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, 2000

         [  ] 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,  2000,  were
$10,212,000.

         The aggregate  market value of the voting stock held by  non-affiliates
of  Registrant  as of March 31,  2000 was  approximately  $364,386  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 31, 2000, 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, 2000, is incorporated by
reference into Part III of this Form 10-KSB.

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


                                       2
<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. All ImmersaVision products can be
configured for interactive virtual reality applications.  Through the end of the
Company's  fiscal year ended  January 31,  2000,  two  ElectricSky  systems were
installed  and are currently  operating,  and several more systems are scheduled
for installation  during fiscal 2001. 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 vender
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

                                       3
<PAGE>

emphasize  computer  controls,   integrated  sound  and  lighting  systems,  and
peripheral  special  effects such as video  projection.  Systems are designed to
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,  and  simulation  training
systems.   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, 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.
None of the products  currently  sold by Spitz are protected by patents.  As new
products are  developed,  Spitz plans to evaluate the  feasibility of patents to
protect its new inventions.

Principal Customers

During fiscal 2000,  revenues of $4,656,000 (46% of total revenues) were derived
from sales to the five largest  customers.  Revenue from one customer  accounted
for 15% of total revenues.  Revenue from another  customer  accounted for 10% 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


                                       4
<PAGE>

format film  projectors  for inclusion  with systems sold to their  customers as
opposed to Spitz selling  directly to the end user.  Also,  the large  aerospace
companies  typically  buy domed  projection  screens from Spitz for inclusion in
military  training  systems  sold to  their  customers.  While  this  creates  a
competitive  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


                                       5
<PAGE>

$820,000 in fiscal 2000 and $521,000 in fiscal 1999.

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, 2000, the Company and Spitz had 62 permanent  employees,  of whom
55 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, 2000.

                                       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 of 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  2000  and  1999.  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.

<TABLE>
<CAPTION>

                              Fiscal 2000     Fiscal    1999
                          ------------------ -----------------
                             High      Low      High     Low
                          -------- --------- -------- --------
        <S>                <C>       <C>      <C>      <C>
         First Quarter      $3.75     $1.50    $5.75    $2.88
         Second Quarter      5.75      2.75     4.38     3.00
         Third Quarter       2.94      2.25     3.05     1.75
         Fourth Quarter      4.00      1.38     1.75     1.50
</TABLE>

Holders

At March 31,  2000,  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, 2000,  accumulated but
undeclared and unpaid  dividends with respect to the 318  outstanding  shares of
Preferred B amounted to $80,891.  The  Preferred B shares may be redeemed by the
Company at $250 per share plus  accumulated  unpaid dividends of $254 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, 2000.

<TABLE>
<CAPTION>

                                                               Percentage
                                                                 Change
                                      Year ended January 31,      2000
                                     ------------------------      vs.
                                        2000         1999         1999
                                   --------------------------- -----------
     <S>                              <C>          <C>           <C>
      Revenues                         100.0%       100.0%        36.0%
      Cost of sales                      69.9         69.2         37.4
      Gross margin                       30.1         30.8         32.9
      Selling expenses                    7.6          9.9          4.3
      Research and development            8.0          6.9         57.4
      General and administrative          8.5         10.7          7.9
      Operating income                    6.0          3.3        149.2
      Interest expense                    0.9          1.6       (23.6)
      Income before income taxes          5.1          1.6        322.0
      Income taxes - current              0.3          0.2        235.7
      Deferred tax benefit              (3.6)            -            *
      Extraordinary gain                    -            -            *
      Net Income                          8.4          1.5        737.6

</TABLE>

-----------

* Not meaningful
                                                    -----------

Revenues  in the year ended  January  31, 2000  (fiscal  2000) were  $10,212,000
compared to  $7,509,000  in the year ended  January 31, 1999 (fiscal  1999),  an
increase of $2,703,000  (36%).  The increase was primarily due to  ImmersaVision
and dome sales. ImmersaVision revenue for fiscal 2000 was $1,643,000 compared to
$273,00 for fiscal 1999, an increase of $1,370,000. The ImmersaVision revenue in
fiscal  2000  was   attributable  to  the  completion  and  installation  of  an
ElectricSky  system for a major domestic  science center and the commencement of
work on two ElectricSky  systems  scheduled for installation in Europe in fiscal
2001. More significant  revenue from ImmersaVision is expected in fiscal 2001 as
work  intensifies on scheduled  installations  as well as other  anticipated new
sales.  Dome revenues  were  $5,510,000 in fiscal 2000 compared to $4,259,000 in
fiscal  1999,  an increase of  $1,251,000.  The  increase in dome  revenues  was
attributable  to higher revenue from ride  simulation  attractions,  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


