U. S. SECURITIES AND EXCHANGE COMMISSION
                             Washington, D.C. 20549
                                   FORM 10-KSB

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

         For the fiscal year ended January 31, 2001

         [  ] 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 - 14835

                         TRANSNATIONAL INDUSTRIES, INC.
                 (Name of small business issuer in its charter)

              Delaware                                 22-2328806
      (State or Other Jurisdiction                   (I.R.S. Employer
    of Incorporation or Organization)             Identification Number)



          Post Office Box 198                            19317
               U.S. Route 1                            (Zip Code)
        Chadds Ford, Pennsylvania
         (Address of principal
           executive offices)

Issuer's telephone number (610) 459-5200

Securities Registered Pursuant to Section 12(b) of the Exchange Act:   None

Securities Registered Pursuant to Section 12(g) of the Exchange Act:

                                  Common Stock
                           ($0.20 par value per share)
                                (Title of class)

         Check whether the Issuer (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
                         -------         -------


<PAGE>


     Check if there is no disclosure of delinquent  filers  pursuant to Item 405
of Regulation S-B contained in this form,  and no disclosure  will be contained,
to the best of  Registrant's  knowledge,  in  definitive  proxy  or  information
statements  incorporated  by  reference  in Part III of this Form  10-KSB or any
amendment to this Form 10-KSB. ( )

     The  Issuer's   revenues  for  the  fiscal  year  January  31,  2001,  were
$13,397,075

     The aggregate  market value of the voting stock held by  non-affiliates  of
Registrant  as of March  30,  2001  was  approximately  $1,175,322  based on the
average of bid and asked price of these  shares.  Shares of Common Stock held by
each  executive  officer and  director and by each person who owns 5% or more of
the  outstanding  Common  Stock have been  excluded in that such  persons may be
deemed to be affiliates.

     As of March 30, 2001, 456,760 shares of Common Stock were outstanding.


                      DOCUMENTS INCORPORATED BY REFERENCE:

     The issuer's definitive proxy statement to be filed with the Securities and
Exchange  Commission  within 120 days after January 31, 2001, is incorporated by
reference into Part III of this Form 10-KSB.

     Transitional small business disclosure format (check one)  YES     NO   X
                                                                   ---      ---



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<PAGE>



                                                      PART I
                                                 ITEM 1. BUSINESS


General Development of Business

Transnational  Industries,  Inc.  (the  "Company"),  is a holding  company.  The
Company  specializes  through its  subsidiary,  Spitz,  Inc.  ("Spitz"),  in the
design,   manufacture   and   integration   of   computer-controlled   immersive
visualization  systems and domed projection screens.  Spitz, under a predecessor
corporation, was founded in 1944.

Narrative Description of Business

Products

--Video projector systems

In 1997  Spitz  introduced  ImmersaVision(TM),  a new  line of  video  projector
products. ImmersaVision uses the latest advances in video projection and desktop
video graphics  combined with other panoramic  visual displays and sound effects
in dome  theaters to create an immersive  virtual  reality  experience.  Markets
targeted  include  existing  and new  planetarium  theaters  and  various  other
applications  that will benefit  from  immersive  multi-media  displays for wide
audiences.  ElectricSky(TM)  is an  ImmersaVision  system  configured  for  dome
theaters   in  the   Planetarium   market   and  other   special   applications.
ElectricHorizon(TM)  is an ImmersaVision  system  configured for immersive video
theaters using wide curved  projection  screens.  ImmersaVision  products can be
configured for interactive virtual reality applications.  Through the end of the
Company's  fiscal year ended January 31, 2001,  three  ElectricSky  systems were
installed  and are  currently  operating,  six more  systems are  scheduled  for
installation  in calendar 2001 and one system is scheduled for  installation  in
calendar  2002.  The  ElectricSky  systems  are being sold and  marketed to both
tourist   attractions  and  science   museums.   Spitz  has  also  delivered  an
ElectricHorizon System for a temporary exhibit at a domestic science museum. The
temporary  ElectricHorizon  exhibit  was owned and  funded by Spitz and  various
suppliers of the hardware and software content for the purpose of demonstration.
At the end of the exhibit,  the  ElectricHorizon  components were dismantled and
returned to the various owners. Spitz has not yet sold an ElectricHorizon system
but there are several sales  prospects that are expected to make order decisions
within  the next year.  In  addition,  Spitz has  entered  into a joint  venture
agreement  to   participate   in  the   development   and  ownership  of  a  new
ElectricHorizon  theater  for a tourist  attraction.  It is not  unusual  in the
markets  targeted  by Spitz for the sales  cycle from  planning  through  vendor
selection to take a year or more.

--Planetarium projector systems

Spitz is the world's  leading  producer of planetarium  systems.  Spitz designs,
manufactures,   installs,   repairs,   and  maintains  (under  renewable  annual
contracts)  planetarium  projector  systems.  Systems  currently  sold by  Spitz
emphasize  computer  controls,   integrated  sound  and  lighting  systems,  and
peripheral  special  effects such as video  projection.  Systems are designed to


                                       3
<PAGE>

meet  individual  customer  preferences,  through the selection of  standardized
basic  systems and various add on options.  Spitz is capable of providing all of
the interior  furnishings and equipment for the  planetarium  theater as well as
complete planetarium show productions.  Additionally, Spitz's experience enables
it to  advise  on  the  theater  design  and  architectural  integration  of the
planetarium  equipment.  Spitz believes that these skills and  capabilities  are
important to buyers of  planetarium  systems.  The  principal  customers for the
Company's planetarium business are entities in the entertainment and educational
markets such as museums and schools.

--Domed Structures

Spitz is also the world's leading  producer of domed projection  screens.  Spitz
designs,  manufactures,  and installs domed projection screens which are used in
planetarium   theaters  and  a  variety  of  other  applications  such  as  ride
simulators,  special or large format film theaters,  simulation training systems
and architectural  treatments.  Spitz's  experience  enables it to advise on the
architectural  integration of domed projection screens and solve complex optical
problems  involving  reflectivity  and image  distortion  on  compoundly  curved
surfaces.  Spitz  believes  that these  skills are  important to buyers of domed
projection  screens.  The  principal  customers  in Spitz's  dome  business  are
entities  in  the   entertainment,   educational  and  commercial  and  military
simulation  markets.   Customers  include  major  theme  parks,  casinos,  world
expositions, museums, schools, and military defense contractors.

Materials and Supplies

ImmersaVision  systems,  Planetarium  systems  and  domes are  manufactured  and
assembled  from standard  metal  materials,  complex  electronic  components and
computer  controls.  The  majority of the  components  are standard but some are
custom made by vendors at the direction of Spitz. The components, as well as the
metal materials, are readily available from numerous supply sources.

Patents and Licenses

Spitz has relied  principally on a combination of contracts and trade secrets to
protect its proprietary  interests in its production processes and its business.
Patents  protect none of the products  currently  sold by Spitz.  Spitz plans to
apply for patents for certain new products. As new products are developed, Spitz
will  continue  to  evaluate  the  feasibility  of patents  to  protect  its new
inventions.

Principal Customers

During fiscal 2001,  revenues of $6,853,834 (51% of total revenues) were derived
from sales to the five largest  customers.  Revenue from one customer  accounted
for 16% of total revenues.  No other customer accounted for 10% or more of total
revenues. Users of Spitz's products normally have not had the need for recurring
purchases except for maintenance and parts.  Accordingly,  Spitz relies on sales
to new projects or  replacement of or  enhancement  to existing  systems.  Spitz
domed  projection  screens are  sometimes  sold to the suppliers of large format
film projectors for inclusion with systems sold to their customers as opposed to
Spitz  selling  directly  to the end user.  While  this  creates  a  competitive


                                       4
<PAGE>

strength for Spitz because of its strong  support  capabilities  and  preference
among the system  suppliers,  it will also  result in reliance on sales to a few
system suppliers.

Competition

While Spitz  believes  that it is the world's  leading  producer of  planetarium
systems and domed projection  screens,  its business is competitive.  Management
estimates  that  there  are one  domestic  and  four  foreign  competitors  that
manufacture   competing   planetarium  systems.   Competition  is  evolving  for
ImmersaVision  from  existing  planetarium  competitors  and other  suppliers of
virtual reality  display  mediums  resulting in two known domestic and one known
foreign  competitor.  There is  currently  one known  domestic  competitor  that
manufactures  domed  projection  screens.  In  addition,  construction  or metal
fabrication  contractors  will  occasionally  supply domed  projection  screens,
particularly in foreign markets.  The many competitive  factors  influencing the
markets for Spitz's products include price,  performance,  customer preferences,
design and integration support, and service capabilities.

Spitz is unique among its  competitors  by virtue of its  capability as a single
source  that can  directly  supply and  integrate  all of the  equipment  in the
planetarium theater, including the projection system, sound, lighting,  computer
control system and domed projection  screen.  Years of involvement in the design
of  domed  theater  systems  for many  different  applications  and dome  market
distribution channels provide Spitz competitive strength in the markets targeted
by  ImmersaVision.  As a  single  source,  capable  of  integrating  all  of the
equipment in the theater from the screen through show production, Spitz attracts
customers  who are  unwilling  to take on such  complex  tasks.  Also,  Spitz is
developing proprietary  programming tools while maintaining strong compatibility
with various formats to keep a competitive  advantage in ImmersaVision  markets.
The Company  believes  that Spitz's long history and proven  performance  as the
supplier of the vast majority of the world's domed  projection  screens are also
competitive strengths.

