UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, DC 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 September 30, 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 number 0-4366

Regan Holding Corp.
(Exact Name of Registrant as Specified in Its Charter)

California	68-0211359
(State or Other Jurisdiction of Incorporation or Organization)	(IRS Employer Identification No.)
2090 Marina Avenue, Petaluma,
California	94954
(Address of Principal Executive Offices)	(ZIP Code)

707-778-8638

(Registrant’s Telephone Number, Including Area Code)

      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 October 31, 2000:

Common Stock-Series A	25,510,128
Common Stock-Series B	588,623

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.

PART I FINANCIAL INFORMATION

Item 1. Financial Statements

REGAN HOLDING CORP. AND SUBSIDIARIES
Condensed Consolidated Balance Sheets

				September 30, 2000			December 31, 1999
				(Unaudited and Restated)
Assets
	Cash and cash equivalents			$	3,138,971		$	1,094,759
	Investments				9,970,001			20,861,973
	Accounts receivable				1,622,556			2,625,867
	Prepaid expenses				1,461,516			1,223,177
	Income taxes receivable				2,806,061			2,893,701
	Deferred income taxes —  current				865,189			895,841
			Total current assets		19,864,294			29,595,318
	Net fixed assets				14,063,525			12,168,135
	Deferred income taxes —  non current				3,285,410			2,582,301
	Notes receivable-net				1,881,946			667,682
	Equity in and advances to investee —   net				1,173,124			—
	Other assets				1,476,335			2,130,268
			Total non current assets		21,880,340			17,548,386
			Total Assets	$	41,744,634		$	47,143,704
Liabilities, Redeemable Common Stock, and Shareholders’ Equity
Liabilities
	Accounts payable and accrued liabilities			$	5,997,279		$	5,308,020
	Accrued sales convention costs				2,171,968			2,248,913
	Margin loan payable				—			3,088,918
			Total current liabilities		8,169,247			10,645,851
	Loans payable				2,212,391			2,256,418
	Incentive compensation payable				99,223			469,720
	Deferred compensation payable				2,727,993			1,364,713
	Other liabilities				281,872			167,641
			Total non current liabilities		5,321,479			4,258,492
			Total Liabilities		13,490,726			14,904,343
Commitments and Contingencies					—			—
Redeemable Common Stock, Series A and B					11,183,966			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: 20,913,427 and 20,863,520 shares at September 30, 2000 and December 31, 1999, respectively			3,641,751			3,659,367
	Common stock committed				100,000			—
	Paid-in capital from retirement of common stock				927,676			927,640
	Paid-in capital from producer stock options				5,136,366			4,276,000
	Retained earnings				7,790,149			12,385,173
	Accumulated other comprehensive loss —  net				(526,000	)		(572,104	)
			Total Shareholders’ Equity		17,069,942			20,676,076
			Total Liabilities, Redeemable Common
			Stock and Shareholders’ Equity	$	41,744,634		$	47,143,704

      See accompanying notes to Condensed Consolidated Financial Statements.

REGAN HOLDING CORP. AND SUBSIDIARIES
Condensed Consolidated Income Statements
(Unaudited)

			For the Three Months Ended						For the Nine Months Ended
			September 30,						September 30,
			2000			1999			2000			1999
			(Restated)			(Restated)			(Restated)			(Restated)
Revenue:
	Marketing allowances		$	3,957,493		$	5,369,512		$	12,493,220		$	21,446,302
	Commission revenue			2,987,158			3,421,286			10,358,535			12,220,510
	Administrative fees			2,245,376			2,041,769			6,711,008			6,674,185
	Other			119,514			174,926			654,404			462,246
		Total revenue		9,309,541			11,007,493			30,217,167			40,803,243
Expenses:
	Salaries and related benefits			6,089,159			5,439,391			18,666,952			16,890,272
	Sales promotion and support			2,334,206			1,706,676			5,362,852			5,522,917
	Producer stock options			208,000			1,124,056			860,366			3,848,212
	Professional fees			1,588,474			645,895			3,972,533			1,474,687
	Occupancy			824,305			515,791			2,365,932			1,283,934
	Depreciation and amortization			883,911			326,451			2,202,856			1,135,628
	Stationery and supplies			152,809			338,968			527,527			693,249
	Courier and postage			267,591			245,576			699,577			770,910
	Travel and entertainment			228,093			260,466			621,677			511,297
	Leased equipment			352,378			330,145			1,109,362			769,537
	Insurance			98,287			104,070			354,354			313,554
	Other			150,734			214,635			474,001			339,622
		Total expenses		13,177,947			11,252,120			37,217,989			33,553,819
Operating income (loss)				(3,868,406	)		(244,627	)		(7,000,822	)		7,249,424
Other income (loss) —  net
	Investment income —  net			204,428			316,459			770,586			868,921
	Losses from equity investment			(275,739	)		—			(329,376	)		—
	Gain (losses) on disposals of fixed assets			54,446			—			(304,600	)		—
		Total other income (loss) — net		(16,865	)		316,459			136,610			868,921
Income (loss) before income taxes, and before cumulative effect of accounting change				(3,885,271	)		71,832			(6,864,212	)		8,118,345
Provision for (benefit from) income taxes				(1,436,189	)		(25,577	)		(2,562,720	)		3,321,226
Net income (loss) before cumulative effect of accounting change				(2,449,082	)		97,409			(4,301,492	)		4,797,119
Cumulative effect of accounting change, net of tax				—			—			(226,000	)		—
Net income (loss)			$	(2,449,082	)	$	97,409		$	(4,527,492	)	$	4,797,119
Earnings (loss) per share:
	Weighted average shares outstanding —  basic			26,252,879			26,375,095			26,312,012			26,403,061
	Basic earnings (loss) per share before cumulative effect of accounting change		$	(0.09	)	$	—		$	(0.16	)	$	0.18
	Cumulative effect of accounting change			—			—			(0.01	)		—
	Basic earnings (loss) per share		$	(0.09	)	$	—		$	(0.17	)	$	0.18
	Weighted average shares outstanding —  diluted			26,252,879			27,724,135			26,312,012			27,759,434
	Diluted earnings (loss) per share before cumulative effect of accounting change		$	(0.09	)	$	—		$	(0.16	)	$	0.17
	Cumulative effect of accounting change			—			—			(0.01	)		—
	Diluted earnings (loss) per share		$	(0.09	)	$	—		$	(0.17	)	$	0.17

      See accompanying notes to Condensed Consolidated Financial Statements.