                                       8
<PAGE>

and military training simulators decreased. Planetarium revenues were $3,059,000
in fiscal 2000  compared to  $2,977,000  in fiscal 1999, an increase of $82,000.
Planetarium  revenue from the sale of  refurbished  systems for the  educational
market increased while revenue from new systems decreased.  Planetarium revenues
include amounts  attributable to the sale of maintenance and parts of $1,286,000
in fiscal 2000  compared to  $1,207,000  in fiscal 1999, an increase of $79,000.
The increase in maintenance and parts revenues was due mostly to higher sales of
parts  and paid  service  visits to  customers  without  preventive  maintenance
agreements.

The Company's revenues from maintenance and parts are recurring and are expected
to remain  steady or increase  over time due to the  expansion of the  Company's
customer base  resulting  from new sales.  For the remaining  (and  predominant)
portions of its revenues,  the Company must rely on the sale of systems, both as
replacements for existing systems and new  installations,  in all of the various
markets that the Company serves.  The Company's products are often sold together
as components of a complete system. In addition to a competitive advantage, this
provides each of the Company's  products with efficient  direct access to a wide
breadth of markets that might  otherwise be difficult to reach. By being sold as
a complete system,  ImmersaVision  products provide new sales  opportunities for
domes and planetarium  systems.  More  importantly,  ImmersaVision  products and
their use in  planetarium  theaters are creating  new  opportunities  beyond the
Company's traditional markets.

The  backlog  of  unearned  revenue  as of January  31,  2000 was  approximately
$7,200,000,  all of which is scheduled to be earned in fiscal 2001. In addition,
the Company has booked, or is in negotiation to book,  approximately  $7,650,000
of new sales  orders of which  approximately  70% is expected to be completed in
fiscal  2001.  The  Company  expects  increasing   revenue   contributions  from
ImmersaVision  products  in future  years as the  installed  base  grows and new
applications of the product are developed. Research and development efforts will
continue with the goal being 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 revenue levels
are  expected  to  increase  over the next year,  uncertainty  in the timing and
delivery  of new sales are  expected  to cause  revenue  levels to  continue  to
fluctuate in interim periods.

Gross margins remained  relevantly  constant at 30.1% in fiscal 2000 compared to
30.8% in fiscal 1999. 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 $32,000 (4%) in fiscal 2000, as
staffing  additions  and  organizational   changes  replaced  higher  levels  of
engineering  resources devoted to sales and marketing activities in prior years.
Selling  expenses  in fiscal 2001 are  expected  to be at current or  increasing
levels as  marketing  efforts on  ImmersaVision  continue to demand  significant
resource commitments. Research and development expenses increased $299,000 (57%)
in fiscal 2000.  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

                                       9
<PAGE>

planetarium products.  Research and development efforts are expected to continue
at increasing  levels in future  periods.  General and  administrative  expenses
increased  $63,000 (8%) in fiscal 2000 primarily due to  inflationary  increases
and  cost  related  to  improvements  to the  Company's  management  information
systems.

Net interest  expense amounted to $94,000 in 2000 compared to $123,000 in fiscal
1999. The $94,000 reported in fiscal 2000 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 $123,000  reported in fiscal 1999 consisted
of $93,000  paid on bank debt plus  $31,000  paid on capital  lease  obligations
offset by $1,000 of interest income earned on cash invested.

The  Company  paid no  federal  income  taxes in fiscal  2000 or fiscal  1999 as
federal  taxable  income was offset by the  utilization  of net  operating  loss
carryforwards.  Income tax expense - current  consists of state  income taxes of
$33,000  and  $14,000 in fiscal  2000 and fiscal  1999,  respectively.  In prior
years,  uncertainty of future  profits  prevented the Company from recording any
tax benefit  associated  with the net operating loss  carryforwards.  Because of
recent  improved  performance  and the  outlook  for fiscal  2001,  the  Company
recorded a deferred tax asset of $368,000 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. Net operating  losses are expected to
continue to offset federal taxable income for the foreseeable  future  resulting
in the payment of no federal  income  taxes.  However,  deferred  tax expense is
expected in future years.  The Company expects to continue to incur state income
taxes in future years.