Competitors  selling  planetarium  projector systems have significantly  greater
financial  resources  than the  Company,  putting  the  Company  at a  potential
disadvantage in new system development and sales promotion.  Competitors selling
domed projection screens continue to provide strong price  competition.  Foreign
currency fluctuations affect Spitz's pricing against its foreign competitors.  A
strengthening  U.S.  dollar  will weaken  Spitz's  price  competitiveness  among
foreign competitors.  Also, future fluctuations and indirect economic effects of
the foreign currency markets remain uncertain.  The continued success of Spitz's
products  will depend on keeping pace with  competing  technologies  and selling
efforts while  maintaining price  competitiveness  and good  relationships  with
system suppliers in the large format film and military training markets.

Research and Development

Spitz conducts  research and  development  and the costs of such activities were
$1,128,000 in fiscal 2001 and $820,000 in fiscal 2000.


                                       5
<PAGE>

Environmental Compliance

Spitz routinely  improves and maintains  various systems designed to control the
quality of air and water  discharged from its plant,  including dust control and
ventilation.  Spitz  anticipates  that it will continue to make similar  routine
expenditures  to comply with current  federal,  state,  and local  environmental
regulations.  The Company does not believe, however, that such expenditures will
be significant or materially affect its earnings or competitive position.

Employees

At January 31, 2001, the Company and Spitz had 71 permanent  employees,  of whom
66 were employed full time.

                               ITEM 2. PROPERTIES

The  Company  and  Spitz  are  located  in  a  46,525  square-foot  building  on
approximately  16.7 acres on U.S. Route 1, Chadds Ford,  Pennsylvania,  which is
leased to Spitz by an unrelated  third party through April 2006,  with an option
to  renew  for  an  additional  eight  years.  The  building  houses  all of the
companies'  administrative  offices  and  production  facilities  and is in good
operating condition.


                            ITEM 3. LEGAL PROCEEDINGS

There was no material litigation pending at the date of this filing.

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

There  were no  matters  submitted  to a vote of  stockholders  during the three
months ended January 31, 2001.



                                       6
<PAGE>


                                     PART II
            ITEM 5. MARKET FOR REGISTRANT'S COMMON STOCK AND RELATED
                               STOCKHOLDER MATTERS

Market Information for Common Stock

The principal  market on which the Company's  Common Stock is traded is the Over
the Counter  market.  Various  market  dealers make the market for the Company's
stock and  trades are made  through  the OTC  Bulletin  Board.  The table  below
presents the high and low bid over-the-counter  market quotations by quarter for
fiscal  2001  and  2000.  The  quotations,  obtained  from  OTC  Bulletin  Board
statistics,  reflect inter-dealer prices, without retail mark-up,  mark-down, or
commission and may not necessarily represent actual transactions.

                                   Fiscal 2001                Fiscal 2000
                                 ---------------            ---------------
                                  High      Low              High      Low
                                 ------   ------            ------   ------

         First Quarter           $4.00     $2.00            $3.75     $1.50
         Second Quarter           6.00      2.50             5.75      2.75
         Third Quarter            7.00      3.50             2.94      2.25
         Fourth Quarter           6.88      2.00             4.00      1.38


Holders

At March 30,  2001,  there were  approximately  100  holders of record of common
stock.

Dividends

The Company has never paid cash  dividends on its common stock,  and the current
policy of its Board of Directors is to retain all earnings to provide  funds for
the growth of the Company.  In addition,  the loan agreements of the Company and
its subsidiary prohibit the payment of cash dividends,  except and to the extent
that the Company satisfies certain financial covenants.  In addition,  the terms
of the  Company's  Series B Preferred  Stock  prohibits  the Company from paying
dividends  on its  common  stock  until  it pays  to  holders  of the  Company's
preferred stock all accrued and unpaid dividends thereon.

Preferred  Stock

The holders of the Series B Cumulative  Convertible  Preferred Stock ("Preferred
B") are  entitled to receive  quarterly  dividends,  when and if declared by the
Company's  Board of  Directors,  at an annual per share  amount of  $27.50.  The
payment of such dividends would be prior and in preference to the payment of any
dividends on the Company's  common stock.  At January 31, 2001,  accumulated but
undeclared and unpaid  dividends with respect to the 318  outstanding  shares of
Preferred B amounted to $89,636.  The  Preferred B shares may be redeemed by the
Company at $250 per share plus  accumulated  unpaid dividends of $282 per share.
The 318 shares of Series B Preferred  are  convertible  into 1,871 shares of the
Company's common stock.


                                       7
<PAGE>


     ITEM 6. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
                             RESULTS OF OPERATIONS

Results of Operations

The following table presents for the periods  indicated (i) the percentage which
certain items in the  consolidated  financial  statements of the Company bear to
revenues and (ii) the percentage  change in the dollar amount of such items from
year to year in the two-year period ended January 31, 2001.

                                                                  Percentage
                                      Percentage of Revenues        Change
                                      Year ended January 31,         2001
                                      ----------------------          vs.
                                         2001         2000           2000
                                      ------------------------    ----------

      Revenues                            100.0%      100.0%          31.2%
      Cost of sales                        68.1        69.9           27.9
      Gross margin                         31.9        30.1           38.8
      Selling expenses                      6.5         7.6           12.6
      Research and development              8.4         8.0           37.6
      General and administrative            7.8         8.5           21.4
      Operating income                      9.1         6.0           98.2
      Interest expense                      0.9         0.9           25.5
      Income before income taxes            8.2         5.1          111.4
      Income taxes - current                0.6         0.3          230.3
      Deferred tax benefit                    -       (3.6)             *
      Net Income                            7.6         8.4           19.6
-----------
* Not determinable
                                                    -----------

Revenues  in the year ended  January  31, 2001  (fiscal  2001) were  $13,397,000
compared to  $10,212,000  in the year ended January 31, 2000 (fiscal  2000),  an
increase of $3,185,000  (31%).  The increase was primarily due to  ImmersaVision
and dome sales.

ImmersaVision  revenue for fiscal 2001 was $3,475,000 compared to $1,643,000 for
fiscal 2000, an increase of $1,832,000. The increase in ImmersaVision revenue in
fiscal 2001 was  attributable to work completed on seven  ImmersaVision  systems
sold to various  educational and entertainment  destinations.  One ImmersaVision
system was  installed  and  opened in a visitor  science  center in Europe.  Two
ImmersaVision  installations  were  completed  early in the  fiscal  year  ended
January 31, 2002 (fiscal 2002),  one at a university in North America and one at
a visitor  science  center in Europe.  ImmersaVision  systems are  scheduled for
installation  later in fiscal 2002 at a university in North  America,  a visitor
science center in Europe and a major educational  center in the Middle East. One
ImmersaVision  system is scheduled for delivery in the fiscal year ended January
31, 2003 (fiscal 2003) at a visitor science center in North America.

                                       8
<PAGE>

Dome  revenues  were  $6,806,000 in fiscal 2001 compared to $5,510,000 in fiscal
2000, an increase of $1,296,000.  The increase in dome revenues was attributable
to the sale of a dome for a special effects attraction for a casino,  more sales
of planetarium domes, and the sale of a special theater dome to a major European
automobile maker for use in a visitor center. Otherwise, dome revenues from film
theaters, ride simulators and military training simulators decreased.

Planetarium  revenues  were  $3,116,000 in fiscal 2001 compared to $3,059,000 in
fiscal 2000, an increase of $57,000.  Planetarium  revenues  attributable to the
sale of new and  refurbished  optical  systems  were  $1,853,000  in fiscal 2001
compared to  $1,773,000  in fiscal 2000,  an increase of $80,000.  The number of
optical  planetarium  systems sold has increased due to ImmersaVision;  however,
the average  sales price is lower than a stand  alone  system  since much of the
peripheral  equipment  has been enhanced and expanded for  integration  into the
ImmersaVision  systems  and is now  recorded  as  part of  ImmersaVision  sales.
Planetarium revenues include amounts attributable to the sale of maintenance and
parts of  $1,263,000  in fiscal 2001  compared to  $1,286,000  in fiscal 2000, a
decrease of $23,000.  The decrease in maintenance  and parts revenues was due to
lower sales of parts and the timing of  performance  on  preventive  maintenance
agreements.

Revenue  growth will be influenced by several  factors.  Except for  maintenance
sales  and  occasional  upgrades,  the  Company's  revenues  do  not  come  from
repetitive sales to an existing  customer base. Most revenues come from the sale
of  theater  systems,   both  as  replacements  for  existing  systems  and  new
installations,  or from a new construction  project.  The Company's products are
sometimes  sold alone as  components  of an attraction or together as a complete
system.  This leads to growth  opportunities  by providing each of the Company's
products  with  efficient  direct access to a wide breadth of markets that might
otherwise be difficult to reach. The ImmersaVision  products generate more sales
opportunities for domes and optical  planetarium systems since systems are often
sold with a dome and optical  planetarium  system.  In  addition,  ImmersaVision
products and their use in  planetarium  theaters are creating new  opportunities
beyond  the  Company's  traditional  markets.  Dome  sales  can  lead to  unique
opportunities to present the Company's  projection system products as a solution
among the various equipment  configurations  that a customer may be considering.
Research  and  development  efforts will  continue  with the goal to promote the
creation of software content and new applications  for  ImmersaVision  that will
enhance  existing  products and provide entry into new  entertainment  and other
commercial  markets.  While this  strategy is  expected  to  maintain  long-term
revenue growth, uncertainty in the timing and delivery for new customer projects
may cause revenue levels to fluctuate.