REGAN HOLDING CORP. AND SUBSIDIARIES
Condensed Consolidated Statement of Shareholders’ Equity
(Unaudited)

		Series A						Common		Paid in Capital		Paid in Capital					Accumulated Other
		Common Stock						Stock		from Retirement of		from Producer		Retained			Comprehensive
		Shares			Amount			Committed		Common Stock		Options		Earnings			Loss			Total
												(Restated)		(Restated)						(Restated)
Balance January 1, 2000			20,863,520		$	3,659,367		$	—	$	927,640	$	4,276,000	$	12,385,173		$	(572,104	)	$	20,676,076
Comprehensive losses:
	Net loss for the nine months ended September 30, 2000														(4,527,492	)					(4,527,492	)
	Net unrealized gains on investments Less: realized gains included in																	81,928			81,928
	net gains																	(5,301	)		(5,301	)
	Deferred tax on net unrealized gains																	(30,523	)		(30,523	)
Total comprehensive losses																					(4,481,388	)
Accretion of redeemable common stock to redemption value															(35,561	)					(35,561	)
Voluntary repurchases of common stock			(36,152	)		(38,737	)				36				(31,971	)					(70,672	)
Issuance of common stock			20,700			21,121															21,121
Common stock committed			65,359						100,000												100,000
Producer stock option expense													860,366								860,366
Balance September 30, 2000 (Unaudited)			20,913,427		$	3,641,751		$	100,000	$	927,676	$	5,136,366	$	7,790,149		$	(526,000	)	$	17,069,942

See accompanying notes to Condensed Consolidated Financial Statements.

REGAN HOLDING CORP. AND SUBSIDIARIES
Condensed Consolidated Statements of Cash Flows
(Unaudited)

				For the Nine Months Ended
				September 30,
				2000			1999
Cash flows from operating activities:				(Restated)			(Restated)
	Net income (loss)			$	(4,527,492	)	$	4,797,119
	Adjustments to reconcile net income (loss) to cash provided by operating activities:
		Depreciation and amortization of fixed assets			2,159,399			1,081,636
		Losses on disposals of fixed assets			304,600			—
		Amortization of intangible assets			43,457			53,992
		Common stock awarded to producers			100,000			419,905
		Producer stock option expenses			860,366			3,848,212
		Amortization/accretion of investments			(107,473	)		(13,561	)
		Realized losses (gains) on sales of investments			(5,301	)		89,628
		Losses from equity investment			329,376			—
		Changes in assets and liabilities:
			Net change in accounts receivable		1,003,311			(480,443	)
			Net change in prepaid expenses		(238,339	)		(245,765	)
			Net change in income taxes receivable		87,640			(792,154	)
			Net change in deferred income taxes		(702,980	)		(1,989,815	)
			Net change in accounts payable and accrued liabilities		689,259			(803,345	)
			Net change in accrued sales convention costs		(76,945	)		931,292
			Net change in other assets and liabilities		1,374,367			35,740
			Net cash provided by operating activities		1,293,245			6,932,441
Cash flows from investing activities:
	Purchases of investments				(7,192,340	)		(13,045,133	)
	Proceeds from sales of investments				18,273,719			8,653,621
	Amounts loaned pursuant to notes receivable				(1,432,244	)		(97,545	)
	Proceeds from repayments of notes receivable				217,980			33,581
	Investment in and advances to investee				(1,502,500	)		—
	Purchases of fixed assets				(4,359,387	)		(8,938,109	)
			Net cash provided by (used in) investing activities		4,005,228			(13,393,585	)
Cash flows from financing activities:
	Proceeds from margin loan				1,000,000			—
	Payments toward margin loan				(4,124,515	)		—
	Proceeds from loans payable				2,100,000			4,132,500
	Payments toward loans payable				(2,144,027	)		(321,648	)
	Return of building loan reserve				378,717			—
	Payment for building loan reserve				—			(650,000	)
	Payments for repurchases, redemptions and retirement of common stock				(485,557	)		(458,745	)
	Proceeds from stock option exercises				21,121			15,285
			Net cash provided by (used in) financing activities		(3,254,261	)		2,717,392
Increase (decrease) in cash and cash equivalents					2,044,212			(3,743,752	)
Cash and cash equivalents, beginning of period					1,094,759			5,916,731
Cash and cash equivalents, end of period				$	3,138,971		$	2,172,979

      See accompanying notes to Condensed Consolidated Financial Statements.

REGAN HOLDING CORP. AND SUBSIDIARIES
Notes to 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, LifeSurance Corporation, and Imagent Online, LLC, (“Imagent”). All intercompany transactions have been eliminated.
	The interim financial data as of September 30, 2000 and for the nine months ended September 30, 2000 and September 30, 1999 is unaudited; however, in the opinion of the Company, the interim data includes all adjustments, consisting only of normal recurring adjustments, necessary for a fair statement of the results for the interim periods. 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 nine months ended September 30, 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.
	Depreciation expense recorded by the Company totaled approximately $869,000 during the three months ended September 30, 2000 and approximately $2.2 million during the nine months then ended. Effective January 1, 2000, the Company changed, from five years to three years, its estimate of the useful lives over which certain computer hardware and software is being depreciated. Had this change in estimate not occurred, the Company would have recorded approximately $634,000 in depreciation expense during the three months ended September 30, 2000 and approximately $1,027,000 during the nine months ended September 30, 2000.
2.	Restatement of Financial Results and Cumulative Effect of Accounting Change
	Stock Option Expense - During the nine months ended September 30, 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 Statements of Income for the three months and nine months ended September 30, 2000 have been restated to reflect $208,000 and $692,000, respectively, in Producer stock option expense related to the January 2001 stock option grants which were earned by Producers during the first three quarters 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. In addition, the Consolidated Statements of Income for the three months and nine months ended September 30, 1999 have been restated to reflect $279,056 and $981,212, respectively, in Producer stock option expense related to the January 2000 stock option grants which were earned by Producers during the first three quarters of 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 nine months ended September 30, 2000. In addition, commission revenue increased by $29,404 and $138,530, respectively, during the three months and nine months ended September 30, 2000. The Form 10-Q for the nine months ended September 30, 2000 as originally filed did not include the effect of adopting SAB 101. Accordingly, the impact of adoption has been included in the 2000 results in the accompanying Condensed Consolidated Statements of Income.
	The effects of the restatement of the stock option expense and the adoption of SAB 101 on the Company’s Consolidated Financial Statements for the three months and nine months ending September 30, 2000 and 1999 are as follows:

Statement of Income Data:

				For the Three Months Ended
				September 30,
	2000						1999
	As originally						As originally
	reported			As restated			reported		As restated
Total revenue	$	9,280,137		$	9,309,541		$	11,007,493	$	11,007,493
Total expenses		12,969,947			13,177,947			10,973,064		11,252,120
Operating income (loss)		(3,689,810	)		(3,868,406	)		34,429		(244,627	)
Other income (loss)		(16,865	)		(16,865	)		316,459		316,459
Income (Loss) before income taxes		(3,706,675	)		(3,885,271	)		350,888		71,832
Provision for (Benefit from) income taxes		(1,364,187	)		(1,436,189	)		88,113		(25,577	)
Net income (loss)	$	(2,342,488	)	$	(2,449,082	)	$	262,775	$	97,409
Basic income (loss) per share	$	(0.09	)	$	(0.09	)	$	0.01	$	—
Diluted income (loss) per share	$	(0.09	)	$	(0.09	)	$	0.01	$	—

				For the Nine Months Ended
				September 30,
	2000						1999
	As originally						As originally
	reported			As restated			reported		As restated
Total revenue	$	30,078,637		$	30,217,167		$	40,803,243	$	40,803,243
Total expenses		37,909,989			37,217,989			32,572,607		33,553,819
Operating income (loss)		(7,831,352	)		(7,000,822	)		8,230,636		7,249,424
Other income		136,610			136,610			868,921		868,921
Income (Loss) before income taxes and cumulative effect of accounting change		(7,694,742	)		(6,864,212	)		9,099,557		8,118,345
Provision for (Benefit from) income taxes		(2,900,075	)		(2,562,720	)		3,721,017		3,321,226
Net income (loss) before cumulative effect of accounting change		(4,794,667	)		(4,301,492	)		5,378,540		4,797,119
Cumulative effect of accounting change, net of tax		—			(226,000	)		—		—
Net income (loss)	$	(4,794,667	)	$	(4,527,492	)	$	5,378,540	$	4,797,119
Basic income (loss) per share	$	(0.18	)	$	(0.17	)	$	0.20	$	0.18
Diluted income (loss) per share	$	(0.18	)	$	(0.17	)	$	0.19	$	0.17

      The restatement to correct stock option expense resulted in a decrease in basic and diluted net loss per share of $0.02 and the adoption of SAB 101 resulted in an increase in basic and diluted loss per share of $0.01 for the nine months ended September 30, 2000.

Balance Sheet Data:

	September 30, 2000
	As originally reported			As restated
Total assets	$	41,381,681	$	41,744,634
Total liabilities	$	13,254,256	$	13,490,726
Redeemable common stock	$	11,183,966	$	11,183,966
Shareholders’ equity	$	16,943,459	$	17,069,942

3.	Notes Receivable
	During the third quarter of 2000, the Company advanced approximately $1.2 million to a Tennessee corporation engaged in the business of values-based investment screening. The Company is currently negotiating to purchase the assets of the Tennessee corporation. Management expects the acquisition to be finalized during the fourth quarter of 2000. These advances, combined with various notes receivable from external parties, are classified as Notes Receivable in the accompanying Condensed Consolidated Balance Sheets.
4.	Equity In and Advances To Investee
	During 1999, the Company formed Imagent, a Delaware limited liability company and a wholly-owned subsidiary of the Company. In May 2000, Imagent entered into an agreement with an Internet start-up company pursuant to which Imagent purchased an ownership interest in the Internet company for $402,500. Imagent’s investment in the Internet company is accounted for under the equity method. The Company’s share of the Internet company’s losses was approximately $329,000 during the nine months ended September 30, 2000. In addition, Imagent loaned $1,100,000 to the Internet company during the nine months ended September 30, 2000. The loan bears interest equal to the Prime Rate, as published in The Wall Street Journal, and will be repaid over two years in equal monthly installments commencing on June 1, 2001. These amounts invested and advanced have been reflected, net of the Company's share of cumulative losses, as Equity In and Advances To Investee in the accompanying Condensed Consolidated Balance Sheets.

5.	Margin Loan Payable
	During the first quarter of 2000, the Company borrowed an additional $1,000,000 under an existing margin loan agreement with the Company’s investment broker. During the first quarter of 2000, the margin loan was repaid in full.
6.	Loan Payable
	In 1999, the Company entered into a loan payable for the purchase of a building (the “1999 Loan”). The 1999 Loan contained certain covenants with which the Company was required to comply, including restrictions on repurchasing non-redeemable common stock. The lender under the 1999 Loan waived this covenant through June 30, 2000. Pursuant to the 1999 Loan agreement, the Company was also required to place approximately $563,000 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 under the 1999 Loan released approximately $379,000 of such reserves for general use by the Company. The remaining reserves were released in the second quarter of 2000.
	In June 2000, the Company refinanced the 1999 Loan. Pursuant to the new loan agreement (the “2000 Loan”), the Company borrowed $2,100,000 at an annual interest rate of 9.01% per annum, payable monthly through August 2010, at which time a balloon payment of approximately $1.8 million becomes due. The 2000 Loan is collateralized by the purchased building, contains no restrictive covenants, and requires no cash reserves.
7.	Deferred Compensation Payable
	During the nine months ended September 30, 2000, approximately $1.3 million in commissions were deferred by producers under the Regan Holding Corp. Producer Commission Deferral Plan and approximately $100,000 in compensation was deferred by key employees under the Regan Holding Corp. Key Employee Deferred Compensation Plan. Such amounts have been recorded as Deferred Compensation Payable in the accompanying Condensed Consolidated Balance Sheets, plus Company matching contributions of approximately $53,000 and gains of approximately $35,000, less distributions and forfeitures of approximately $102,000.
8.	Commitments and Contingencies
	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 is obligated to 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, which totaled approximately $25.5 million at September 30, 2000. The Company has purchased two life insurance policies with a combined face amount of $29.0 million for the purpose of funding this obligation in the event of Ms. Regan’s death.