As a result of the above,  the Company reported net income of $854,000 in fiscal
2000 compared to net income of $109,000 in fiscal 1999.

LIQUIDITY AND CAPITAL RESOURCES

The Company  funds its  continuing  operations  primarily by cash  provided from
operating activities.  The Company also uses a revolving credit contract 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 $257,000 in fiscal 2000, compared
to $956,000 in fiscal 1999. The Company's  $854,000 of net income in fiscal 2000
only  produced  $257,000  of net cash  due to  operating  activities  due to the
effects of $720,000 of cash used by changes in operating assets and liabilities,
net, offset in part by $123,000 (net) of non-cash charges to net income.  By way
of  comparison,  in fiscal 1999 the Company had $956,000 of net cash provided by
operating activities from $109,000 of net income, due to the effects of $429,000


                                       10
<PAGE>

of cash generated  from changes in operating  assets and  liabilities,  net, and
$418,000 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  $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 payments of $121,000 on capital leases and monthly
principal  payments on the bank term note of $166,000  offset by net proceeds of
$205,000 on the revolving credit note. Non cash financing transactions in fiscal
2000 consist of $315,000 of machinery and  equipment  acquired  through  capital
leases.

Of the $956,000 provided by operations in fiscal 1999,  $310,000 was invested in
capital additions and financing  activities used $662,000.  Financing activities
included net pay downs of $450,000 on the  revolving  credit  note,  payments of
$83,000 on capital leases,  and monthly principal payments on the bank term note
of $129,000.  Non cash financing  transactions in fiscal 2000 consist of $32,000
of computer equipment acquired through capital leases.

Total debt at January 31,  2000 was  $1,202,000,  an  increase of $233,000  from
$969,000 at January 31, 1999. In summary, the increase resulted from $205,000 of
net proceeds on the revolving credit note plus new capital lease  obligations of
$315,000  offset by  $166,000  of  scheduled  payments  applied to term debt and
$121,000 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  $838,000
($315,000 by capital lease) and $342,000 ($32,000 by capital lease), in 2000 and
1999,  respectively.  Cost  of  computer  software  developed  to  automate  and
integrate  the  control  and show  production  process of  ImmersaVision  into a
theater  environment  with other  products  amounted to $309,000 and $233,000 in
2000  and  1999,  respectively.  Future  opportunities  from  ImmersaVision  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, 2000 there was a $355,000  balance on the  revolving  credit note
compared  to $150,000 at January 31,  1999.  This  resulted in unused  borrowing
capacity of  $445,000  at January  31, 2000  compared to $650,000 at January 31,
1999.  Cash balances of $109,000  provided  additional  liquidity at January 31,
2000  compared to $455,000 at January 31,  1999.  The next source of  liquidity,
accounts  receivable,  increased to  $2,173,000  at January 31, 2000 compared to
$1,712,000  at  January  31,  1999.  This  resulted  in an $80,000  decrease  in
liquidity  available from cash,  borrowing  capacity and accounts  receivable at
January  31,  2000  compared to January 31,  1999.  The  decrease is  noteworthy
considering the increased customer contract volume and a significant increase of
$677,000  in  accounts  payable  obligations.  Contributing  to the  decrease in
liquidity available from cash,  borrowing capacity and accounts receivable was a
$709,000  reduction in funding from  contracts in progress as billings  exceeded
revenue  recorded by only  $54,000 at January  31, 2000  compared to $763,000 at


                                       11
<PAGE>

January 31, 1999.  This  illustrates  the previous  discussion  of the effect of
customer progress payments on cash flow.  Contracts in progress used cash during
fiscal 2000 as  performance  through the completion of each project caught up to
the  advanced  billings  at January  31,  1999.  Although  advance  billings  on
contracts  in progress  at January  31,  2000 are minimal  compared to the prior
year, contracts in progress are still expected to absorb liquidity during fiscal
2001. This will continue to pressure liquidity. The payment terms on many of the
large prospective contracts remain uncertain and advance payments from customers
appear  unlikely  in the  immediate  future.  The  Company's  bank has  recently
notified the Company of its intention to increase the borrowing  limit under the
revolving credit agreement to $1,100,000 to provide additional liquidity for the
growth of the business.