The  backlog  of  unearned  revenue  as of January  31,  2001 was  approximately
$9,000,000,  of which  $7,000,000 is scheduled to be earned in fiscal 2001.  The
backlog  combined  with lower  sales  bookings in fiscal 2002 will lead to lower
revenue levels in fiscal 2002. This is an example of the temporary  fluctuations
resulting  from the timing of customer  projects.  There is  currently  only one
ImmersaVision  system on the backlog  scheduled  for  delivery  in fiscal  2003;
however,  there are several sales  prospects  which could result in  significant
revenue in fiscal 2003.  Strong sales  prospects  combined  with the  successful
operations of the new ImmersaVision theaters and new applications of the product
are expected to lead to more sales with deliveries beyond fiscal 2002. Also, new
efforts to expand upon recent successes on special dome projects are expected to
yield significant revenue opportunities in fiscal 2002 and beyond.

                                       9
<PAGE>

Gross margins improved to 31.9% in fiscal 2001 compared to 30.1% in fiscal 2000.
Volume related efficiencies  improved strong gross margins on domes, while gross
margins on planetarium and ImmersaVision revenue lagged. Low planetarium margins
continued due to pricing and cost  pressures on new projector  systems.  Selling
expenses  increased  $98,000 (13%) in fiscal 2001 due to staffing  additions and
higher  levels  of  engineering   resources   devoted  to  sales  and  marketing
activities.  Selling  expenses in fiscal  2001 are  expected to be at current or
increasing levels as marketing efforts continue to demand  significant  resource
commitments.  Research and  development  expenses  increased  $308,000  (38%) in
fiscal  2001.  The  increase in research  and  development  expenses  was due to
modifications  and  improvements of  ImmersaVision  products to fulfill customer
requirements,  the  continued  creation  of  proprietary  programming  tools for
software  content  development for  ImmersaVision,  and  improvements to optical
planetarium products.  Research and development efforts are expected to continue
at increasing  levels in future  periods.  General and  administrative  expenses
increased  $185,000 (21%) in fiscal 2001  primarily due to increased  staff cost
and improvements to the Company's management information systems.

Net interest  expense amounted to $118,000 in 2001 compared to $94,000 in fiscal
2000.  The  $118,000  reported in fiscal 2001  consisted of $70,000 paid on bank
debt plus $49,000 paid on capital lease obligations offset by $1,000 of interest
income earned on cash invested. The $94,000 reported in fiscal 2001 consisted of
$63,000 paid on bank debt plus $35,000 paid on capital lease obligations  offset
by $4,000 of interest income earned on cash invested.

The  Company  paid no  federal  income  taxes in fiscal  2001 or fiscal  2000 as
federal  taxable  income was offset by the  utilization  of net  operating  loss
carryforwards.  Income tax expense - current  consists of state  income taxes of
$76,000  and  $33,000 in fiscal  2001 and fiscal  2000,  respectively.  Prior to
fiscal 2000,  uncertainty of future profits prevented the Company from recording
any tax benefit associated with the net operating loss carryforwards. Because of
improved  performance and the positive outlook for future earnings,  the Company
recorded a deferred  tax asset of  $368,000 in fiscal  2000 in  anticipation  of
future utilization of the net operating loss  carryforwards.  This resulted in a
$368,000 deferred tax benefit recorded in fiscal year 2000,  increasing recorded
net  income.  At January  31,  2001 it was  determined  that the outlook for the
future utilization of the net operating loss carryforwards resulted in no change
to the  $368,000  deferred  tax asset.  As a result,  no deferred tax expense or
benefit was  recorded  for fiscal  2001.  Net  operating  losses are expected to
continue to offset federal taxable income for the foreseeable  future  resulting
in no payment of federal income taxes. However, deferred tax expense is expected
in future years as the net operating loss carryforwards are extinguished and the
deferred  tax asset is reduced.  The Company  expects to continue to incur state
income taxes in future years.

As a result of the above, the Company reported income before taxes of $1,097,000
in fiscal 2001 compared  $519,000 in fiscal 2000.  After recording the effect of
current and deferred taxes, net income was $1,021,000 in fiscal 2001 compared to
$854,000 in fiscal 2000.

                                       10
<PAGE>


Liquidity and Capital Resources

The Company  funds its  continuing  operations  primarily by cash  provided from
operating  activities.  The Company also uses a revolving  credit agreement with
its bank to fund its working capital requirements.  The Company usually receives
progress  payments  under  the terms of its  customer  contracts.  Payments  are
typically  based on the  completion  of various  chronological,  production  and
installation  milestones.  Timing and the level of progress  payments vary among
contracts  depending upon many factors.  The cumulative progress payments can be
more or less  than the cost and  estimated  earnings  recognized  on a  contract
during the period of performance. The nature and timing of progress payments can
cause  cash flow from  operations  to  fluctuate  from  period to  period.  Some
customer  contracts  require the Company to provide standby letters of credit as
performance security.

Net cash provided by operating  activities was $855,000 in fiscal 2001, compared
to $257,000 in fiscal 2000.  The  Company's  $1,021,000  of net income in fiscal
2001 produced $855,000 of net cash provided from operating activities due to the
effects of $749,000 of cash used by changes in operating assets and liabilities,
offset  in part  by  $583,000  of  non-cash  charges  to net  income.  By way of
comparison,  the  Company's  $854,000 of net income in fiscal 2000 only produced
$257,000 of net cash provided  from  operating  activities.  This was due to the
effects  of the non cash  addition  to income  from the  $368,000  deferred  tax
benefit,  $720,000 of cash used by changes in operating  assets and liabilities,
offset in part by  $491,000 of  non-cash  charges to net  income.  The change in
operating assets from time to time is primarily attributable to progress payment
terms on  particular  customer  contracts,  and the Company  expects  changes in
operating assets from year to year to remain both material and variable.

The  $855,000  provided  by  operations  in fiscal  2001 was reduced by $213,000
invested  in  capital  additions  and  $240,000  used by  financing  activities.
Financing  activities  included net proceeds of $245,000 on the revolving credit
note  offset by  payments  of  $178,000  on capital  leases,  monthly  principal
payments on the bank term note of $170,000  and the  purchase of treasury  stock
for cash of $137,000.  Non cash financing transactions in fiscal 2001 consist of
$127,000 of machinery and equipment acquired through capital leases.

The  $257,000  provided  by  operations  in fiscal  2000 was offset by  $523,000
invested  in  capital  additions  and  $82,000  used  by  financing  activities.
Financing  activities  included net proceeds of $205,000 on the revolving credit
note offset by payments  of  $121,000  on capital  leases and monthly  principal
payments on the bank term note of $166,000.  Non cash financing  transactions in
fiscal 2001  consist of $315,000 of machinery  and  equipment  acquired  through
capital leases.

Total debt at January 31,  2001 was  $1,226,000,  an  increase  of $24,000  from
$1,202,000  at January 31, 2000.  The  increase  resulted  from  $245,000 of net
proceeds on the  revolving  credit note plus new capital  lease  obligations  of
$127,000  reduced by $170,000  of  scheduled  payments  applied to term debt and
$178,000 of payments applied to capital lease obligations.

Capital  additions  consisting of the purchase and  fabrication of machinery and
equipment  and  the  development  of  computer  software  amounted  to  $340,000


                                       11
<PAGE>

($127,000 by capital lease) and $838,000  ($315,000 by capital  lease),  in 2001
and 2000,  respectively.  Future opportunities are expected to require continual
investments  in  hardware  and  software  in order  to  benefit  from  advancing
technologies. When appropriate, the Company will fund the acquisition of capital
assets through  capital leases or equipment  financing  notes.  The Company will
continue to finance  capital  investments  through  operations and external debt
sources.

At January 31, 2001 there was a $600,000  balance on the  revolving  credit note
compared  to $355,000 at January 31,  2000.  This  resulted in unused  borrowing
capacity of  $500,000  at January  31, 2001  compared to $445,000 at January 31,
2000.  Cash balances of $509,000  provided  additional  liquidity at January 31,
2001  compared to $107,000 at January 31,  2000.  The next source of  liquidity,
accounts  receivable,  increased to  $3,485,000  at January 31, 2001 compared to
$2,173,000  at January  31,  2000.  This  resulted in a  $1,769,000  increase in
liquidity  available from cash,  borrowing  capacity and accounts  receivable at
January 31, 2001 compared to January 31, 2000.  Contributing  to the increase in
liquidity available from cash,  borrowing capacity and accounts receivable was a
$514,000  addition in funding from  contracts  in progress as billings  exceeded
revenue  recorded by $568,000 at January 31, 2001 compared to $54,000 at January
31, 2000.  This  illustrates  the previous  discussion of the effect of customer
progress  payments  on cash flow.  Contracts  in progress  produced  cash during
fiscal  2001 as a result of  billings  for work  performed  and  advances on new
contracts.  Since billings  exceeded revenue recorded by $568,000 at January 31,
2001, contracts in progress are expected to absorb liquidity during fiscal 2002.
The payment terms on many of the large  prospective  contracts  remain uncertain
and advance payments from customers appear unlikely in the immediate future.