9.	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 nine months ended September 30, 2000, redeemable common stock was redeemed and retired as follows:

	Series A Redeemable						Series B Redeemable						Total Redeemable
	Common Stock						Common Stock						Common Stock
				Carrying						Carrying						Carrying
	Shares			Amount			Shares			Amount			Shares			Amount
Balance January 1, 2000		4,921,615		$	9,794,014			589,757		$	1,769,271			5,511,372		$	11,563,285
Accretion to redemption value		—			29,675			—			5,886			—			35,561
Redemption and retirement of common stock		(212,047	)		(412,627	)		(1,134	)		(2,253	)		(213,181	)		(414,880	)
Balance September 30, 2000		4,709,568		$	9,411,062			588,623		$	1,772,904			5,298,191		$	11,183,966

10.	Common Stock Committed
	During the second quarter of 2000, the Company became obligated to award to two LMG producers 65,359 shares of Series A common stock in exchange for achievement of certain milestones in conjunction with a sales incentive program. As of September 30, 2000, these shares had not been issued. To reflect this obligation, the Company recorded common stock committed in the amount of $100,000 during the second quarter of 2000.
11.	Amendments to Marketing and Insurance Processing Agreements
	In October 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 November 30, 2000. LMG and American National are in the process of negotiating new agreements.
12.	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 three months and nine months ended September 30, 2000, the Company recorded Producer stock option expense of $208,000 and $692,000, respectively, related to the January 2001 grants which were earned by Producers during the respective periods in 2000. In addition, during the second quarter of 2000, the Company recorded approximately $168,000 of expense related to stock options that were granted to other non-employees. These charges reflect measurement of the options based on management’s best estimate of the fair value of the options at the date of grant. The fair value of all the options was estimated using the Black-Scholes option pricing model with the following assumptions: risk free interest rates ranging between 5.04% and 6.52%, expected lives ranging from six to ten years, and expected volatility ranging from 28.33% to 34.17%. A dividend yield assumption was not applicable, as the Company’s stock is not publicly traded nor does the Company pay dividends.
13.	Liquidity and Capital Resources (Restated)
	During the nine months ended September 30, 2000, the Company experienced net losses of approximately $4.5 million, which, when combined with investing and financing activities, resulted in a significant decrease in working capital during the period. In addition, the Company is obligated to repurchase certain shares of its common stock pursuant to various contractual agreements under which the shares were issued. If the Company’s net losses continue or if requests for repurchase of redeemable common stock increase

	significantly, a cash shortfall could occur. However, management anticipates that future cash flows from operations, combined with existing cash and investment balances, will provide sufficient funding for the foreseeable future. Further, in the event that a shortfall were to occur, management believes that adequate financing could be obtained to meet the Company’s cash flow needs.
14.	Earnings per Share (Restated)

	Income/(Loss)			Shares		Per-share
	(Numerator)			(Denominator)		Amount
	(Restated)					(Restated)
For the three months ended
September 30, 2000
Loss available to common shareholders	$	(2,449,082	)		26,252,879	$	(0.09	)
Effect of dilutive securities - employee and producer stock options (1)		—			—
Diluted loss per share	$	(2,449,082	)		26,252,879	$	(0.09	)
For the three months ended
September 30, 1999
Income available to common shareholders	$	97,409			26,375,095	$	—
Effect of dilutive securities - employee and producer stock options		—			1,349,040
Diluted earnings per share	$	97,409			27,724,135	$	—
For the nine months ended
September 30, 2000
Loss before cumulative effect of accounting change	$	(4,301,492	)		26,312,012	$	(0.16	)
Cumulative effect of accounting change		(226,000	)		—		(0.01	)
Loss available to common shareholders		(4,527,492	)		26,312,012	$	(0.17	)
Effect of dilutive securities - employee and producer stock options (1)		—			—
Diluted loss per share	$	(4,527,492	)		26,312,012	$	(0.17	)
For the nine months ended
September 30, 1999
Income available to common shareholders	$	4,797,119			26,403,061	$	0.18
Effect of dilutive securities - employee and producer stock options		—			1,356,373		(0.01	)
Diluted earnings per share	$	4,797,119			27,759,434	$	0.17

(1)       The diluted share base for the three and nine months ended September 30, 2000 exclude incremental shares of 2,246,612 and 2,288,778, respectively, related to employee and non-employee stock options. These shares are excluded due to their antidilutive effect as a result of the Company’s net losses incurred during 2000.