The Company's 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.

YEAR 2000 IMPACT AND MANAGEMENT INFORMATION SYSTEMS

The Year 2000 Issue is the result of older  computer  programs  being  unable to
distinguish between the year 1900 and 2000. This could have resulted in a system
failure or miscalculations causing disruptions of operations,  including,  among
other  things,  a  temporary  inability  to process  transactions,  or engage in
similar normal business activities. In 1999 the Company began to make changes to
its  computer  systems  in  order to  prepare  for the  year  2000  and  improve
management information systems.

The Company has used a combination of mini computer applications,  microcomputer
applications  and  manual  procedures  to account  for and  manage its  business
processes. The very unique nature of the Company's business, its small size, and
the  variety  of  activities  it is  involved  in,  along  with  past  financial
constraints,  have perpetuated the use of the current  systems.  Improvements in
the  Company's  financial   condition,   the  availability  of  more  affordable
technology  solutions and  anticipated  increases in business volume now justify
major improvement to the Company's information systems.  Therefore,  the Company
concluded that it would be better served by an alternative  solution. As part of
the  objective to improve its  information  systems,  the Company  evaluated its
overall data  processing  resources and made  substantial  changes in the fiscal
year ending January 31, 2000. In this process, the Company selected new products
that are Year 2000 compliant.  The Company completed an analysis of its business
processes and requirements,  which were matched to the capabilities of available
enterprise software products. A list of enterprise software products best suited
for the  Company's  business was compiled  and a  determination  was made on the
basic  computer  infrastructure  required to run the list of software  products.
Installation of the new computer  infrastructure was completed in August 1999 at
an initial cost of $82,000.  An enterprise software system was selected after an
evaluation of several  products,  which required  additional  computer  hardware
installed  in September  1999 at a cost of  approximately  $40,000.  Cost of the


                                       12
<PAGE>

enterprise  software,  installation and implementation is estimated at $300,000.
The cost is being capitalized and funded through operating cash flow and leasing
of computer hardware and software.  Implementation of the enterprise software is
in process and is scheduled for  completion  during fiscal 2001. The first phase
of the  implementation,  which replaced  critical  financial  applications,  was
completed  on December 1, 1999.  In  addition,  modifications  have been made to
certain date sensitive  applications of the current minicomputer system in order
to ensure that other critical business processes continue through the completion
of the implementation of the new enterprise software.

The Company  experienced no failures of its  information  systems,  products and
experienced no interruption in service nor any delivery delays from suppliers at
the turn of the  century,  and  continued  to  experience  no errors,  delays or
interruptions throughout the first quarter of fiscal 2001.

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, 2000 and 1999, 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,  2000  and  1999,  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 18, 2000


                                       15
<PAGE>


                         Transnational Industries, Inc.

                           Consolidated Balance Sheets

                             (Dollars in thousands)
<TABLE>
<CAPTION>

                                                                         January 31,
                                                                 ------------- -------------
                                                                         2000          1999
                                                                 ------------- -------------
<S>                                                                <C>           <C>

Assets

Current Assets:
  Cash                                                              $     107      $    455
  Accounts receivable                                                   2,173         1,712
  Inventories                                                           1,716         1,281
  Deferred taxes                                                          368             -
  Other current assets                                                    149            85
                                                                 ------------- -------------

Total current assets                                                    4,513         3,533



Machinery and equipment:
  Machinery and equipment                                             $ 2,838       $ 2,309
  Less accumulated depreciation                                         1,932         1,697
                                                                 ------------- -------------

Net machinery and equipment                                               906           612



Other assets:
  Repair and maintenance inventories, less provision
    for obsolescence (2000--$1,181; 1999--$1,141)                          55           165
  Computer software, less amortization                                    674           501
  Excess of cost over net assets of business acquired,
    less amortization                                                   1,757         1,825
                                                                 ------------- -------------

Total other assets                                                      2,486         2,491
                                                                 ------------- -------------

Total assets                                                        $   7,905         6,636
                                                                 ============= =============
</TABLE>

See notes to consolidated financial statements.


                                       16
<PAGE>


                         Transnational Industries, Inc.