A January  31,  2001 the  Company was  contingently  liable for  $427,908  under
various  standby  letters  of  credit  issued  on its  behalf  by its  bank  and
correspondents  of its bank.  The letters of credit were issued as security  for
performance and advances on customer contracts.  The Company was also liable for
$182,342  under a letter of  credit  issued  by a  correspondent  of its bank to
secure payment for a custom made machine ordered for its factory operations. The
Company's  bank  underwrites  letter of  credit  requirements  on an  individual
approval  basis  independent  of its other bank  agreements in order to make the
revolving credit agreement available for working capital requirements.

In July 2000 the Company's  Revolving  Credit  Agreement was amended.  Under the
amendment the borrowing  limit was increased  from $800,000 to  $1,100,000,  the
rate of interest was lowered from prime plus two percent to prime plus  one-half
percent and the maturity  date was  extended  from July 1, 2002 to July 6, 2005.
The security and all other terms of the bank debt agreements remain unchanged.

The Company's  amended debt  agreements,  combined with current  assets and cash
flow from operations,  assuming  reasonably  consistent  revenue levels,  should
provide the Company with adequate liquidity for the foreseeable future. However,
new growth  opportunities for the Company's  business may require funding beyond
the  capabilities  of the Company's  current  capital  structure.  The Company's
improved financial condition and capital structure should improve its ability to
raise additional funds for growth through other capital resources.

                                       12
<PAGE>

Forward-Looking Information

The  statements in this Annual Report on Form 10-KSB that are not  statements of
historical fact constitute  "forward-looking  statements." Said  forward-looking
statements  involve risks and uncertainties  which may cause the actual results,
performance or achievements  of the Company to be materially  different from any
future results, performances or achievements,  expressly predicted or implied by
such forward-looking statements. These forward-looking statements are identified
by  their  use of forms of such  terms  and  phrases  as  "expects,"  "intends,"
"goals," "estimates,"  "projects," "plans,"  "anticipates,"  "should," "future,"
"believes," and "scheduled."

The  important  factors  which  may cause  actual  results  to  differ  from the
forward-looking statements contained herein include, but are not limited to, the
following:  general economic and business  conditions;  competition;  success of
operating initiatives; operating costs; advertising and promotional efforts; the
existence  or absence of adverse  publicity;  changes in  business  strategy  or
development plans; the ability to retain key management; availability, terms and
deployment   of  capital;   business   abilities   and  judgment  of  personnel;
availability  of  qualified   personnel;   labor  and  employee  benefit  costs;
availability and costs of raw materials and supplies; and changes in, or failure
to comply with, government  regulations.  Although the Company believes that the
assumptions  underlying  the  forward-looking  statements  contained  herein are
reasonable, any of the assumptions could be inaccurate, and therefore, there can
be no assurance that the forward-looking statements included in this filing will
prove to be accurate. In light of the significant  uncertainties inherent in the
forward-looking  statements  included herein,  the inclusion of such information
should not be regarded as a  representation  by the Company or any other  person
that the objectives and expectations of the Company will be achieved.


                                       13
<PAGE>



                    ITEM 7. CONSOLIDATED FINANCIAL STATEMENTS

                                      INDEX

                                                                          Page



   Report of Independent Auditors                                           15

   Consolidated Balance Sheets                                              16

   Consolidated Statements of Operations                                    18

   Consolidated Statements of Changes in Stockholders' Equity               19

   Consolidated Statements of Cash Flows                                    20

   Notes to Consolidated Financial Statements                               21





                                       14
<PAGE>



Report of Independent Auditors



To the Stockholders and
the Board of Directors
Transnational Industries, Inc.
Chadds Ford, Pennsylvania

We have audited the  accompanying  consolidated  balance sheet of  Transnational
Industries,  Inc. as of January 31, 2001 and 2000, and the related  consolidated
statements of operations, changes in stockholders' equity and cash flows for the
years then ended.  These  financial  statements  are the  responsibility  of the
Company's  management.  Our  responsibility  is to  express  an opinion on these
financial statements based on our audit.

We conducted our audit in accordance with generally accepted auditing standards.
Those standards  require that we plan and perform the audit to obtain reasonable
assurance   about  whether  the  financial   statements  are  free  of  material
misstatement.  An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements.  An audit also includes
assessing the  accounting  principles  used and  significant  estimates  made by
management,  as well as evaluating the overall financial statement presentation.
We believe that our audit provides a reasonable basis for our opinion.

In our opinion, the consolidated  financial statements referred to above present
fairly,  in all  material  respects,  the  consolidated  financial  position  of
Transnational   Industries,   Inc.  at  January  31,  2001  and  2000,  and  the
consolidated  results  of its  operations  and its cash flows for the years then
ended, in conformity with generally accepted accounting principles.



                                                     STOCKTON BATES, LLP





Philadelphia, Pennsylvania
April 25, 2001



                                       15
<PAGE>


                         Transnational Industries, Inc.

                           Consolidated Balance Sheets

                             (Dollars in thousands)

<TABLE>
<CAPTION>

                                                                             January 31,
                                                                    ---------------------------
                                                                            2001          2000
                                                                    ---------------------------
Assets

Current Assets:
 <S>                                                                   <C>           <C>
 Cash                                                                   $    509      $    107
  Accounts receivable                                                      3,485         2,173
  Inventories                                                              2,393         1,716
  Deferred taxes                                                             368           368
  Other current assets                                                       315           149
                                                                    ------------- -------------

Total current assets                                                       7,070         4,513



Machinery and equipment:
  Machinery and equipment                                                $ 3,182       $ 2,838
  Less accumulated depreciation                                            2,231         1,932
                                                                    ------------- -------------

Net machinery and equipment                                                  951           906



Other assets:
  Repair and maintenance inventories, less provision
    for obsolescence (2001--$1,221; 2000--$1,181)                             74            55
  Computer software, less amortization                                       505           674
  Excess of cost over net assets of business acquired,
    less amortization                                                      1,689         1,757
                                                                    ------------- -------------

Total other assets                                                         2,268         2,486
                                                                    ------------- -------------

Total assets                                                             $10,289        $7,905
                                                                    ============= =============
</TABLE>

See notes to consolidated financial statements.



                                       16
<PAGE>


                                          Transnational Industries, Inc.

                                      Consolidated Balance Sheets (continued)

                                              (Dollars in thousands)
<TABLE>
<CAPTION>

                                                                             January 31,
                                                                    ---------------------------
                                                                            2001          2000
                                                                    ---------------------------
Liabilities and stockholders' equity

Current liabilities:
  <S>                                                                   <C>            <C>
  Accounts payable                                                      $ 1,452      $   1,043
  Deferred maintenance revenue                                              671            751
  Accrued expenses                                                          581            398
  Billings in excess of cost and estimated earnings                       1,768            815
  Current portion of long-term debt                                         385            323
                                                                    ------------ --------------

Total current liabilities                                                 4,857          3,330

Long-term debt, less current portion                                        841            879


Stockholders' equity:
  Series B cumulative convertible preferred stock,
  $0.01 par value - authorized 100,000  shares;
issued and outstanding 318 shares
  (liquidating value $169,136)                                               73             73
Common stock, $0.20 par value -authorized
  1,000,000 shares; issued and outstanding 456,760
  (excluding 45,710 shares held in treasury) at
  January 31, 2001, 502,470 at January 31, 2000                             100            100
Additional paid-in capital                                                8,516          8,505
Accumulated deficit                                                      (3,961)        (4,982)
                                                                    ------------ --------------
                                                                          4,728          3,696
Less: Treasury stock                                                       (137)            -
                                                                    ------------ --------------
Total stockholders' equity                                                4,591          3,696
                                                                    ------------ --------------

Total liabilities and stockholders' equity                             $ 10,289       $  7,905
                                                                    ============ ==============

</TABLE>

See notes to condensed consolidated financial statements.


                                       17
<PAGE>

                      Consolidated Statements of Operations

                      (In thousands, except per share data)

<TABLE>
<CAPTION>
                                                     Year ended January 31,
                                              ----------------------------------
                                                          2001             2000
                                              ----------------- ----------------

<S>                                                   <C>              <C>
Revenues                                              $ 13,397         $ 10,212
Cost of sales                                            9,129            7,137
                                              ----------------- ----------------
Gross margin                                             4,268            3,075

Selling expenses                                           877              779
Research and development                                 1,128              820
General and administrative expenses                      1,048              863
                                              ----------------- ----------------
                                                         3,053            2,462
                                              ----------------- ----------------
Operating Income                                         1,215              613

Interest expense, net                                      118               94
                                              ----------------- ----------------
Income before income taxes                               1,097              519

Income tax expense - current                                76               33
Income tax benefit  - deferred                               -            (368)
                                              ----------------- ----------------

Net income                                               1,021              854

Preferred dividend requirement                               8                8
                                              ----------------- ----------------
Income applicable to common shares                     $ 1,013         $    846
                                              ================= ================

Basic earnings per common share                       $   2.22         $   1.68
                                              ================= ================
Diluted earnings per common share                     $   2.11         $   1.65
                                              ================= ================

</TABLE>

See notes to consolidated financial statements.



