			2,256,418
	Incentive compensation payable			126,785			469,720
	Deferred compensation payable			1,924,376			1,364,713
	Other liabilities			204,105			167,641
		Total non-current liabilities		4,507,177			4,258,492
		Total Liabilities		11,768,989			14,904,343
Commitments and Contingencies							—
Redeemable Common Stock, Series A and B				11,459,884			11,563,285
Shareholders’ Equity
	Preferred stock, no par value: Authorized: 100,000,000 shares No shares issued or outstanding			—			—
	Series A common stock, no par value: Authorized: 45,000,000 shares, Issued and outstanding: 20,872,292 and 20,863,520 shares at March 31, 2000 and December 31, 1999, respectively			3,669,651			3,659,367
	Paid-in capital from retirement of common stock			936,104			927,640
	Paid-in capital from producer stock options			4,526,000			4,276,000
	Retained earnings			11,333,409			12,385,173
	Accumulated other comprehensive loss-net			(552,507	)		(572,104	)
		Total Shareholders’ Equity		19,912,657			20,676,076
		Total Liabilities, Redeemable Common Stock and Shareholders’ Equity	$	43,141,530		$	47,143,704

See accompanying notes to Condensed Consolidated Financial Statements.

REGAN HOLDING CORP. AND SUBSIDIARIES

CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS (Unaudited)

			For the Three Months Ended
			March 31,
			2000			1999
				(Restated)
Revenue
	Marketing allowances		$	4,173,759		$	7,876,090
	Commission income			3,603,751			4,040,988
	Administrative fees			2,222,885			2,288,243
	Seminar income			62,131			130,789
	Other income			141,124			53,313
		Total revenue		10,203,650			14,389,423
Expenses
	Salaries and related benefits			6,251,009			5,557,313
	Sales promotion and support			1,364,727			2,097,833
	Producer stock options			250,000			—
	Professional fees			1,046,770			385,973
	Occupancy			758,648			381,958
	Depreciation and amortization			597,683			562,268
	Stationery and supplies			209,335			178,021
	Courier and postage			207,291			244,828
	Travel and entertainment			150,022			93,448
	Equipment			362,442			179,034
	Insurance			148,294			88,117
	Other			206,255			53,014
		Total expenses		11,552,476			9,821,807
Operating Income (Loss)				(1,348,826	)		4,567,616
Other Income (Loss)
	Investment income—net			253,300			198,658
	Loss on disposals of fixed assets			(186,898	)		—
		Total other income (loss)		66,402			198,658
Income (Loss) Before Income Taxes, and Before Cumulative Effect of Accounting Change				(1,282,424	)		4,766,274
Provision for (Benefit From) Income Taxes				(461,432	)		1,972,526
Net Income (Loss) Before Cumulative Effect of Accounting Change				(820,992	)		2,793,748
Cumulative Effect of Accounting Change, Net of Tax				(226,000	)		—
Net Income (Loss)			$	(1,046,992	)	$	2,793,748
Earnings (Loss) Per Share:
	Weighted average shares outstanding-basic			26,345,353			26,395,692
	Basic earnings (loss) per share Before Cumulative Effect of Accounting Change		$	(0.03	)	$	0.11
	Cumulative Effect of Accounting Change			(0.01	)		—
	Basic earnings (loss) per share		$	(0.04	)	$	0.11
	Weighted average shares outstanding-diluted			26,345,353			27,413,090
	Diluted earnings (loss) per share Before Cumulative Effect of Accounting Change		$	(0.03	)	$	0.10
	Cumulative Effect of Accounting Change			(0.01	)		—
	Diluted earnings (loss) per share		$	(0.04	)	$	0.10

See accompanying notes to Condensed Consolidated Financial Statements.