                     Consolidated Balance Sheets (continued)

                             (Dollars in thousands)
<TABLE>
<CAPTION>

                                                                       January 31,
                                                                 ------------- -------------
                                                                     2000          1999
                                                                 ------------- -------------
<S>                                                                <C>           <C>

Liabilities and stockholders' equity

Current liabilities:
  Accounts payable                                                   $1,043         $ 366
  Deferred maintenance revenue                                          751           686
  Accrued expenses                                                      398           338
  Billings in excess of cost and estimated earnings                     815         1,447
  Current portion of long-term debt                                     323           238
                                                                 ------------- -------------

Total current liabilities                                             3,330         3,075

Long-term debt, less current portion                                    879           731


Stockholders' equity:
  Series B cumulative  convertible preferred stock,
  $0.01 par value - authorized 100,000 shares;
  issued and outstanding 318 shares
  (liquidating value $160,391)                                           73            73
 Common stock, $0.20 par value -authorized
  1,000,000 shares; issued and outstanding 502,470                      100           100
 Additional paid-in capital                                           8,505         8,493
 Accumulated deficit                                                 (4,982)       (5,836)
                                                                 ------------- -------------

Total stockholders' equity                                            3,696         2,830
                                                                 ------------- -------------

Total liabilities and stockholders' equity                          $ 7,905       $ 6,636
                                                                 ============= =============

</TABLE>

See notes to consolidated financial statements.


                                       17
<PAGE>



                         Transnational Industries, Inc.

                      Consolidated Statements of Operations

                      (In thousands, except per share data)
<TABLE>
<CAPTION>

                                               Year ended January 31,
                                               -----------------------
                                                     2000        1999
                                               ----------- -----------

<S>                                               <C>          <C>
Revenues                                          $10,212      $7,509
Cost of sales                                       7,137       5,195
                                               ----------- -----------
Gross margin                                        3,075       2,314

Selling expenses                                      779         747
Research and development                              820         521
General and administrative expenses                   863         800
                                               ----------- -----------
                                                    2,462       2,068
                                               ----------- -----------
Operating Income                                      613         246

Interest expense, net                                  94         123
                                               ----------- -----------
Income before income taxes                            519         123

Income tax expense - current                           33          14
Income tax benefit  - deferred                       (368)
                                               ----------- -----------

Net income                                            854         109

Preferred dividend requirement                          8           8
                                               ----------- -----------
Income applicable to common shares               $    846    $    101
                                               =========== ===========

Basic earnings per common share                  $   1.68    $    .20
                                               =========== ===========
Diluted earnings per common share                $   1.65    $    .20
                                               =========== ===========

</TABLE>

See notes to consolidated financial statements.

                                       18
<PAGE>




                         Transnational Industries, Inc.

           Consolidated Statements of Changes in Stockholders' Equity

                                 (In thousands)

<TABLE>
<CAPTION>


                                                 Preferred Stock     Common           Additional          Accumulated
                                                     Series B         Stock        Paid in Capital          Deficit
                                               ------------------ -------------- --------------------- -------------------
<S>                                                      <C>           <C>                 <C>               <C>
Balance at January 31, 1998                                 $ 76          $ 100               $ 8,479           $ (5,945)

Conversion of Preferred
Stock to  Common Stock                                       (3)                                    3


Compensation from stock options                                                                    11

Net Income                                                                                                           109
                                               ------------------ -------------- --------------------- -------------------
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)
                                               ================== ============== ===================== ===================
</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,
                                                                            ----------------- ---------------
                                                                                        2000            1999
                                                                            ----------------- ---------------
<S>                                                                                <C>              <C>
Operating activities
Net income                                                                             $ 854           $ 109
Adjustments to reconcile net income to net cash provided
by operating activities:
    Deferred taxes                                                                      (368)
    Depreciation and amortization                                                        439             367
    Provision for obsolescence                                                            40              40
    Compensation from stock options                                                       12              11
    Changes in operating assets and liabilities, net:
        Accounts receivable                                                             (461)           (975)
        Inventories                                                                     (288)            162
        Other current assets                                                             (64)             50
        Cost and estimated earnings on contracts net of billings                        (709)          1,135
        Accounts payable                                                                 677            (102)
        Accrued expenses                                                                 125             159
                                                                            ----------------- ---------------
Net cash provided by operating activities                                                257             956
                                                                            ----------------- ---------------