                                       18
<PAGE>



                         Transnational Industries, Inc.

           Consolidated Statements of Changes in Stockholders' Equity

                                 (In thousands)


<TABLE>
<CAPTION>

                                                 Preferred                     Additional
                                                   Stock          Common     Paid in Capital    Treasury       Accumulated
                                                  Series B        Stock                          Stock           Deficit
                                               --------------- ------------- ---------------- ------------- -------------------
<S>                                                      <C>          <C>            <C>           <C>               <C>
Balance at January 31, 1999                              $ 73         $ 100          $ 8,493            --           $ (5,836)


Compensation from stock options                                                           12

Net Income                                                                                                                854
                                               --------------- ------------- ---------------- ------------- -------------------
Balance at January 31, 2000                              $ 73         $ 100          $ 8,505            --           $ (4,982)


Compensation from stock options                                                           11

Purchase of treasury stock                                                                           (137)

Net Income                                                                                                              1,021
                                               --------------- ------------- ---------------- ------------- -------------------
Balance at January 31, 2001                              $ 73         $ 100          $ 8,516       $ (137)           $ (3,961)
                                               =============== ============= ================ ============= ===================


</TABLE>


See notes to consolidated financial statements.



                                       19
<PAGE>


                                             Transnational Industries, Inc.

                                         Consolidated Statements of Cash Flows

                                                    (in thousands)
<TABLE>
<CAPTION>

                                                                                 Year ended January 31,
                                                                            ----------------- ---------------
                                                                                        2001            2000
                                                                            ----------------- ---------------

Operating activities
<S>                                                                                  <C>             <C>
Net income                                                                         $  1,021          $  854
Adjustments to reconcile net income to net cash provided
by operating activities:
    Deferred taxes                                                                       -             (368)
    Depreciation and amortization                                                       532             439
    Provision for obsolescence                                                           40              40
    Compensation from stock options                                                      11              12
    Changes in operating assets and liabilities, net:
        Accounts receivable                                                          (1,312)           (461)
        Inventories                                                                    (297)           (288)
        Other current assets                                                           (166)            (64)
        Billings net of cost and estimated earnings on contracts                        514           (709)
        Accounts payable                                                                409             677
        Accrued expenses                                                                103             125
                                                                            ----------------- ---------------
Net cash provided by operating activities                                               855             257
                                                                            ----------------- ---------------

Investing activities
Capital expenditures                                                                   (213)           (523)
                                                                            ----------------- ---------------
Net cash used by investing activities                                                  (213)           (523)
                                                                            ----------------- ---------------

Financing activities
Proceeds from revolving line of credit                                                1,960           1,115
Payments on revolving line of credit                                                 (1,715)           (910)
Payments on capital leases                                                             (178)           (121)
Scheduled payments on long term debt                                                   (170)           (166)
Purchase of treasury stock                                                             (137)               -
                                                                            ----------------- ---------------
Net cash used by financing activities                                                  (240)            (82)
                                                                            ----------------- ---------------

Increase (decrease) in cash                                                             402            (348)
Cash at beginning of year                                                               107             455
                                                                            ----------------- ---------------
Cash at end of year                                                                 $   509          $  107
                                                                            ================= ===============

</TABLE>

See notes to consolidated financial statements.


                                       20
<PAGE>



                         Transnational Industries, Inc.
                   Notes to Consolidated Financial Statements


1.  Summary of Significant Accounting Policies

Nature of Business

Transnational Industries,  Inc. (the Company) is a holding company. The Company,
through its  subsidiary,  Spitz,  Inc.  (Spitz) manages its business as a single
operating  segment,   supplying  visual  immersion  theaters  with  systems  and
subsystems  for simulation  applications  used in  entertainment,  education and
training.  In its fifty-two year history,  Spitz has predominantly  manufactured
astronomical  simulation  systems  (planetariums),  projection  domes, and other
curved projection  screens.  Projection domes and curved projection  screens are
used for various  applications  including  large  format film  theaters  such as
Omnimax theaters and various simulation systems. Spitz also services the systems
it sells under maintenance contracts.  In recent years, Spitz has introduced new
video and computer  graphics  projection  products for planetarium  theaters and
other  applications  using  immersive  multimedia  displays for wide  audiences.
Principal customers are domestic and international  museums,  schools,  military
defense  contractors,  theme  parks  and  other  entities  in the  entertainment
industry.

Consolidation and Basis of Presentation

The consolidated  financial  statements  include the accounts of the Company and
its  wholly  owned  subsidiary,  Spitz.  Upon  consolidation,   all  significant
intercompany transactions have been eliminated.

Revenue Recognition

Revenues from sales of equipment are  recognized on the percentage of completion
method,  measured by the percentage of cost incurred to estimated total cost for
each contract.  Estimated  losses under the percentage of completion  method are
charged  to  operations   immediately.   Revenues  from  maintenance   contracts
representing  the  estimated  portion for  preventive  service  (40% of contract
value) are recognized upon completion of the preventive service.  The balance of
revenues from maintenance contracts  representing covered services is recognized
over the one-year term of the contract.  Revenues from parts and other  services
are recognized upon shipment or completion of the service, respectively.

Inventories

Inventories  are  stated  at the  lower  of  cost,  determined  by the  first-in
first-out  method, or market value.  Certain repair and maintenance  inventories
having  realization  cycles  longer  than  one  year  have  been  classified  as
long-term.  Inventories  include  amounts  related  to long  term  contracts  as
determined by the percentage of completion method of accounting.

                                       21
<PAGE>

Machinery and Equipment

Machinery  and  equipment  are stated at cost,  which is  depreciated  using the
straight-line method over the estimated useful lives of the assets.

Computer Software

Computer  software  consists  of  costs  of  developing  software  products  for
automated  control  systems  and show  production  tools  sold  with  projection
systems.  Costs are amortized  over the estimated  sale of units not to exceed a
period of 5 years.  Amortization of costs related to computer  software products
held for sale  amounted to $165,000 and $107,000 in fiscal 2001 and fiscal 2000,
respectively.

Excess of Cost Over Net Assets of Business Acquired

The excess of cost over net assets of  business  acquired  is  amortized  on the
straight-line  basis over forty years.  The Company  continually  evaluates  the
carrying amount of this asset.  Accumulated  amortization of excess of cost over
net assets of business  acquired  amounted to $1,059,000 and $991,000 at January
31, 2001 and 2000, respectively.

Income Taxes

Income taxes are accounted for by the asset and liability approach in accordance
with Statement of Financial  Accounting  Standard No. 109 "Accounting for Income
Taxes".  Deferred  taxes will  arise,  subject to a  valuation  allowance,  from
differences  between  the  financial  reporting  and tax  bases  of  assets  and
liabilities  and are adjusted for changes in the tax laws when those changes are
enacted.

Estimates

The preparation of financial  statements in conformity  with generally  accepted
accounting  principles require management to make estimates and assumptions that
affect certain  reported amounts and  disclosures.  Accordingly,  actual results
could differ from those estimated.

Earnings  Per Share

Earnings per share have been computed in accordance  with Statement of Financial
Accounting  Standards  No. 128.  Basic  earnings per share reflect the amount of
income  available  for each share of common stock  outstanding  during the year.
Diluted  earnings  per share  reflects the amount of income  available  for each
share of common stock  outstanding  during the year assuming the issuance of all
dilutive potential shares.


                                       22
<PAGE>


The following table sets forth the computation of basic and diluted earnings per
share (dollars in thousands except per share data):

<TABLE>
<CAPTION>

                                                                                         Year ended January 31,
                                                                               --------------------------------------
                                                                                              2001               2000
                                                                               ------------------- ------------------
Numerator (same for basic and dilutive):
<S>                                                                                      <C>                <C>
        Net income                                                                         $ 1,021             $  854
        Preferred dividend requirement                                                           8                  8
                                                                               ------------------- ------------------
        Net income available to common  stockholders                                       $ 1,013             $  846
                                                                               =================== ==================
Denominator:
        Weighted average shares outstanding for basic earnings per
        share                                                                              456,760            502,470
        Dilutive effect of employee stock options                                           22,600             10,157
                                                                               ------------------- ------------------
        Weighted average shares outstanding and assumed
        conversions for dilutive earnings per share                                        479,360            512,627
                                                                               =================== ==================

Basic earnings per share                                                                   $  2.22             $ 1.68
                                                                               =================== ==================
Diluted earnings per share:                                                                $  2.11             $ 1.65
                                                                               =================== ==================
</TABLE>

Common shares  potentially  issuable under the contractual  conversion rights of
the Preferred B shares would have an  antidilutive  effect on earnings per share
and therefore have not been included in the above computations. Weighted average
common shares issuable under the contractual  conversion rights of the Preferred
B shares amounted to 1,871 shares in fiscal year 2001 and fiscal 2000.