15.	Segment Information (Restated)
	The table below presents information about the Company’s operating segments:

			Legacy			Legacy						Regan
			Marketing			Financial			LifeSurance			Holding Corp.
			Group			Services, Inc.			Corporation			(stand-alone)			Other			Total
			(Restated)			(Restated)						(Restated)						(Restated)
Three months ended
September 30, 2000
		Total revenue	$	8,698,057		$	304,149		$	136,161		$	147,089		$	24,085		$	9,309,541
		Total expenses		11,228,209			595,634			257,243			1,002,000			94,861			13,177,947
		Operating loss		(2,530,152	)		(291,485	)		(121,082	)		(854,911	)		(70,776	)		(3,868,406	)
		Other income (loss)		194,911			7,362			761			54,633			(274,532	)		(16,865	)
		Loss before tax		(2,335,241	)		(284,123	)		(120,321	)		(800,278	)		(345,308	)		(3,885,271	)
		Tax provision (benefit)		(1,134,199	)		(156,962	)		(39,132	)		93,546			(199,442	)		(1,436,189	)
		Net loss before cumulative effect of accounting change		(1,201,042	)		(127,161	)		(81,189	)		(893,824	)		(145,866	)		(2,449,082	)
		Cumulative effect of accounting change		—			—			—			—			—			—
		Net loss	$	(1,201,042	)	$	(127,161	)	$	(81,189	)	$	(893,824	)	$	(145,866	)	$	(2,449,082	)
Three months ended
September 30, 1999
		Total revenue	$	10,505,015		$	416,697		$	80,041		$	100		$	5,640		$	11,007,493
		Total expenses		8,548,844			420,394			365,906			1,904,125			12,851			11,252,120
		Operating income (loss)		1,956,171			(3,697	)		(285,865	)		(1,904,025	)		(7,211	)		(244,627	)
		Other income		313,790			359			—			—			2,310			316,459
		Income (loss) before tax		2,269,961			(3,338	)		(285,865	)		(1,904,025	)		(4,901	)		71,832
		Tax provision (benefit)		655,473			(32,757	)		(105,320	)		(541,511	)		(1,462	)		(25,577	)
		Net income (loss)	$	1,614,488		$	29,419		$	(180,545	)	$	(1,362,514	)	$	(3,439	)	$	97,409
Nine months ended
September 30, 2000
		Total revenue	$	27,742,622		$	1,685,700		$	345,284		$	400,788		$	42,773		$	30,217,167
		Total expenses		30,595,677			1,530,622			1,301,396			3,417,592			372,702			37,217,989
		Operating income (loss)		(2,853,055	)		155,078			(956,112	)		(3,016,804	)		(329,929	)		(7,000,822	)
		Other income (loss)		739,184			20,638			2,880			(300,338	)		(325,754	)		136,610
		Income (loss) before tax		(2,113,871	)		175,716			(953,232	)		(3,317,142	)		(655,683	)		(6,864,212	)
		Tax benefit		(1,309,650	)		(73,074	)		(351,813	)		(579,558	)		(248,625	)		(2,562,720	)
		Net income (loss) before cumulative effect of accounting change		(804,221	)		248,790			(601,419	)		(2,737,584	)		(407,058	)		(4,301,492	)
		Cumulative effect of accounting change		(226,000	)		—			—			—			—			(226,000	)
		Net income (loss)	$	(1,030,221	)	$	248,790		$	(601,419	)	$	(2,737,584	)	$	(407,058	)	$	(4,527,492	)
Nine months ended
September 30, 1999
		Total revenue	$	39,414,008		$	1,169,839		$	213,415		$	100		$	5,881		$	40,803,243
		Total expenses		25,134,039			1,071,868			951,011			6,368,999			27,902			33,553,819
		Operating income (loss)		14,279,969			97,971			(737,596	)		(6,368,899	)		(22,021	)		7,249,424
		Other income		861,811			862			—			1,618			4,630			868,921
		Income (loss) before tax		15,141,780			98,833			(737,596	)		(6,367,281	)		(17,391	)		8,118,345
		Tax provision (benefit)		5,634,833			(58,855	)		(279,363	)		(1,971,375	)		(4,014	)		3,321,226
		Net income (loss)	$	9,506,947		$	157,688		$	(458,233	)	$	(4,395,906	)	$	(13,377	)	$	4,797,119
Total assets
	September 30, 2000		$	21,620,917		$	1,489,008		$	1,423,683		$	15,542,249		$	1,668,777		$	41,744,634
	December 31, 1999		$	27,527,585		$	1,327,639		$	1,136,184		$	16,918,845		$	233,451		$	47,143,704

The “Other” segments above include Legacy Advisory Services, Inc., Legacy Reinsurance Company, and Imagent Online, LLC. These entities' operations do not currently represent material amounts to the Company’s results and, accordingly, were not separated for purposes of this disclosure.

16.	Carrier and Product Concentration
	A significant percentage of the Company’s consolidated revenue during the periods presented was generated from LMG sales on behalf of each of the Carriers, as follows:

	Three Months Ended						Nine Months Ended
	September 30,						September 30,
	2000			1999			2000			1999
Transamerica		69.4	%		10.9	%		78.3	%		9.3	%
IL Annuity		23.2	%		71.2	%		15.7	%		76.4	%
American National		7.4	%		11.3	%		6.0	%		10.1	%

Although LMG markets and administers several products on behalf of the Carriers, the Company’s consolidated revenue during the periods presented was derived primarily from sales and administration of two fixed annuity products, as follows:

	Three Months Ended						Nine Months Ended
	September 30,						September 30,
	2000			1999			2000			1999
SelectMark™ (sold on behalf of Transamerica)		50.2	%		8.5	%		43.3	%		11.1	%
VisionMark™ (sold on behalf of IL Annuity)		7.9	%		15.3	%		12.2	%		29.4	%

17.	Reclassifications
	Certain amounts in the 1999 consolidated financial statements have been reclassified to conform with the 2000 presentation. 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.