2

REGAN HOLDING CORP. AND SUBSIDIARIES

CONDENSED CONSOLIDATED STATEMENT OF SHAREHOLDERS’ EQUITY (Unaudited)

									Paid-in Capital
									from		Paid-in Capital
			Series A Common Stock						Retirement of		from
									Common		Producer
			Shares			Amount			Stock		Options
											(Restated)
Balance December 31, 1999				20,863,520		$	3,659,367		$	927,640	$	4,276,000
Comprehensive loss:
	Net loss for the three months ended March 31, 2000
	Net unrealized gains on investments
	Less: Gains included in net loss
	Deferred tax on net unrealized gains
		Total comprehensive losses
Redemption and retirement of common stock				(7,028	)		(7,028	)		8,464
Exercise of stock options				15,800			17,312
Producer stock option expense												250,000
Balance March 31, 2000 (Unaudited)				20,872,292		$	3,669,651		$	936,104	$	4,526,000

[Additional columns below]

[Continued from above table, first column(s) repeated]

						Accumulated
						Other
			Retained			Comprehensive
			Earnings			Loss			Total
			(Restated)						(Restated)
Balance December 31, 1999			$	12,385,173		$	(572,104	)	$	20,676,076
Comprehensive loss:
	Net loss for the three months ended March 31, 2000			(1,046,992	)					(1,046,992	)
	Net unrealized gains on investments						41,319			41,319
	Less: Gains included in net loss						(8,746	)		(8,746	)
	Deferred tax on net unrealized gains						(12,976	)		(12,976	)
		Total comprehensive losses								(1,027,395	)
Redemption and retirement of common stock				(4,772	)					(3,336	)
Exercise of stock options										17,312
Producer stock option expense										250,000
Balance March 31, 2000 (Unaudited)			$	11,333,409		$	(552,507	)	$	19,912,657

See accompanying notes to Condensed Consolidated Financial Statements.

3

REGAN HOLDING CORP. AND SUBSIDIARIES

CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS (Unaudited)

				For the Three Months Ended
				March 31,
				2000			1999
				(Restated)
Cash flows from operating activities:
	Net income (loss)			$	(1,046,992	)	$	2,793,748
	Adjustments to reconcile net income (loss) to cash provided by operating activities:
	Depreciation and amortization of fixed assets				583,199			544,512
	Loss on disposal of fixed assets				(186,898	)		—
	Amortization of intangible assets				14,484			17,757
	Common stock awarded to producers				—			369,905
	Producer stock option expenses				250,000			81,000
	Amortization/accretion of investments				(625	)		(21,576	)
	Realized gains on sales of investments				8,746			87,652
	Changes in assets and liabilities
		Net change in accounts receivable			631,651			(391,949	)
		Net change in prepaid expenses			(461,065	)		(477,264	)
		Net change in income taxes receivable			584,239			2,045,239
		Net change in deferred income taxes			(194,700	)		(72,714	)
		Net change in marketing supplies inventory			(88,941	)		(142,304	)
		Net change in software licensing fees			(118,041	)		—
		Net change in accounts payable			39,114			(54,577	)
		Net change in accrued sales convention costs			(465,878	)		154,261
		Net change in accrued liabilities			79,028			(964,605	)
		Net change in other assets and liabilities			473,196			(103,866	)
			Net cash provided by operating activities		100,517			3,865,219
Cash flows from investing activities:
	Purchases of investments				(5,730,021	)		(12,032,709	)
	Proceeds from sales of investments				14,487,749			8,588,066
	Purchases of fixed assets				(1,333,901	)		(450,626	)
			Net cash provided by (used in) in investing activities		7,423,827			(3,895,269	)
Cash flows from financing activities:
	Proceeds from margin loan				1,000,000			—
	Payments toward margin loan				(4,124,515	)		—
	Payments toward loan payable				(4,507	)		—
	Return of building loan reserve				378,717			—
	Payments for redemption and retirement of common stock				(106,737	)		(3,703	)
	Proceeds from stock option exercises				17,312			—
			Net cash used in financing activities		(2,839,730	)		(3,703	)
Increase (decrease) in cash and cash equivalents					4,684,614			(33,753	)
Cash and cash equivalents, beginning of period					1,094,759			5,916,731
Cash and cash equivalents, end of period				$	5,779,373		$	5,882,978

See accompanying notes to Condensed Consolidated Financial Statements.

4

REGAN HOLDING CORP. AND SUBSIDIARIES

NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

1. Financial Information

      The accompanying Condensed Consolidated Financial Statements are prepared in conformity with accounting principles generally accepted in the United States and include the accounts of Regan Holding Corp. (the “Company”) and its wholly-owned subsidiaries, Legacy Marketing Group (“LMG”), Legacy Financial Services, Inc., Legacy Advisory Services, Inc., Legacy Reinsurance Company, and LifeSurance Corporation. All intercompany transactions have been eliminated.