Investing activities
Capital expenditures                                                                    (523)           (310)
                                                                            ----------------- ---------------
Net cash used by investing activities                                                   (523)           (310)
                                                                            ----------------- ---------------

Financing activities
Proceeds from revolving line of credit                                                 1,115             200
Payments on revolving line of credit                                                    (910)           (650)
Payments on capital leases                                                              (121)            (83)
Scheduled payments on long term debt                                                    (166)           (129)
                                                                            ----------------- ---------------
Net cash used by financing activities                                                    (82)           (662)
                                                                            ----------------- ---------------

Decrease in cash                                                                        (348)            (16)
Cash at beginning of year                                                                455             471
                                                                            ----------------- ---------------
Cash at end of year                                                                    $ 107           $ 455
                                                                            ================= ===============

</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. It 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 10 years.  Amortization of costs related to computer software products
held for sale  amounted to $107,000  and $37,000 in fiscal 2000 and fiscal 1999,
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 $991,000 and $924,000 at January 31,
2000 and 1999, 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,
                                                                               --------------------------------------
                                                                                              2000               1999
                                                                               ------------------- ------------------
<S>                                                                                      <C>                <C>

Numerator (same for basic and dilutive):
        Net income                                                                           $ 854             $  109
        Preferred dividend requirement                                                           8                  8
                                                                               ------------------- ------------------
        Net income available to common  stockholders                                        $  846             $  101
                                                                               =================== ==================
Denominator:
        Weighted average shares outstanding for basic earnings per
        share                                                                              502,470            501,720
        Dilutive effect of employee stock options                                           10,157              6,393
                                                                               ------------------- ------------------
        Weighted average shares outstanding and assumed
        conversions for dilutive earnings per share                                        512,627            508,113
                                                                               =================== ==================

Basic earnings per share                                                                   $  1.68             $  .20
                                                                               =================== ==================
Diluted earnings per share:                                                                $  1.65             $  .20
                                                                               =================== ==================
</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 2000 and 1,906 shares in fiscal
1999.

2.             Inventories

Inventories consist of (in thousands):

<TABLE>
<CAPTION>

                                                                                      January 31,
                                                                           --------------------------------
                                                                                      2000            1999
                                                                           ---------------- ---------------
<S>                                                                                <C>             <C>
Raw materials, parts, and subassemblies                                              $ 935           $ 735
Work-in-process                                                                         75              27
Cost and estimated earnings in excess of billings                                      761             684
                                                                           ---------------- ---------------
Total inventories                                                                    1,771           1,446
Repairs and maintenance inventories recorded with other assets                          55             165
                                                                           ---------------- ---------------
Inventory recorded within current assets                                            $1,716          $1,281
                                                                           ================ ===============

</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,
                                                                            ---------------------------------
                                                                                        2000            1999
                                                                            ----------------- ---------------
<S>                                                                                  <C>             <C>
Costs incurred on contracts in progress                                              $ 4.680         $ 3,358
Estimated earnings                                                                     1,828           1,408
                                                                            ----------------- ---------------
Total costs and estimated earnings on contracts in progress                            6,508           4,766
Less billings to date                                                                 (6,562)         (5,529)
                                                                            ----------------- ---------------
Total costs and estimated earnings on contracts in progress net of
 Billings                                                                              $ (54)         $ (763)
                                                                            ================= ===============

</TABLE>

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

<TABLE>
<CAPTION>

                                                                                        January 31,
                                                                             --------------------------------
                                                                                        2000            1999
                                                                            ---------------- ---------------
<S>                                                                                  <C>            <C>
Costs and estimated earnings in excess of billings recorded
With inventory                                                                         $ 761          $  684
Billings in excess of costs and estimated earnings recorded with
Liabilities                                                                             (815)         (1,447)
                                                                             ---------------- ---------------
Total costs and estimated earnings on contracts in progress net of
Billings                                                                               $ (54)         $ (763)
                                                                             ================ ===============
</TABLE>


4. Debt

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

<TABLE>
<CAPTION>

                                                                                           January 31,
                                                                                  --------------- ---------------
                                                                                            2000            1999
                                                                                  --------------- ---------------
<S>                                                                                      <C>             <C>
   Capitalized lease obligations (Note 6)                                                   $396            $200