2.             Inventories

Inventories consist of (in thousands):

<TABLE>
<CAPTION>

                                                                                 January 31,
                                                                      -----------------------------------
                                                                                    2001            2000
                                                                      ------------------- ---------------
<S>                                                                              <C>              <C>
Raw materials, parts, and subassemblies                                          $ 1,210          $  935
Work-in-process                                                                       57              75
Cost and estimated earnings in excess of billings                                  1,200             761
                                                                      ------------------- ---------------
Total inventories                                                                  2,467           1,771
Repairs and maintenance inventories recorded with other assets                        74              55
                                                                      ------------------- ---------------
Inventory recorded within current assets                                         $ 2,393         $ 1,716
                                                                      =================== ===============

</TABLE>



                                       23
<PAGE>


3.  Costs and Estimated Earnings on Contracts in Progress

Costs and estimated earnings on contracts in progress consist of:

<TABLE>
<CAPTION>

                                                                                              January 31,
                                                                                   -----------------------------------
                                                                                                2001            2000
                                                                                   ------------------- ---------------
<S>                                                                                          <C>              <C>
Costs incurred on contracts in progress                                                      $  7,643         $ 4,680
estimated earnings                                                                              3,243           1,828
                                                                                   ------------------- ---------------
Total costs and estimated earnings on contracts in progress                                    10,886           6,508
less billings to date                                                                         (11,454)         (6,562)
                                                                                   ------------------- ---------------
Total billings net of costs and estimated earnings on contracts in
progress                                                                                      $  (568)         $  (54)
                                                                                   =================== ===============

</TABLE>

Included in the  accompanying  balance  sheet or footnotes  under the  following
captions:

<TABLE>
<CAPTION>
                                                                                               January 31,
                                                                                    ----------------------------------
                                                                                                2001            2000
                                                                                    ------------------ ---------------
<S>                                                                                         <C>               <C>
Costs and estimated earnings in excess of billings recorded
with inventory                                                                              $  1,200          $  761
Billings in excess of costs and estimated earnings recorded with
liabilities                                                                                   (1,768)           (815)
                                                                                    ------------------ ---------------
Total billings net of costs and estimated earnings on contracts in progress
                                                                                             $  (568)         $  (54)
                                                                                    ================== ===============
</TABLE>

4.   Debt

Current and long term debt consists of (in thousands):

<TABLE>
<CAPTION>
                                                                                           January 31,
                                                                                  --------------- ---------------
                                                                                            2001            2000
                                                                                  --------------- ---------------
<S>                                                                                     <C>             <C>
  Capitalized lease obligations (Note 7)                                                 $   345         $   396

   Revolving credit note payable to First Keystone Federal Savings Bank, due
   July 6, 2005 with monthly interest at 0.5% over prime                                     600             355

   Term note payable to First Keystone Federal Savings Bank, payable in equal
   monthly installments of $17,122 including interest at 9.25% through July 1,
   2002                                                                                      281             451
                                                                                  --------------- ---------------
  Total debt                                                                               1,226           1,202

   Less current portion                                                                      385             323
                                                                                  --------------- ---------------
   Long term debt, less current portion                                                  $   841         $   879
                                                                                  =============== ===============
</TABLE>

                                       24
<PAGE>

On July 7, 2000 the Company's  Revolving  Credit  Agreement  with First Keystone
Federal Savings Bank (First Keystone)  originally  executed on June 12, 1997 was
amended.  Under the amendment the borrowing limit was increased from $800,000 to
$1,100,000,  the rate of  interest  was  lowered  from prime plus two percent to
prime plus one-half percent and the maturity date was extended from July 1, 2002
to July 6, 2005.  The security  and all other terms of the bank debt  agreements
remain unchanged.

The balance on the term note payable to First  Keystone  represents  the balance
due on an $820,000 note issued on June 12, 1997. The note is payable  jointly by
the  Company and Spitz with  interest at 9.25% over five years in equal  monthly
installments  of $17,122.  The balance on the  revolving  credit note payable to
First Keystone represents the balance due under the $1,100,000  Revolving Credit
Agreement  executed on July 7, 2000.  The Revolving  Credit Note is also jointly
payable by the Company and Spitz,  requires monthly  interest  payments at prime
plus 0.5% and matures on July 6, 2005. The Revolving  Credit  Agreement  permits
borrowing,  subject to an asset based formula, of up to $1,100,000  resulting in
unused  borrowing  capacity of $500,000 at January 31, 2001. The debt agreements
with First  Keystone are secured by virtually  all of the  Company's  assets and
require the maintenance of certain financial covenants.

5.  Preferred Stock

The holders of the Series B Cumulative  Convertible  Preferred Stock (Preferred)
are  entitled  to  receive  quarterly  dividends,  when and if  declared  by the
Company's  Board of  Directors,  at an annual per share  amount of  $27.50.  The
payment of such dividends would be prior and in preference to the payment of any
dividends on the Company's  common stock.  At January 31, 2001,  accumulated but
undeclared and unpaid  dividends with respect to the 318  outstanding  shares of
Preferred  amounted  to  $89,636.  The  Preferred  shares may be redeemed by the
Company at $250 per share plus  accumulated  unpaid dividends of $282 per share.
The 318  shares of  Preferred  are  convertible,  at the  option of the  holders
thereof, into 1,871 shares of the Company's common stock, and such common shares
have been reserved by the Company for issuance upon conversion.

Upon  liquidation,  dissolution,  or  winding  up of  the  Company,  before  any
distribution  with  respect to the common  stock,  the  holders of shares of the
Preferred are entitled to receive an amount equal to the  aggregate  liquidation
value,  which would include any accumulated and unpaid dividends.  The Preferred
has no voting  rights except as to any change in the  Company's  Certificate  of
Incorporation  adversely  affecting  the  preferences  of  the  holders  of  the
Preferred and as required by law. In such instances, each holder of Preferred is
entitled  to the number of votes  equal to the number of shares of common  stock
that would be obtained upon conversion of the Preferred.


6. Treasury Stock

In February  2000,  the Company  completed a  transaction  whereby it  purchased
45,710 shares of its common  stock,  consisting of all of the shares of a single
shareholder,  for cash of $3 per share or a total of  $137,130.  Such shares are
held in treasury reducing the number of common shares outstanding to 456,760.

                                       25
<PAGE>


7. Leases

Spitz leases its office and  production  facilities  under an  operating  lease.
Total rent expense under the lease amounted to $262,200 in fiscal years 2001 and
2000.  The current term under the lease,  which  commenced May 1, 1998, is for a
period of eight years.  Upon  expiration  of the current term on April 30, 2006,
the lease provides  Spitz with a renewal  option for an additional  eight years.
Annual rent is $262,200  through the first five years of the current  eight-year
term. Rent for the remaining  three years and the optional  renewal term will be
escalated based on the Consumer Price Index.  Minimum rental  commitments  under
the operating lease are as follows for the fiscal years ended: 2002 through 2006
-- $262,200; 2007 -- $65,550.

Spitz  finances  purchases of certain  machinery and equipment  through  capital
leases.  Assets under capital  lease  included in Machinery and Equipment are as
follows (in thousands):

                                                          January 31,
                                             --------------------------------
                                                         2001           2000
                                             ----------------- --------------
    Machinery and equipment                            $  709         $  583
    Less accumulated depreciation                         265            148
                                             ----------------- --------------
    Net book value                                     $  444         $  435
                                             ================= ==============



The asset and  liability  are recorded at the present value of the minimum lease
payments based on the interest rates imputed in the leases at rates ranging from
10.7% to 12.8%.  Depreciation  on the assets under  capital lease is included in
depreciation expense.

Future  minimum  annual  rentals under  capital lease  agreements at January 31,
2001, are as follows (in thousands):

                                              Fiscal 2001           $  229
                                              Fiscal 2002              134
                                              Fiscal 2003               23
                                              Fiscal 2004                -
                                              Fiscal 2005                -
                                                             --------------
Total payments                                                         386
Less amount representing interest                                       41
                                                             --------------
Present value of capital lease obligations                             345
Less current portion                                                   198
                                                             --------------
Long term obligation                                                 $ 147
                                                             ==============


                                       26
<PAGE>

8.  Stock Compensation Plan

Under the 1995 Stock  Option and  Performance  Incentive  Plan,  the Company may
grant stock options, stock appreciate rights or shares aggregating up to 100,000
shares of the Company's  common stock to employees of the Company and Spitz.  On
May 20, 1996, 10,500 stock options were granted to certain management  employees
at an exercise price of $2.25, the market price of the Company's common stock on
the grant date.  On July 8, 1997,  39,500 stock  options were granted to certain
management and other  employees at an exercise price of $2.50.  The market price
of the  Company's  common  stock on July 8, 1997 was  $3.63.  The  options  vest
ratably  over four  years  from the date of grant and  expire ten years from the
date of grant. The following table summarizes the activity:

<TABLE>
<CAPTION>

                                                                       Fiscal year ended January 31,
                                                        -------------------------------------------------------------
                                                                     2001                            2000
                                                        -----------------------------    ----------------------------
                                                                         Weighted                        Weighted
                                                           Number         Average          Number        Average
                                                          Of shares      exercise         of shares   exercise price
                                                                           price
                                                        -------------- --------------    ------------ ---------------

<S>                                                        <C>            <C>              <C>            <C>
Options outstanding at beginning of period                 50,000         $ 2.45           50,000         $ 2.45

Options granted                                              --                              --
                                                        --------------                   ------------

Options outstanding at end of period                       50,000         $ 2.45           50,000         $ 2.45
                                                        ==============                   ============

Options exercisable at end of period                       40,125         $ 2.43           27,625         $ 2.41
                                                        ==============                   ============
</TABLE>

The weighted average remaining  contractual life of the 50,000 outstanding stock
options at January 31, 2001 is 6.2 years.