      The statements are unaudited but reflect all adjustments (consisting only of normal recurring adjustments) which are, in the opinion of management, necessary for a fair presentation of the Company’s consolidated financial position and results of operations. The Condensed Consolidated Balance Sheet data at December 31, 1999, was derived from audited consolidated financial statements, but does not include all disclosures required by accounting principles generally accepted in the United States. The results for the three months ended March 31, 2000 are not necessarily indicative of the results to be expected for the entire year. Users of these Condensed Consolidated Financial Statements are encouraged to refer to the Annual Report on Form 10-K/A (Amendment No. 2) for the year ended December 31, 1999 for additional disclosure.

      Effective January 1, 2000, the Company changed, from five years to three years, the estimated useful life over which certain computer hardware is being depreciated. Had this change in estimate not occurred, the Company would have recorded $443,307 in depreciation expense during the three months ended March 31, 2000.

2.   Restatement of Financial Results and Cumulative Effect of Accounting Change

      Stock Option Expense - During the quarter ended March 31, 2000, the Company originally recorded stock option expense of $1,384,000 related to 2,132,507 stock options granted to independent insurance producers ("Producers") in January 2000 pursuant to Regan Holding Corp.’s Producer Stock Option and Award plan. The number of options granted was based on the Producers' sales performance during 1999. In addition, the Company granted 1,515,924 options to Producers in January 2001, which were based on their performance during 2000. In connection with a review of the Company’s stock option program, the Company determined that the expense related to the options granted in 2001 should have been recorded during the year ended December 31, 2000, based on the Producers performance and the current fair value of options earned at each interim reporting date. As a result, the Condensed Consolidated Statement of Operations for quarter ended March 31, 2000 has been restated to reflect Producer stock option expense of $250,000 related to the stock options granted in January 2001 which were earned by Producers during the first quarter of 2000 and to reflect a $1,384,000 decrease in Producer stock option expense to reverse stock option expense related to options granted in January 2000 which were earned by Producers in 1999. There was no comparable effect for the quarter ended March 31, 1999.

      Revenue Recognition - Effective January 1, 2000, the Company adopted SEC Staff Accounting Bulletin No. 101, Revenue Recognition in Financial Statements (“SAB 101”). Under the Marketing Agreement with American National Insurance Company (“American National”), the Company is obligated to repay to American National an annual amount equal to 0.1% of specified premium levels to the extent that such premiums are below the minimum production requirement of $500 million during each twelve month period ended September 30th (the “Premium Deficiency”). As a result, the Company changed its revenue recognition policy to recognize commission revenue net of 0.1% of the Premium Deficiency, assuming no additional premiums will be sold under the American National Marketing Agreement. Prior to December 31, 1999, the Company recorded revenue throughout the twelve month period net of 0.1% of the projected annual Premium Deficiency. The cumulative effect of this change in accounting principle resulted in an increase in the net loss of $226,000, net of a tax benefit of $149,000, in the quarter ended March 31, 2000. In addition, commission revenue increased by $52,888 during the three months ended March 31, 2000. The Form 10-Q for the three months ended March 31, 2000 as originally filed did not include the effect of adopting SAB 101. Accordingly, the impact of adoption has been included in the first quarter 2000 results in the accompanying Condensed Consolidated Statement of Operations.

      The effects of the restatement of the stock option expense and the adoption of SAB 101 on the Company’s Condensed Consolidated Financial Statements for the period ending March 31, 2000 are as follows:

Statement of Operations Data:

	For the Three Months Ended
	March 31, 2000
	As originally
	reported			As restated
Total revenue	$	10,150,762		$	10,203,650
Total expenses		12,686,476			11,552,476
Operating loss		(2,535,714	)		(1,348,826	)
Other income		66,402			66,402
Loss before income taxes and cumulative effect of accounting change		(2,469,312	)		(1,282,424	)
Benefit from income taxes		(943,241	)		(461,432	)
Net loss before cumulative effect of accounting change		(1,526,071	)		(820,992	)
Cumulative effect of accounting change, net of tax		—			(226,000	)
Net loss	$	(1,526,071	)	$	(1,046,992	)
Net loss per share – basic and diluted	$	.06		$	.04

The restatement to correct stock option expense resulted in a decrease in basic and diluted net loss per share of $0.03 and the adoption of SAB101 resulted in an increase in basic and diluted net loss per share of $0.01 for the quarter ended March 31, 2000.