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

			Legacy			Legacy						Regan
			Marketing			Financial			LifeSurance			Holding Corp.
			Group			Services, Inc.			Corporation			(stand-alone)			Other			Total
			(Restated)			(Restated)						(Restated)						(Restated)
Three months ended
September 30, 2000
		Total revenue	$	8,698,057		$	304,149		$	136,161		$	147,089		$	24,085		$	9,309,541
		Total expenses		11,228,209			595,634			257,243			1,002,000			94,861			13,177,947
		Operating loss		(2,530,152	)		(291,485	)		(121,082	)		(854,911	)		(70,776	)		(3,868,406	)
		Other income (loss)		194,911			7,362			761			54,633			(274,532	)		(16,865	)
		Loss before tax		(2,335,241	)		(284,123	)		(120,321	)		(800,278	)		(345,308	)		(3,885,271	)
		Tax provision (benefit)		(1,134,199	)		(156,962	)		(39,132	)		93,546			(199,442	)		(1,436,189	)
		Net loss before cumulative effect of accounting change		(1,201,042	)		(127,161	)		(81,189	)		(893,824	)		(145,866	)		(2,449,082	)
		Cumulative effect of accounting change		—			—			—			—			—			—
		Net loss	$	(1,201,042	)	$	(127,161	)	$	(81,189	)	$	(893,824	)	$	(145,866	)	$	(2,449,082	)
Three months ended
September 30, 1999
		Total revenue	$	10,505,015		$	416,697		$	80,041		$	100		$	5,640		$	11,007,493
		Total expenses		8,548,844			420,394			365,906			1,904,125			12,851			11,252,120
		Operating income (loss)		1,956,171			(3,697	)		(285,865	)		(1,904,025	)		(7,211	)		(244,627	)
		Other income		313,790			359			—			—			2,310			316,459
		Income (loss) before tax		2,269,961			(3,338	)		(285,865	)		(1,904,025	)		(4,901	)		71,832
		Tax provision (benefit)		655,473			(32,757	)		(105,320	)		(541,511	)		(1,462	)		(25,577	)
		Net income (loss)	$	1,614,488		$	29,419		$	(180,545	)	$	(1,362,514	)	$	(3,439	)	$	97,409
Nine months ended
September 30, 2000
		Total revenue	$	27,742,622		$	1,685,700		$	345,284		$	400,788		$	42,773		$	30,217,167
		Total expenses		30,595,677			1,530,622			1,301,396			3,417,592			372,702			37,217,989
		Operating income (loss)		(2,853,055	)		155,078			(956,112	)		(3,016,804	)		(329,929	)		(7,000,822	)
		Other income (loss)		739,184			20,638			2,880			(300,338	)		(325,754	)		136,610
		Income (loss) before tax		(2,113,871	)		175,716			(953,232	)		(3,317,142	)		(655,683	)		(6,864,212	)
		Tax benefit		(1,309,650	)		(73,074	)		(351,813	)		(579,558	)		(248,625	)		(2,562,720	)
		Net income (loss) before cumulative effect of accounting change		(804,221	)		248,790			(601,419	)		(2,737,584	)		(407,058	)		(4,301,492	)
		Cumulative effect of accounting change		(226,000	)		—			—			—			—			(226,000	)
		Net income (loss)	$	(1,030,221	)	$	248,790		$	(601,419	)	$	(2,737,584	)	$	(407,058	)	$	(4,527,492	)
Nine months ended
September 30, 1999
		Total revenue	$	39,414,008		$	1,169,839		$	213,415		$	100		$	5,881		$	40,803,243
		Total expenses		25,134,039			1,071,868			951,011			6,368,999			27,902			33,553,819
		Operating income (loss)		14,279,969			97,971			(737,596	)		(6,368,899	)		(22,021	)		7,249,424
		Other income		861,811			862			—			1,618			4,630			868,921
		Income (loss) before tax		15,141,780			98,833			(737,596	)		(6,367,281	)		(17,391	)		8,118,345
		Tax provision (benefit)		5,634,833			(58,855	)		(279,363	)		(1,971,375	)		(4,014	)		3,321,226
		Net income (loss)	$	9,506,947		$	157,688		$	(458,233	)	$	(4,395,906	)	$	(13,377	)	$	4,797,119
Total assets
	September 30, 2000		$	21,620,917		$	1,489,008		$	1,423,683		$	15,542,249		$	1,668,777		$	41,744,634
	December 31, 1999		$	27,527,585		$	1,327,639		$	1,136,184		$	16,918,845		$	233,451		$	47,143,704

“Other” segments above include Legacy Advisory Services, Inc., Legacy Reinsurance Company, and Imagent Online, LLC. Such entities’ financial results are not material in the aggregate and therefore were not separated for purposes of this disclosure.

Analysis of Regan Holding Corp. Consolidated

      Results of Operations—The Company experienced consolidated net losses of approximately $2.5 million during the third quarter of 2000, compared to consolidated net income of approximately $97,000 during the third quarter of 1999. For the nine months ended September 30, 2000, the Company experienced net losses of approximately $4.5 million, compared with net income of approximately $4.8 million for the same period in 1999. These losses are due primarily to a decrease in Legacy Marketing Group (“LMG”) revenue and increases in LMG expenses, both of which are discussed below.

      Liquidity and Capital Resources— 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 anticipated 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 that is redeemable at the option of shareholders under various agreements with the Company.

      Cash and short-term investment grade securities represented 31.4% of the Company’s total consolidated assets at September 30, 2000, compared with 46.6% at December 31, 1999. This decrease in cash and short-term investments is attributable primarily to purchases of fixed assets, advances to existing and anticipated investees, and repayment of a margin loan, as discussed below.

      The Company paid approximately $4.4 million during the nine months ended September 30, 2000 to purchase computer hardware and software, leasehold improvements, and acquisitions of furniture and fixtures. Such purchases were necessary to accommodate new employees and support anticipated growth in sales volume.

      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 ownership interest in the internet company for $402,500 during May 2000. The Company also loaned $600,000 during June 2000 and $500,000 during August 2000 to the internet company. Repayments under the note will commence in June 2001. The Company may advance additional funds during the fourth quarter of 2000 and the first of quarter 2001.

      The Company advanced approximately $1.2 million during the third quarter of 2000 to a Tennessee corporation engaged in the business of values-based investment screening. The Company is currently negotiating to purchase the assets of the Tennessee corporation. Management expects the acquisition to be finalized during the fourth quarter of 2000.

      During the last 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.

      The Company is obligated to repurchase certain shares of its common stock pursuant to contractual agreements under which the shares were issued. At September 30, 2000 and December 31, 1999, the total redemption value of all redeemable common stock outstanding was approximately $11.2 million and $11.6 million, respectively. Cash paid pursuant to redemption requests from shareholders totaled approximately $486,000 during the nine months ended September 30, 2000 and approximately $459,000 during the same period in 1999.

      At December 31, 1999, the Company’s investment portfolio included a $12.0 million equity investment in an affiliate of an insurance carrier with which LMG contracts. In the first quarter of 2000, the corner affiliate 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.

      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 is obligated to 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, which totaled approximately $25.5 million at September 30, 2000. The Company has purchased two life insurance policies with a combined face amount of $29.0 million for the purpose of funding this obligation in the event of Ms. Regan’s death.

      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.