The Company has elected to follow  Accounting  Principles  Board  Opinion No. 25
(APB 25) in accounting  for its employee stock options  because the  alternative
fair value  accounting  provided  under  Financial  Accounting  Standards  Board
Statement No. 123 (FAS 123) requires the use of option valuation models that, in
management's opinion, do not necessarily provide a reliable measure of the value
of its employee stock options.  Under APB 25, compensation is measured under the
intrinsic  value method at the grant date and recorded  ratably over the vesting
period.  Intrinsic  value is  measured  by the  difference  between  the  option
exercise  price and the market price of the  underlying  stock at the grant date
for the options granted by the Company.  The options granted in July 1997 had an
exercise  price  ($2.50)  below  market  value  ($3.63) at the grant date.  As a
result,  compensation  expense from stock  options,  in accordance  with APB 25,
amounted to $11,102 in each of fiscal years 2001 and 2000.

Pro forma  information  regarding  net income and earnings per share is required
under FAS 123 and has been  determined  as if the Company had  accounted for its
employee stock options under the fair value method of that  statement.  The fair
value  for  the  options  granted  was  estimated  at the  grant  date  using  a
Black-Scholes  option  pricing model with the following  assumptions:  risk free


                                       27
<PAGE>

interest rate 6%; dividend yield 0%, expected  volatility of 40%; and a weighted
average  expected life of 7.62 years.  Under FAS 123 the estimated fair value of
the options is amortized to expense over the vesting period.

The following pro forma  information  reflects net income and earnings per share
had the Company  accounted  for the  employee  stock  options  under FAS 123 (in
thousands except per share data):



                                                          Year ended January 31,
                                                         -----------------------
                                                                 2001      2000
                                                         -----------------------

    Net income                             As reported        $ 1,021     $ 854
                                           Pro forma            1,008       839

    Basic earnings per common share        As reported           2.22      1.68
                                           Pro forma             2.19      1.65

    Diluted earnings per common share      As reported           2.11      1.65
                                           Pro forma             2.10      1.64


9.  Profit Sharing Plan

The  Company  has  a  funded  profit-sharing  plan  covering  substantially  all
employees.  The plan permits the Company to make discretionary  contributions to
the  accounts  of  participants.  Under the plan,  the  Company  makes a partial
matching  contribution to each participant's  account equal to 50 percent of the
participant's   contribution,   subject  to  a  maximum  of  3  percent  of  the
participant's  total  cash  compensation  and  subject  to  certain  limitations
contained in the Internal  Revenue Code.  Profit-sharing  expense related to the
plan was $76,000 and $86,000 in fiscal 2001 and 2000, respectively.

10.   Income Taxes

Current income tax expense for 2001 and 2000 consists of applicable state income
taxes on the income before taxes of Spitz.  Current  federal  income tax expense
for both 2001 and 2000 have been  eliminated by the  utilization  of federal net
operating loss carry forwards.

Deferred  income taxes result from temporary  differences in the financial bases
and tax bases of assets and liabilities. Significant components of the Company's
deferred taxes at January 31, 2001 and 2000 are as follows: (in thousands)


                                       28
<PAGE>



                                                   January 31,
                                          --------------------------
                                                 2001         2000
                                          ------------ -------------

Net Operating Loss Carryforwards             $  3,599      $  3,970
Obsolescence Reserve                              415           401
                                          ------------ -------------
                                                4,014         4,371
Valuation Allowance                            (3,646)       (4,003)
                                          ------------ -------------
Deferred tax asset                            $   368        $  368
                                          ============ =============

The valuation allowance is intended to represent the corresponding amount of net
deferred tax assets,  which may not be realized.  The  Company's  provision  for
income taxes may be impacted by adjustments to the valuation allowance which may
be  required  if  circumstances  change  regarding  the  utilization  of the net
deferred tax assets in future  periods.  The valuation  allowance was reduced in
2000 to reflect  management's  belief  that it was more  likely  than not that a
certain amount of the deferred tax asset relating to the  utilization of the net
operating loss carryforwards would be realized. This realization was measured by
the Company's then current backlog and  management's  belief that taxable income
would  result as the then backlog was run out.  Management  continues to believe
that existing backlog at January 31, 2001 and the realization of other known and
unknown  sales  prospects  will more  likely  than not result in future  taxable
income against which the existing  recorded deferred tax asset will be utilized.
The  reduction  in the  valuation  allowance  from  2000  to 2001  reflects  the
utilization  of the net operating loss  carryforwards  in estimated 2001 taxable
income of $1,172.000. The corresponding amount of net operating loss utilization
for 2000 was $650,000.

At January 31, 2001,  the Company had net operating loss  carryforwards  for tax
purposes of  $10,584,000  expiring  2007 through 2009.  For financial  reporting
purposes,   the  net  operating  loss  carryforward  in  2001  is  approximately
$11,805,000.  The difference relates to the nondeductible  reserve for inventory
valuation not recognized for tax purposes.

The Internal Revenue Service has not examined the Company tax returns during the
years in which the net operating  losses were  generated or since that time. The
effects of such  examinations on the Company's tax loss  carryforwards,  if any,
cannot currently be determined.


11. Financial Instruments

Risk Management

Spitz's  financial  instruments  subject  to  credit  risk are  primarily  trade
accounts  receivable  and cash.  Credit is granted to  customers in the ordinary
course of business but the Company usually receives  progress payments under the
terms of its  customer  contracts.  Additionally,  letters  of credit  are often
arranged to secure payment from international customers.

The  Company  and its  subsidiary  maintain  cash  balances  at three  financial
institutions  located in  Maryland,  Michigan  and  Pennsylvania.  Accounts  are
secured by the Federal Deposit Insurance  Corporation.  During the normal course


                                       29
<PAGE>

of business, balances may exceed the insured amount.

Spitz customer contracts are generally payable in U.S.  currency.  Occasionally,
foreign  currency will be required to purchase goods and services related to the
installation of products at foreign  customers  sites.  Spitz generally does not
use  derivative  financial  instruments  with respect to such  foreign  currency
requirements  as their  amounts  are  generally  minor  relative  to the overall
contract costs. air Value of Financial  Instruments  SFAS No. 107,  "Disclosures
About Fair Value of Financial Instruments",  requires disclosures about the fair
value of certain  financial  instruments for which it is practicable to estimate
that  value.  For  purposes of such  disclosures,  the fair value of a financial
instrument is the amount at which the instrument could be exchanged in a current
transaction between willing parties, other than in a forced sale or liquidation.
Management  believes  that  the  fair  value  of its  financial  instruments  is
generally equal to its book value.

12.  Supplemental Cash Flow Information

Non cash financing  transactions  consist of machinery and equipment of $127,000
and  $315,000   acquired  through  capital  leases  in  fiscal  2001  and  2000,
respectively.

Interest paid on debt including capital lease  obligations  amounted to $119,000
in Fiscal 2001 and $98,000 in Fiscal 2000.  The Company  paid no federal  income
taxes in Fiscal 2001 and 2000.

13.  Significant Customers and Geographic Information

In fiscal year 2001,  one  customer  accounted  for 16.3% of total  revenue.  In
fiscal  year  2000,  one  customer  accounted  for  15.2% and  another  customer
accounted for 10.1% of total revenue. Export revenues by geographic area for the
years ended January 31 consist of (in thousands):

                                             Year ended January 31,
                                       -----------------------------------
                                                   2001              2000
                                       ----------------- -----------------
       Canada                                    $   15             $   7
       Europe                                     3,324             2,366
       Middle East                                1,650                 5
       Far East                                   1,321               710
                                       ----------------- -----------------
       Total export revenues                    $ 6,310           $ 3,088
                                       ================= =================

14.  Commitments and contingencies

At January  31,  2001 the Company was  contingently  liable for  $427,908  under
various  standby  letters  of  credit  issued  on its  behalf  by its  bank  and
correspondents  of its bank.  The letters of credit were issued as security  for
performance and advances on customer contracts.  The Company was also liable for
$182,342  under a letter of  credit  issued  by a  correspondent  of its bank to
secure payment for a custom made machine ordered for its factory operations. The
Company's bank underwrites the letter of credit requirements  independent of its
other debt agreements.

                                       30
<PAGE>

              ITEM 8. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS
                     ON ACCOUNTING AND FINANCIAL DISCLOSURE

Not applicable.


                                    PART III

    ITEM 9. DIRECTORS AND EXECUTIVE OFFICERS, PROMOTERS AND CONTROL PERSONS;
               COMPLIANCE WITH SECTION 16 (A) OF THE EXCHANGE ACT

The information required by this Item is incorporated herein by reference to the
sections entitled  "Proposal No. 1 -- Election of Directors - Executive Officers
of the Company" and "-- Section 16(a) Beneficial Ownership Reporting Compliance"
of the  Company's  Definitive  Proxy  Statement to be filed with the  Commission
within 120 days after January 31, 2001.