Balance Sheet Data:

	March 31, 2000
	As originally
	reported		As restated
Total assets	$	42,923,031	$	43,141,530
Total liabilities	$	11,446,877	$	11,768,989
Redeemable common stock	$	11,459,884	$	11,459,884
Shareholders’ equity	$	20,016,270	$	19,912,657

3. Margin Loan Payable

      During the first quarter of 2000, the Company borrowed an additional $1,000,000 under a margin loan agreement with the Company’s investment broker. As of March 31, 2000 the margin loan was paid in full.

4. Loan Payable

      In 1999, the Company entered into a loan payable for the purchase of a building. The loan agreement contains certain covenants with which the Company must comply, including restrictions on repurchasing non-redeemable common stock. The lender has waived this covenant through June 30, 2000, provided that such voluntary repurchases do not exceed $125,000 per quarter. Pursuant to the loan agreement, the Company was also required to place approximately $560,000 in reserve to cover loan payments in the event of default and to provide for certain repair costs. During the first quarter of 2000, the lender released $378,717 of such reserves for general use by the Company.

5. Deferred Compensation Payable

      During the first quarter of 2000, $421,984 in commissions were deferred by producers under the Regan Holding Corp. Producer Commission Deferral Plan and $32,468 in compensation was deferred by key employees under the Regan Holding Corp. Key Employee Deferred Compensation Plan. Such amounts have been recorded as a liability in the accompanying Condensed Consolidated Financial Statements, plus Company matching contributions of $27,579 and first quarter gains of $77,632.

5

REGAN HOLDING CORP. AND SUBSIDIARIES

NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS — (Continued)

6. Redeemable Common Stock

      The Company is obligated to repurchase certain of its shares of common stock pursuant to various agreements under which the common stock was issued. During the three months ended March 31, 2000, redeemable common stock was redeemed and retired as follows:

							Series B
	Series A Redeemable						Redeemable						Total Redeemable
	Common Stock						Common Stock						Common Stock
				Carrying						Carrying						Carrying
	Shares			Amount			Shares			Amount			Shares			Amount
Balance December 31, 1999		4,921,615		$	9,794,014			589,757		$	1,769,271			5,511,372		$	11,563,285
Redemption and retirement of common stock		(51,925	)		(103,332	)		(23	)		(69	)		(51,948	)		(103,401	)
Balance March 31, 2000		4,869,690		$	9,690,682			589,734		$	1,769,202			5,459,424		$	11,459,884

7. Stock Option Expense (Restated)

      In January 2001, the Company granted 1,515,924 stock options to Producers based on their sales performance during 2000. Accordingly, during the quarter ended March 31, 2000, the Company recorded Producer stock option expense of $250,000 related to the January 2001 grants which were earned by Producers during the first quarter of 2000. The fair value of the options was estimated using the Black-Scholes option-pricing model with the following assumptions: risk free interest rates ranging from 5.0% to 6.5%, expected volatility of 28.3%, and expected lives of 6 years. A dividend yield assumption was not applicable, as the Company’s stock is not publicly traded nor does the Company pay dividends.

8. Loss on Disposals of Fixed Assets

      The Company recorded pre-tax non-operating losses of $186,898 during the first quarter of 2000 related to idle assets and other equipment replaced as a result of capital improvements.

9. Amendments to Marketing and Insurance Processing Agreements

      In April 2000, LMG and American National Insurance Company ("American National") amended the terms of the Marketing Agreement and the Insurance Processing Agreement, pursuant to which LMG markets and administers fixed annuity and life insurance products, to extend the terms to July 31, 2000. LMG and American National are in the process of negotiating a five year extension for both agreements.