      Generally, the Company’s cash needs are met through cash provided from operating activities, which totaled approximately $6.9 million during the nine months ended September 30, 1999 and approximately $1.3 million during the nine months ended September 30, 2000. The decrease in cash flows from operating activities is attributable primarily to a decrease in LMG sales. Until such sales increase, as discussed below, operating activities may generate negative cash flows. 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 were 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 third quarter of 2000, LMG’s net loss totaled approximately $1.2 million, compared to net income of approximately $1.6 million for the same period in 1999. For the nine months ended September 30, 2000, LMG recorded a net loss of approximately $1.0 million, compared to net income of approximately $9.5 million during the same period in 1999. These fluctuations are attributable primarily to decreases in revenue and increases in expenses, as discussed below.

      Revenue—LMG’s major sources of revenue are marketing allowances, commission revenue, 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 revenue 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 in force and processing of producer appointments and terminations. Total LMG revenue decreased approximately $1.8 million, or 17.2%, in the third quarter of 2000, compared to the third quarter of 1999, and decreased approximately $11.7 million, or 29.6%, during the nine months ended September 30, 2000, compared to the nine months ended September 30, 1999. These decreases are attributable primarily to decreases in premium placed in force for the Carriers, as discussed below.

      LMG marketing allowances and commission revenue, combined, decreased approximately $2.0 million, or 23.3%, during the third quarter of 2000, compared to the third quarter of 1999, due primarily to a 30.1% decrease in fixed annuity premium placed in force for the Carriers. For the nine months ended September 30, 2000, such revenue decreased by approximately $11.6 million, or 35.5%, compared to the same period in 1999 due to a decrease in premium of 43.6%. These decreases are attributable primarily to market conditions that resulted in the

poor performance of bond investments underlying the annuities’ crediting rates and to lower than anticipated market acceptance of one fixed annuity product, which was introduced in 1999. The decrease in premium placed in force was partially offset by a shift to sales of fixed annuity and life insurance products that yield higher commissions. To avoid further declines in sales, several new products and product enhancements were released at the sales incentive convention in July 2000 that are expected to result in increased sales in the fourth quarter. However, there can be no assurances that the release of these products will result in increased sales.

      A significant percentage of the Company’s consolidated revenue during the periods presented was generated from LMG sales on behalf of each of the Carriers, as follows:

	Three Months Ended						Nine Months Ended
	September 30,						September 30,
	2000			1999			2000			1999
Transamerica		69.4	%		10.9	%		78.3	%		9.3	%
IL Annuity		23.2	%		71.2	%		15.7	%		76.4	%
American National		7.4	%		11.3	%		6.0	%		10.1	%

      Although LMG markets and administers several products on behalf of the Carriers, the Company’s consolidated revenue during the periods presented was derived primarily from sales and administration of two fixed annuity products, as follows:

	Three Months Ended						Nine Months Ended
	September 30,						September 30,
	2000			1999			2000			1999
SelectMark™ (sold on behalf of Transamerica)		50.2	%		8.5	%		43.3	%		11.1	%
VisionMark™ (sold on behalf of IL Annuity)		7.9	%		15.3	%		12.2	%		29.4	%

      This shift between Carriers' products is attributable primarily to more favorable acceptance of Transamerica's products in the marketplace, which is largely related to the products experiencing higher crediting rates, and is expected to continue for the foreseeable future.

      The Company is currently implementing several initiatives to increase the volume of LMG sales, including several marketing programs that are designed to strengthen relationships with existing producers and attract new producers. In addition, LMG released several new products and product enhancements at a sales convention in July 2000 that are expected to diversify LMG’s product portfolio, enhance market share, and increase sales. The Company is also in negotiations with certain additional insurance carriers to provide marketing and administrative services, similar to those performed for the Carriers. However, there can be no assurances that such events will occur or, if they occur, will result in increases in LMG sales.

      Expenses—Total LMG expenses increased approximately $2.7 million, or 31.3%, during the three months ended September 30, 2000, compared to the three months ended September 30, 1999, and increased approximately $5.5 million, or 21.7%, for the nine months ended September 30, 2000, compared to the nine months ended September 30, 1999. These increases are attributable primarily to increases in salaries and related benefits, sales promotion and support, 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 $556,000, or 11.1%, in the third quarter of 2000, compared to the third quarter of 1999. For the nine months ended September 30, 2000, salaries and related benefits increased approximately $1.3 million, or 8.2%, compared to the same period in 1999. Such increases resulted primarily from regular annual pay

increases and from increases in the number of employees, which are largely attributable to preparation for increases in sales. During the third quarter of 2000, however, the Company hired several employees at higher salary levels, including one executive officer. Such increases in senior personnel are considered necessary in order to support anticipated increases in LMG sales, as discussed above. Accordingly, salary and benefits expense is expected to increase in future periods.

      Sales promotion and support expense is comprised primarily of costs related to LMG’s annual national sales conventions, product marketing materials designed and printed for distribution to Producers, and incentives paid to Producers to stimulate sales. These expenses increased approximately $560,000, or 36.1%, during the third quarter of 2000, compared to the third quarter of 1999, due primarily to actual and planned increases in attendance at sales conventions and increases in incentives paid to Producers.

      Occupancy expenses consist primarily of leased office space and related costs. These expenses increased approximately $336,000, or 77.0%, in the third quarter of 2000, compared to the third quarter of 1999. During the nine months ended September 30, 2000, occupancy expense increased $1.1 million, or 119.7%, compared to the same period in 1999. These increases are 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 that correspond with increases in employment, as discussed above.

      Professional fees increased approximately $950,000, or 196.3%, in the third quarter of 2000 compared to the third quarter of 1999. For the nine months ended September 30, 2000, professional fees increased approximately $2.2 million, or 208.2%, compared to the nine months ended September 30, 1999. Such increases are due primarily to consulting fees related to various information systems projects.

      For the nine months ended September 30, 2000, depreciation and amortization expense increased $751,000, or 742.6%. This increase is due primarily to acquisitions of fixed assets, which were necessary to improve newly leased office space and to accommodate increases in employment as discussed above, and to a decrease in the estimated useful lives of certain computer hardware and software from five years to three years resulting in increased depreciation expense.

Analysis of Legacy Financial Services, Inc.