                         ITEM 10. EXECUTIVE COMPENSATION

The information required by this Item is incorporated herein by reference to the
sections  entitled  "Proposal No. 1 -- Election of Directors --  Compensation of
Directors" and "-- Executive  Compensation"  of the Company's  Definitive  Proxy
Statement  to be filed with the  Commission  within 120 days after  January  31,
2001.



                     ITEM 11. SECURITY OWNERSHIP OF CERTAIN
                        BENEFICIAL OWNERS AND MANAGEMENT

The information required by this Item is incorporated herein by reference to the
section  entitled   "Security   Ownership  of  Certain   Beneficial  Owners  and
Management"  of the Company's  Definitive  Proxy  Statement to be filed with the
Commission within 120 days after January 31, 2001.



                 ITEM 12. CERTAIN RELATIONSHIPS AND TRANSACTIONS

The information required by this Item is incorporated herein by reference to the
section   entitled   "Proposal  No.  1  --  Election  of  Directors  --  Certain
Relationships and  Transactions" of the Company's  Definitive Proxy Statement to
filed with the Commission within 120 days after January 31, 2001.


                                       31
<PAGE>

                    ITEM 13. EXHIBITS AND REPORTS ON FORM 8-K

(a)            Exhibits

Exhibit
 No.     Description of Document

3.1   Certificate of  Incorporation  of Registrant,  as amended  (Exhibit 3.1 to
      Registrant's  Registration  Statement No. 33-6826 on Form S-1 incorporated
      herein by reference).

3.2   Certificate of Amendment of Certificate  of  Incorporation  of Registrant,
      filed  August 31,  1990  (Exhibit  3.2 to  Registrant's  Form 10-K for the
      fiscal year ended January 31, 1991 (the "1991 10-K")  incorporated  herein
      by reference).

3.3   Certificate of Designations, Preferences and Rights of the Preferred Stock
      (Exhibit 4(b) to Registrant's  1989 Form 8-K filed with the Securities and
      Exchange  Commission  on February 15, 1989 ("1989 Form 8-K")  incorporated
      herein by reference).

3.4   Certificate  of   Designations,   Rights  and   Preferences  of  Series  B
      Convertible  Preferred  Stock  of  Registrant,  filed  September  5,  1990
      (Exhibit 3.4 to the 1991 10-K, incorporated herein by reference).

3.5   By-laws of Registrant,  as amended (Exhibit 3.3 to Registrant's  Form 10-K
      for the fiscal year ended  January 31,  1989  ["1989  10-K")  incorporated
      herein by reference).

4.1   Certificate of Incorporation of Registrant,  as amended, listed as Exhibit
      3.1 above and incorporated herein by reference.

4.2   Certificate of Amendment of Certificate  of  Incorporation  of Registrant,
      listed as Exhibit 3.2 above and incorporated herein by reference.

4.3   Certificate  of  Designations,  Preferences  and  Rights of the  Preferred
      Stock, listed as Exhibit 3.3 above and incorporated herein by reference.

4.4   Certificate  of   Designations,   Rights  and   Preferences  of  Series  B
      Convertible Preferred Stock of Registrant, listed as Exhibit 3.4 above and
      incorporated herein by reference.

4.5   Convertible  Subordinated  Debenture  Purchase  Agreement,   dated  as  of
      November 22, 1989,  between  Registrant  and the purchasers of convertible
      subordinated  debentures set forth therein  (Exhibit 4(a) to  Registrant's
      Quarterly  Report on Form 10-Q for the quarter ended October 31, 1989 (the
      "10/31/89 10-Q") incorporated herein by reference).

10.1  Transnational  Industries Inc. 1995 Stock Option and Performance Incentive
      Plan  (Exhibit "A" to  Registrant's  Proxy  Statement  dated June 16, 1995
      incorporated herein by reference).

10.2  Employment  Agreement  dated May 1, 1995 between  Charles Holmes and Spitz
      Inc  (Exhibit  10.2 to  Registrant's  1996  10-K  incorporated  herein  by
      reference).

10.3  Employment  Agreement dated May 1, 1995 between Paul Dailey and Spitz Inc.
      (Exhibit  10.3H  to  Registrant's   1996  10-K   incorporated   herein  by
      reference).

                                       32
<PAGE>

10.4  Employment  Agreement  dated May 1, 1995 between  Jonathan  Shaw and Spitz
      Inc.  (Exhibit  10.4 to  Registrant's  1996  10-K  incorporated  herein by
      reference).

10.5  Employment  Agreement  dated May 1, 1995 between  John  Fogleman and Spitz
      Inc.  (Exhibit  10.5 to  Registrant's  1996  10-K  incorporated  herein by
      reference).

10.6  Line of Credit  Agreement,  dated June 12, 1997,  between  First  Keystone
      Savings Bank, the Company and Spitz,  Inc.  (Exhibit 10.1 to  Registrant's
      Form 10-QSB for the  quarterly  period ended July 31, 1997 (the "7/97 Form
      10-QSB") incorporated herein by reference).

10.7  Line of Credit Note,  dated June 12, 1997, of the Company and Spitz,  Inc.
      to First  Keystone  Savings  Bank  (Exhibit  10.2 to the 7/97 Form  10-QSB
      incorporated herein by reference).

10.8  Term Note,  dated June 12, 1997,  of the Company and Spitz,  Inc. to First
      Keystone  Savings Bank (Exhibit 10.3 to the 7/97 Form 10-QSB  incorporated
      herein by reference).

10.9  Purchase and sale of shares of  Transnational  Industries Inc. between the
      Estate of Alan W. Drew and Transnational Industries Inc. dated January 28,
      2000 (Exhibit 10.1 to  Registrant's  Form 10-QSB for the quarterly  period
      ended April 30, 2000 (the "4/2000  Form  10-QSB")  incorporated  herein by
      reference).

10.10 Goldbelt  Electric  Theater  LLC  Operating  Agreement  between  Goldbelt,
      Incorporated  and Spitz Inc.  dated  April 10, 2000  (Exhibit  10.2 to the
      4/2000 Form 10-QSB incorporated herein by reference).

10.11 Letter  Agreement  to Amend  Revolving  Line of Credit dated July 7, 2000,
      between First Keystone Federal Savings Bank, Transnational Industries Inc.
      and Spitz Inc (Exhibit 10.1 to Registrant's  Form 10-QSB for the quarterly
      period ended July 31, 2000 (the "7/2000 Form 10-QSB")  incorporated herein
      by reference).

10.12 Line of Credit  Modification  Agreement dated July 7, 2000,  between First
      Keystone Federal Savings Bank, Transnational Industries Inc. and Spitz Inc
      (Exhibit 10.2 to the 7/2000 Form 10-QSB incorporated herein by reference).

10.13 Renewal  Line  of  Credit  Note  dated  July  7,  2000,  of  Transnational
      Industries  Inc.  and Spitz Inc. to First  Keystone  Federal  Savings Bank
      (Exhibit 10.3 to the 7/2000 Form 10-QSB incorporated herein by reference).

21    Subsidiaries of Registrant (a Delaware corporation):

                                   Spitz, Inc.

   (b)   Reports on Form 8-K for the quarter ended January 31, 2001.

                  None



                                       33
<PAGE>


SIGNATURES


In  accordance  with  Section 13 or 15(d) of the Exchange  Act,  the  registrant
caused this report to be signed on its behalf by the undersigned, thereunto duly
authorized.


Dated: April 27, 2001                        Transnational Industries, Inc.


By:       /s/ Charles H. Holmes Jr.          By:    /s/  Paul L. Dailey
          --------------------------------          ----------------------------
          Charles H. Holmes Jr.                     Paul L. Dailey
          Director, President and                   Vice President and
          Chief Executive Officer                   Chief Financial Officer

In  accordance  with the  Securities  Exchange  Act, this report has been signed
below by the following persons on behalf of the registrant and in the capacities
and on the dates indicated.

    Signature                  Title                            Date



By: /s/ Charles H. Holmes Jr.
    --------------------------
    Charles H. Holmes Jr.      Director, President and          April 27, 2001
                               Chief Executive Officer
                               (Principal Executive Officer)

By: /s/  Paul L. Dailey
    --------------------------
    Paul L. Dailey             Vice President and               April 27, 2001
                               Chief Financial Officer
                               (Principal Financial Officer)
                               (Principal Accounting Officer)


By: /s/  Charles F. Huber
    --------------------------
    Charles F. Huber           Chairman of the Board            April 27, 2001
                               of Directors

By: /s/  William D. Witter
    --------------------------
    William D. Witter          Vice-Chairman of the Board       April 27, 2001
                               of Directors

By: /s/  Michael S. Gostomski
    --------------------------
    Michael S. Gostomski       Director                         April 27, 2001

By: /s/  Calvin a. Thompson
    --------------------------
    Calvin A. Thompson         Director                         April 27, 2001

By: /s/  Mason N. Carter
    --------------------------
    Mason Carter               Director                         April 27, 2001



                                       34