6

REGAN HOLDING CORP. AND SUBSIDIARIES

NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS — (Continued)

10. Segment Information (Restated)

      The table below presents information about the Company’s operating segments:

			Legacy			Legacy
			Marketing			Financial
			Group			Services, Inc.			Other			Total
			(Restated)			(Restated)			(Restated)			(Restated)
Three months ended March 31, 2000:
		Total revenue	$	9,321,921		$	709,404		$	172,325		$	10,203,650
		Total expenses		9,719,257			430,544			1,402,675			11,552,476
		Operating income (loss)		(397,336	)		278,860			(1,230,350	)		(1,348,826	)
		Other income (loss)		244,509			3,695			(181,802	)		66,402
		Income (loss) before tax		(152,827	)		282,555			(1,412,152	)		(1,282,424	)
		Tax provision (benefit)		(189,488	)		62,535			(334,479	)		(461,432	)
		Net income (loss) before cumulative effect of accounting change		36,661			220,020			(1,077,673	)		(820,992	)
		Cumulative effect of accounting change		(226,000	)		—			—			(226,000	)
		Net income (loss)	$	(189,339	)	$	220,020		$	(1,077,673	)	$	(1,046,992	)
Three months ended March 31, 1999:
		Total revenue	$	14,067,996		$	242,219		$	79,208		$	14,389,423
		Total expenses		7,940,659			308,855			1,572,293			9,821,807
		Operating income (loss)		6,127,337			(66,636	)		(1,493,085	)		4,567,616
		Other income		198,359			299			—			198,658
		Income (loss) before tax		6,325,696			(66,337	)		(1,493,085	)		4,766,274
		Tax provision (benefit)		2,459,949			(57,539	)		(429,884	)		1,972,526
		Net income (loss)	$	3,865,747		$	(8,798	)	$	(1,063,201	)	$	2,793,748
Total assets:
	March 31, 2000		$	23,792,559		$	1,524,880		$	17,824,091		$	43,141,530
	December 31, 1999		$	27,527,585		$	1,327,639		$	18,288,480		$	47,143,704

      “Other” segments above include Regan Holding Corp. (stand-alone) and its remaining subsidiaries, Legacy Advisory Services, Inc., Legacy Reinsurance Company, and LifeSurance Corporation. Such entities’ operations do not currently factor significantly into management decision making and, accordingly, were not separated for purposes of this disclosure.

11. Subsequent Events

      During May 2000, the Company entered into an agreement to fund a financial services Internet start-up company. Pursuant to this agreement, the Company purchased an equity investment in the Internet company for $500,000 during May 2000 and is obligated to provide additional funding of up to $1 million during 2000, depending on the Internet company's achievement of agreed-upon development objectives.

12. Reclassifications

      Certain amounts in the 1999 consolidated financial statements have been reclassified to conform with 2000 classifications. Such reclassifications had no impact on net income (loss) or shareholders’ equity.

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

      Except for historical information contained herein, certain of the matters discussed in this Form 10-Q/A are “forward-looking statements” as defined in the Private Securities Litigation Reform Act of 1995. These “forward-looking statements” involve certain risks and uncertainties. All forecasts and projections in this report are “forward-looking statements” and are based on management’s current expectations of the Company’s near term results, based on current information available. Actual results could differ materially.

7

REGAN HOLDING CORP. AND SUBSIDIARIES

NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS — (Continued)

      The table below presents information about the Company’s operating segments:

			Legacy			Legacy
			Marketing			Financial
			Group			Services, Inc.			Other			Total
			(Restated)			(Restated)			(Restated)			(Restated)
Three months ended March 31, 2000:
		Total revenue	$	9,321,921		$	709,404		$	172,325		$	10,203,650
		Total expenses		9,719,257			430,544			1,402,675			11,552,476
		Operating income (loss)		(397,336	)		278,860			(1,230,350	)		(1,348,826	)
		Other income (loss)		244,509			3,695			(181,802	)		66,402
		Income (loss) before tax		(152,827	)		282,555			(1,412,152	)		(1,282,424	)
		Tax provision (benefit)		(189,488	)		62,535			(334,479	)		(461,432	)
		Net income (loss) before cumulative effect of accounting change		36,661			220,020			(1,077,673	)		(820,992	)
		Cumulative effect of accounting change		(226,000	)		—			—			(226,000	)
		Net income (loss)	$	(189,339	)	$	220,020		$	(1,077,673	)	$	(1,046,992	)
Three months ended March 31, 1999:
		Total revenue	$	14,067,996		$	242,219		$	79,208		$	14,389,423
		Total expenses		7,940,659			308,855			1,572,293			9,821,807
		Operating income (loss)		6,127,337			(66,636	)		(1,493,085	)		4,567,616
		Other income		198,359			299			—			198,658
		Income (loss) before tax		6,325,696			(66,337	)		(1,493,085	)		4,766,274
		Tax provision (benefit)		2,459,949			(57,539	)		(429,884	)		1,972,526
		Net income (loss)	$	3,865,747		$	(8,798	)	$	(1,063,201	)	$	2,793,748
Total assets:
	March 31, 2000		$	23,792,559		$	1,524,880		$	17,824,091		$	43,141,530
	December 31, 1999		$	27,527,585		$	1,327,639		$	18,288,480		$	47,143,704