   Revolving credit note payable to First Keystone Federal Savings Bank, due
   July 1, 2002 with monthly interest at 2% over prime                                       355             150

   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                                                                                      451             619
                                                                                  --------------- ---------------
   Total debt                                                                              1,202             969

   Less current portion                                                                      323             238
                                                                                  --------------- ---------------
   Long term debt, less current portion                                                     $879            $731
                                                                                  =============== ===============
</TABLE>

                                       24
<PAGE>

The balance on the term note  payable to First  Keystone  Federal  Savings  Bank
(First  Keystone)  represents  the balance due on an $820,000 note issued to the
Company's  primary lender 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 an $800,000  Revolving  Credit
Agreement  executed on June 12, 1997. The Revolving  Credit Note is also jointly
payable by the Company and Spitz,  requires monthly  interest  payments at prime
plus 2% and matures on July 1, 2002.  The  Revolving  Credit  Agreement  permits
borrowing,  subject to an asset based  formula,  of up to $800,000  resulting in
unused  borrowing  capacity of $445,000 at January 31, 2000. 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, 2000,  accumulated but
undeclared and unpaid  dividends with respect to the 318  outstanding  shares of
Preferred  amounted  to  $80,891.  The  Preferred  shares may be redeemed by the
Company at $250 per share plus  accumulated  unpaid dividends of $254 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.  Leases

Spitz leases its office and  production  facilities  under an  operating  lease.
Total rent expense  under the lease  amounted to $262,200 and $257,025 in fiscal
years 2000 and 1999,  respectively.  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: 2001 through 2006 -- $262,200; 2007 $65,550.

                                       25
<PAGE>

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):

<TABLE>
<CAPTION>

                                                          January 31,
                                                --------------------------------
                                                            2000           1999
                                                ----------------- --------------
<S>                                                        <C>            <C>
    Machinery and equipment                                $ 583          $ 357
    Less accumulated depreciation                            148            143
                                                ----------------- --------------
    Net book value                                         $ 435          $ 214
                                                ================= ==============
</TABLE>

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
11.8% 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,
2000, are as follows (in thousands):

<TABLE>
<CAPTION>
<S>                                                             <C>
                                                Fiscal 2001       $  192
                                                Fiscal 2002          181
                                                Fiscal 2003           86
                                                Fiscal 2004            -
                                                Fiscal 2005            -
                                                              -----------
Total payments
                                                                     459
Less amount representing interest
                                                                      63
                                                              -----------
Present value of capital lease obligations
                                                                     396
Less current portion
                                                                     153
                                                              -----------
Long term obligation                                               $ 243
                                                              ===========
</TABLE>

7.  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:


                                       26
<PAGE>

<TABLE>
<CAPTION>


                                                                       Fiscal year ended January 31,
                                                        -----------------------------------------------------------
                                                                     2000                            1999
                                                        -----------------------------  ----------------------------
                                                                         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                       27,625         $ 2.43         15,125         $ 2.41
                                                        ==============                 ============
</TABLE>

The weighted average remaining  contractual life of the 50,000 outstanding stock
options at January 31, 2000 is 7.2 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 2000 and 1999.

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
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):


                                       27
<PAGE>

<TABLE>
<CAPTION>


                                                                   Year ended January 31,
                                                                 --------------------------
                                                                          2000        1999
                                                                 -------------- -----------

          <S>                                                           <C>         <C>
           Net income                              As reported           $ 854       $ 109
                                                   Pro forma               831          94

           Basic earnings per common share         As reported            1.68         .20
                                                   Pro forma              1.65         .17

           Diluted earnings per common share       As reported            1.65         .20
                                                   Pro forma              1.64         .17

</TABLE>

8.  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 $71,000 in fiscal 2000 and 1999, respectively.

9. Income Taxes

Current income tax expense for 2000 and 1999 consists of applicable state income
taxes on the income before taxes of Spitz. Current federal income taxes for both
2000 and 1999 have been  eliminated by the  utilization of federal net operating
loss carryforwards.