      Results of Operations—LFS net losses totaled approximately $128,000 during the third quarter of 2000, compared to approximately $30,000 in net income during the third quarter of 1999. This fluctuation is attributable primarily to decreases in revenue and increases in expenses, as discussed below. During the nine months ended September 30, 2000, LFS net income totaled approximately $250,000, compared to approximately $158,000 during the same period in 1999. This increase in net income is attributable primarily to increases in revenue, which were partially offset by increases in expenses, as discussed below.

      Revenue—LFS’ primary source of revenue is commission overrides, which are generated through sales of variable life insurance, variable annuities, mutual funds, and debt and equity securities. Levels of commission revenue are directly related to the volume of sales of such products. Total LFS revenue decreased approximately $113,000, or 27.0%, during the three months ended September 30, 2000, compared to the same period in 1999, due primarily to decreases in sales volume. For the nine months ending September 30, 2000, total revenue increased by approximately $517,000, or 44.2%, compared to the same period in 1999, due primarily to increases in sales volume. Also contributing to increases in commission revenue were shifts to sales by independent broker networks from which LFS receives an additional supervisory commission override.

      Expenses—Total LFS expenses increased approximately $176,000, or 41.9%, during the third quarter of 2000 compared to the third quarter of 1999. For the nine months ended September 30, 2000, expenses increased approximately $459,000, or 42.8%, compared to the nine months ended September 30, 1999. The increases are attributable primarily to increases in the number of employees, to the addition of personnel at higher pay levels, and to regular annual pay increases and increases in sales promotion and support expenses related to increased attendance at the annual sales convention.

Analysis of LifeSurance Corporation

      Results of Operations—LifeSurance Corporation recorded net losses of approximately $81,000 during the three months ended September 30, 2000, compared to approximately $181,000 during the same period in 1999 and recorded net losses of approximately $601,000 during the nine months ended September 30, 2000, compared to approximately $459,000 during the same period in 1999. These increased losses are attributable primarily to increases in expenses, which were partially offset by increases in revenue, as discussed below.

      Revenue—LifeSurance Corporation’s primary source of revenue is fees paid by for attendance at estate planning seminars. LifeSurance Corporation’s revenue increased approximately $56,000 during the three months ended September 30, 2000, compared to the three months ended September 30, 1999, and increased approximately $131,000 during the nine months ended September 30, 2000, compared to the nine months ended September 30, 1999. These increases are attributable primarily to increased seminar attendance.

      Expenses—LifeSurance Corporation’s expenses consist primarily of salaries and related benefits and sales promotion and support costs. Salaries and related benefits expense increased approximately $20,000, or 14.3%, during the quarter ended September 30, 2000, compared to the quarter ended September 30, 1999, and increased approximately $178,000, or 48.5% for the nine months ended September 30, 2000, compared to the same period in 1999. Such increases are attributable primarily to increases in personnel and to regular annual pay increases. Sales promotion and support expenses decreased approximately $69,000 during the quarter ended September 30, 2000, compared to the same three months in 1999, and decreased approximately $29,000 for the nine months ended September 30, 2000, compared to the same period in 1999. These decreases are attributable primarily to reallocation of certain sales concept costs to a separate subsidiary during 2000.

Analysis of Regan Holding Corp. (stand-alone)

      Results of Operations—Regan Holding Corp. recorded net losses of approximately $894,000 during the three months ended September 30, 2000, compared to net losses of approximately $1.4 million during the same period in 1999. During the nine months ended September 30, 2000, Regan Holding Corp. recorded net losses of approximately $2.7 million compared to net losses of approximately $4.4 million during the same period in 1999. These decreased losses are attributable primarily to increases in revenue and decreases in expenses, as discussed below.

      Revenue—Regan Holding Corp.’s revenue consists solely of rental revenue from an office building that was purchased during mid-1999. The building was leased to unaffiliated tenants during the fourth quarter of 1999, which resulted in revenue of approximately $147,000 during the third quarter of 2000, and approximately $401,000 during the nine months ended September 30, 2000.

      Expenses—Regan Holding Corp.’s expenses decreased approximately $902,000, or 47.4%, during the three months ended September 30, 2000, compared to the three months ended September 30, 1999, and decreased approximately $3.0 million, or 46.3%, during the nine months ended September 30, 2000, compared to the same period in 1999. These decreases are primarily due to decreases in Producer stock option expense for options granted to Producers as an incentive to stimulate sales. Due to an overall decrease in sales volume between periods, there were fewer Producer stock option grants and therefore lower Producer stock option expenses.

Analysis of Other Segments

      Results of Operations—Other segments consist of Legacy Advisory Services, Inc., Legacy Reinsurance Company, and Imagent Online, LLC. Combined net losses from these entities increased approximately $143,000 during the third quarter of 2000, compared to the third quarter of 1999, and increased approximately $394,000 during the nine months ended September 30, 2000, compared to the same period in 1999. These increased losses are attributable primarily to equity investment losses recorded by Imagent Online, LLC related to its investment in an Internet start-up company, as discussed above. Such losses are expected to continue for the foreseeable future.

PART II – OTHER INFORMATION

Item 6. Exhibits and Reports on Form 8-K

(a)	Index to Exhibits
	Exhibit 3(ii)	Amended and Restated Bylaws of Regan Holding Corp.*
	Exhibit 10.1	Amendment Sixteen to the Marketing Agreement by and between Legacy Marketing Group and American National Insurance Company, dated October 2000.*
	Exhibit 10.2	Amendment Fifteen to the Insurance Processing Agreement by and between Legacy Marketing Group and American National Insurance Company, October 2000.*
	Exhibit 11.1	Computation of Earnings Per Share-Basic**
	Exhibit 11.2	Computation of Earnings Per Share-Diluted**
	Exhibit 27	Financial Data Schedule *
(b)	Reports on Form 8-K
	No reports on Form 8-K were filed during the third quarter of 2000.

*	Filed with original filing on November 14, 2000.
**	Restated Earnings Per Share information is included in Note 14 of the Condensed Consolidated Financial Statements in this filing.

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 R. Preston Pitts,
		President and Chief Operations Officer