      “Other” segments above include Regan Holding Corp. (stand-alone) and its remaining subsidiaries, Legacy Advisory Services, Inc., Legacy Reinsurance Company, and LifeSurance Corporation.

Analysis of Regan Holding Corp. Consolidated

      Results of Operations—The Company experienced a consolidated net loss of approximately $1.1 million in the first quarter of 2000, compared to consolidated net income of approximately $2.8 million during the first quarter of 1999, due primarily to a decrease in LMG revenue which is discussed below.

      Liquidity and Capital Resources—The Company’s ability to mobilize its assets remained strong at March 31, 2000, with cash and short-term investment grade securities representing 41.5% of the Company’s total consolidated assets.

      The Company’s principal needs for cash are: (i) funding operating expenses; (ii) purchases of computer hardware and software, leasehold improvements, and acquisitions of furniture and fixtures to accommodate new employees and support growth in operations; (iii) funding continued product development and potential strategic acquisitions; and (iv) as a reserve to cover possible redemptions of certain of the Company’s common stock, which is redeemable at the option of certain shareholders under various agreements with the Company. In the first quarter of 2000, redemption requests received by the Company were not material in amount, neither individually nor in the aggregate, and the Company believes that its liquid assets are sufficient to meet anticipated requests for redemption. At March 31, 2000 and December 31, 1999, the total redemption value of all redeemable common stock outstanding was approximately $11.5 million.

      Generally, the Company’s cash needs are met through cash provided from operating activities, which totaled approximately $101,000 during the quarter ended March 31, 2000, compared to approximately $3.9 million during the quarter ended March 31, 1999.

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The decrease in cash flows from operating activities is attributable primarily to decreases in LMG income. Until such income increases (see discussion below), operating activities may generate negative cash flows. Cash and investments on hand are expected to be sufficient to cover any operating needs during this period. The Company’s future cash flows available to fund operations will depend primarily on the level of sales of annuity and life insurance products by LMG and upon the Company’s ability to control expenses.

      At December 31, 1999, the Company's investment portfolio included a $12 million equity investment in Indianapolis Life Group of Companies (the "Indianapolis Group"), an affiliate of an insurance carrier with which LMG contracts. In the first quarter of 2000, the Indianapolis Group repurchased the equity securities from the Company for approximately $12.5 million, pursuant to the terms of the investment agreement under which the securities were purchased.

      During the latter two quarters of 1999 and the first quarter of 2000, the Company obtained approximately $4.1 million in margin loan advances from its investment broker. The margin loan was repaid in full during the first quarter of 2000, using proceeds from the repurchase of the Indianapolis Group equity securities, as discussed above.

      During May 2000, the Company entered into an agreement to fund a financial services internet start-up company. Pursuant to this agreement, the Company purchased an equity investment in the internet company for $500,000 during May 2000 and is obligated to provide additional funding of up to $1 million during 2000, depending on the internet company's achievement of agreed-upon development objectives.

      In May 1998, the Company entered into a Shareholder’s Agreement with Lynda Regan, Chief Executive Officer of the Company and Chairman of the Company’s Board of Directors, and certain other individuals. Under the terms of this agreement, in the event of the death of Ms. Regan, the Company shall repurchase from Ms. Regan’s estate all of the shares of the Company’s common stock that were owned by Ms. Regan at the time of her death or that were transferred by her to one or more trusts prior to her death. The purchase price to be paid by the Company shall be equal to 125% of the fair market value of the shares. The Company has purchased a life insurance policy with a face amount of $14.0 million for the purpose of funding this obligation in the event of Ms. Regan’s death. Any excess of the obligation over the insurance proceeds are expected to be funded with cash and investments and, if necessary, through external financing.