Deferred  income taxes result from temporary  differences in the financial bases
and tax bases of assets and liabilities. Significant components of the Company's
net deferred tax at January 31, 2000 and 1999 are as follows: (in thousands)

<TABLE>
<CAPTION>

                                                              January 31,
                                                    -------------------------------
                                                             2000             1999
                                                    -------------- ----------------
        <S>                                              <C>              <C>
         Net operating loss carryforwards                 $ 3,970          $ 4,477
         Obsolescence reserve                                 401              388
                                                    -------------- ----------------
         Net deferred tax assets                             4371             4865
         Valuation allowance                               (4,003)           (4865)
                                                    -------------- ----------------
         Deferred income tax, net                          $  368            $   0
                                                    ============== ================
</TABLE>

The  valuation  allowance is intended to represent the  corresponding  amount of
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 deferred


                                       28
<PAGE>

tax assets in future  periods.  The valuation  allowance did not remain equal to
the net  deferred  tax asset for the 2000 tax year because it is felt that it is
more likely than not that taxable income will result from the Company's  current
backlog and the Company  will utilize the tax benefit  related to net  operating
loss utilization in the near term.

At January 31, 2000,  the Company had  investment  tax credit  carryforwards  of
$126,000  expiring in 2000 through 2002 and a net operating  loss  carryforwards
for tax purposes of  $11,678,000  expiring  2012  through  2014.  For  financial
reporting purposes, the net operating loss carryforward in 2000 is approximately
$13,739,000.  The difference relates to the nondeductible  reserve for inventory
valuation not recognized for tax purposes.  The net operating loss  carryforward
was reduced by approximately $729,000 and $334,000 from the utilization of a net
operating loss deduction in 2000 and 1999,  respectively.  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.

10. 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  two  financial
institutions  located in Michigan and Pennsylvania.  Accounts are secured by the
Federal  Deposit  Insurance  Corporation.  During the normal course 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.

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.

11.  Supplemental Cash Flow Information

Non cash financing  transactions  consist of machinery and equipment of $315,000


                                       29
<PAGE>

and  $32,000   acquired   through  capital  leases  in  fiscal  2000  and  1999,
respectively.

Interest paid on debt including capital lease obligations amounted to $98,000 in
Fiscal 2000 and  $124,000 in Fiscal  1999.  The Company  paid no federal  income
taxes in Fiscal 2000 and 1999.

12.  Significant Customers and Geographic Information

In fiscal year 2000,  one  customer  accounted  for 15.2% and  another  customer
accounted for 10.1% of total  revenue.  In fiscal year 1999, no single  customer
accounted for more than 10% of total revenue. Export revenues by geographic area
for the years ended January 31 consist of (in thousands):

<TABLE>
<CAPTION>

                                                       Year ended January 31,
                                                 -----------------------------------
                                                             2000              1999
                                                 ----------------- -----------------
               <S>                                       <C>               <C>
                 Canada                                     $   7             $   3
                 South America                                  -                43
                 Europe                                     2,366               942
                 Middle East                                    5                22
                 Far East                                     710               263
                                                 ----------------- -----------------
                 Total export revenues                    $ 3,088            $1,273
                                                 ================= =================
</TABLE>


13.  Subsequent Event - Purchase of Common 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 $137,310. Such shares are to
be held in treasury reducing the number of common shares outstanding to 456,760.

                                       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, 2000.

                         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,
2000.



                     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, 2000.



                 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, 2000.

                                       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).

                                       32
<PAGE>

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

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, 1999 (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).


21          Subsidiaries of Registrant (a Delaware corporation):

                                            Spitz, Inc.

27          Financial Data Schedules*

         *Filed electronically herewith

   (b)   Reports on Form 8-K for the quarter ended January 31, 2000.

                  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 28, 2000                            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.            April 28, 2000
                                 Director, President and
                                 Chief Executive Officer
                                 Principal Executive Officer)


By: /s/  Paul L. Dailey
    --------------------------
    Paul L. Dailey              Vice President and                April 28, 2000
                                Chief Financial Officer
                                (Principal Financial Officer)
                                (Principal Accounting Officer)


By: /s/  Charles F. Huber
    --------------------------
    Charles F. Huber            Chairman of the Board             April 28, 2000
                                of Directors


By: /s/  William D. Witter
    --------------------------
    William D. Witter            Vice-Chairman of the             April 28, 2000
                                 Board of Directors


By: /s/  Michael S. Gostomski
    ----------------------------
    Michael S. Gostomski          Director                        April 28, 2000


By: /s/  Calvin a. Thompson
    ----------------------------
    Calvin A. Thompson            Director                        April 28, 2000



                                       34