      Management intends to continue to retain any earnings for use in its business and does not anticipate paying any cash dividends in the foreseeable future. As a result, management anticipates that cash and investments will continue to represent a high percentage of total assets. Management believes that existing cash and investment balances, together with cash flows from operations, will provide sufficient funding for the foreseeable future. However, in the event that a shortfall was to occur, management believes that adequate financing could be obtained to meet the Company’s cash flow needs.

Analysis of Legacy Marketing Group

      Results of Operations—During the first quarter of 2000, LMG’s net loss totaled approximately $189,000 compared to net income of approximately $3.9 million in the first quarter of 1999. This shift is due primarily to decreases in income and to increases in expenses, as discussed below.

      Income—LMG’s major sources of income are marketing allowances, commission income and administrative fees from sales and administration of fixed annuity and life insurance products on behalf of the insurance carriers with which the Company contracts (the “Carriers”). Levels of marketing allowances and commission income are directly related to the sales volume of such products. Administrative fees are a function not only of product sales, but also of administration of policies inforce and producer appointments. Total LMG income decreased approximately $4.8 million, or 33.7%, in the first quarter of 2000 compared to the first quarter of 1999. The decreases are attributable primarily to decreases in premium placed inforce for the Carriers, as discussed below.

      LMG marketing allowances and commission income, combined, decreased approximately $4.6 million, or 39.4%, due to a decrease in fixed annuity premium placed inforce of approximately $236.7 million, or 47.7%, during the first quarter of 2000 compared to the first quarter of 1999. This decrease is attributable primarily to current market conditions which have resulted in the poor performance of bond investments underlying the annuities’ crediting rates and to lower than anticipated market acceptance of the VisionMark II™annuity, which was introduced in 1999 to replace the original version of the VisionMark™. The decrease in premium placed inforce was partially offset by a shift to fixed life insurance products which yield higher commissions.

      Currently, the Company markets and administers fixed annuity and life insurance products on behalf of three Carriers. During the three months ended March 31, 2000, 13.4%, 36.8%, and 40.6% of the Company’s total consolidated income resulted from LMG agreements with American National, IL Annuity and Insurance Company ("IL Annuity"), and Transamerica Life Insurance and Annuity Company ("Transamerica") respectively, compared to 8.9%, 80.4%, and 6.4% during the same period in 1999.

      Although the Company markets and administers several fixed annuity and life insurance products on behalf of the Carriers, LMG’s income is derived primarily from sales and administration of two fixed annuity products. During the first quarters of 2000 and 1999, 18.1% and 63.0% of the Company’s total income resulted

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from LMG sales of the VisionMark™ annuity, offered through IL Annuity, respectively, and 33.6% and 5.5% of the Company’s consolidated income resulted from sales of the SelectMark™ annuity, offered through Transamerica, respectively.

      These shifts from sales of IL Annuity products to sales of Transamerica products are attributable primarily to market acceptance of the SelectMark™ product and are expected to continue for the foreseeable future.

      The Company is currently implementing several intiatives to increase LMG income, including negotiations with insurance carriers to provide marketing and administrative services, similar to those performed for the Carriers. In addition, LMG is expected to release several new products during 2000, which are expected to diversify LMG's product portfolio, enhance market share, and increase income. Several marketing programs are also planned for 2000, which are designed to strengthen relationships with existing producers and to attract new producers. However, there can be no assurances that such events would occur or, were they to occur, would result in increases in LMG income.

      Expenses—Total LMG expenses increased approximately $1.8 million, or 22.4%, during the three months ended March 31, 2000 compared to the three months ended March 31, 1999. This increase is due primarily to increases in compensation, occupancy, professional fees, and depreciation, as discussed below.

      As a service organization, LMG's primary expenses are salaries and related employee benefits. These expenses increased approximately $465,000, or 8.8%, during the first quarter of 2000 compared to the first quarter of 1999. Such increases resulted primarily from regular annual wage increases and from increases in the average number of full-time equivalent employees. The increases in personnel during 1999 were largely attributable to preparation for, and accommodation of, increases in sales. However, the rate of increase in salaries expense is lower than the rates of increase in personnel due to the fact that newly added personnel were primarily at lower salary levels. During 2000, however, the Company plans to hire several LMG employees at higher salary levels, some of whom are expected to be elected as officers of LMG. Such increases in personnel are considered necessary in order to support anticipated increases in LMG income, as discussed above. Accordingly, salaries and benefits expense is expected to increase in future periods.

      Occupancy expenses consist primarily of office building and equipment leasing costs. These expenses increased approximately $429,000, or 189.5%, in the first quarter of 2000 compared to the first quarter of 1999 due primarily to the leasing of new office space during the third quarter of 1999 and to overall increases in telephone, utilities, and other related expenses which correspond with increases in employment, as discussed above.

      Professional fees increased approximately $632,000, or 234.3%, in the first quarter of 2000 compared to the three months ended March 31, 1999, due primarily to consulting fees related to various information systems projects.

      Depreciation and amortization expense increased approximately $169,000, or 714.3%, in the first quarter of 2000 compared to the first quarter of 1999, due primarily to acquisitions of fixed assets, which were necessary to improve newly leased office space and to accommodate increases in employment, and to a change in the estimated useful lives over which certain computer hardware are being depreciated.

Analysis of Legacy Financial Services, Inc.

      Results of Operations—During the first quarter of 2000, LFS had net income of approximately $220,000 compared to a net loss of approximately $9,000 during the first quarter of 1999. This shift is primarily due to increases in income, partially offset by increases in expenses, as discussed below.

      Income—LFS’ major source of income is commission overrides, which are generated through sales of variable life insurance and annuity products, mutual funds, and certain equity securities. Levels of commission income are directly related to the volume of sales of such products. Total LFS revenue increased approximately $467,000, or 192.9%, in the three months ended March 31, 2000 compared to the corresponding period in 1999 due primarily to overall increases in sales volume. Also contributing to increases in commission income were shifts to sales by independent broker networks from which LFS receives higher net commissions.

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      Expenses—Total LFS expenses increased approximately $122,000, or 39.4%, in the first quarter of 2000 compared to the first quarter of 1999 due primarily to increases in salaries and benefits. As a service organization, LFS operating expenses consist primarily of salaries and related employee benefits. These expenses increased approximately $131,000, or 64.2%, in the first quarter of 2000, from the corresponding quarter in 1999, due primarily to increases in the average number of employees, to the addition of personnel at higher pay levels, and to regular annual pay increases.

Analysis of Other Segments

      Results of Operations—Other segments consist of Regan Holding Corp. (stand-alone), LifeSurance Corporation, Legacy Advisory Services, Inc. and Legacy Reinsurance Company. Combined net losses from these entities increased approximately $15,000, or 1.4%, in the first quarter of 2000 compared to the first quarter of 1999 primarily due to losses on disposals of fixed assets, partially offset by reduced operating expenses, as discussed below.

      Regan Holding Corp. (stand-alone) recorded non-operating losses of approximately $187,000 during the first quarter of 2000 related to idle assets and other equipment replaced as a result of capital improvements. Also, Regan Holding Corp. (stand-alone) recorded $250,000 of Producer stock option expense related to stock options granted to producers as an incentive to stimulate sales. Offsetting this expense was a reversal of $1,384,000 in Producer stock option expense related to options granted in January 2000 but earned by producers in 1999.

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PART II. OTHER INFORMATION

Item 6.  Exhibits and Reports on Form 8-K

(a)	Index to Exhibits
	Exhibit  10.1	Amendment Thirteen to the Marketing Agreement by and between Legacy Marketing Group and American National Insurance Company, dated April, 2000. *
	Exhibit  10.2	Amendment Twelve to the Insurance Processing Agreement by and between Legacy Marketing Group and American National Insurance Company, dated April 2000. *
	Exhibit  11.1	Computation of Earnings (Loss) Per Share-Basic and Diluted (Restated)
	Exhibit  27	Financial Data Schedule *
(b)	Reports on Form 8-K
	No reports on Form 8-K were filed during the first quarter of 2000.

* Filed with original filing on May 15, 2000.

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SIGNATURES

      Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized.

REGAN HOLDING CORP.

Date: September 20, 2001 Signature: /s/ R. PRESTON PITTS
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R. Preston Pitts,
President & Chief Operating Officer

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