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

         [X] QUARTERLY REPORT UNDER SECTION 13 OR 15(d) OF THE
              SECURITIES EXCHANGE ACT OF 1934

         For the quarterly period ended July 31, 2001

         [  ] TRANSITION REPORT UNDER SECTION 13 OR 15(d) OF THE
              EXCHANGE ACT

         For the transition period from                 to
                                        ---------------    -------------

                  Commission File Number 0-14835

                         TRANSNATIONAL INDUSTRIES, INC.
        (Exact name of small business issuer as specified in its charter)


            Delaware                                        22-2328806
  (State or Other Jurisdiction of                        (IRS Employer
   Incorporation or Organization)                      Identification Number)



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

                                 (610) 459-5200
                           (Issuer's telephone number)

Check  whether the issuer (1) filed all reports  required to be filed by Section
13 or 15(d) of the  Exchange  Act during the past 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

State the number of shares outstanding of each of the issuer's classes of common
stock, as of the latest practicable date.

                          Common stock, $0.20 par value
                     Outstanding at August 31, 2001: 456,760

Transitional Small Business Disclosure Format (check one):
YES           NO    X
     -----        -----
<PAGE>




                         TRANSNATIONAL INDUSTRIES, INC.

                                   INDEX                                  PAGE


Part I.    FINANCIAL INFORMATION

  Item 1.    Financial Statements

             Condensed consolidated balance sheets -- July 31, 2001,
             and January 31, 2001.                                         3-4

             Condensed consolidated statements of operations -- Three
             months ended July 31, 2001 and 2000; six months ended
             July 31, 2001 and 2000.                                         5

             Condensed consolidated statements of cash flows -- Six
             months ended July 31, 2001 and 2000.                            6

             Notes to condensed consolidated financial statements --
             July 31, 2001.                                                7-8

  Item 2.    Management's Discussion and Analysis of Financial
             Condition and Results of Operations                          9-12


Part II.   OTHER INFORMATION

  Item 6.    Exhibits and Reports on Form 8-K                               13


SIGNATURES                                                                  13



                                       2
<PAGE>

                          PART I. FINANCIAL INFORMATION

Item 1.  Financial Statements


                         Transnational Industries, Inc.

                      Condensed Consolidated Balance Sheets

                             (Dollars in thousands)
<TABLE>
<CAPTION>

                                                                     July 31,      January 31,
                                                                        2001           2001
                                                                   -------------- -------------
Assets                                                                (Unaudited)    (Audited)
<S>                                                                   <C>           <C>
Current Assets:
  Cash                                                                  $    370      $    509
  Accounts receivable                                                      2,092         3,485
  Inventories                                                              1,884         2,393
  Deferred taxes                                                             368           368
  Other current assets                                                       367           315
                                                                    ------------- -------------

Total current assets                                                       5,081         7,070



Machinery and equipment:
  Machinery and equipment                                                $ 3,659       $ 3,182
  Less accumulated depreciation                                            2,418         2,231
                                                                    ------------- -------------

Net machinery and equipment                                                1,241           951



Other assets:
  Repair and maintenance inventories, less provision
    for obsolescence                                                          74            74
  Computer software, less amortization                                       404           505
  Excess of cost over net assets of business acquired,
    less amortization                                                      1,655         1,689
                                                                    ------------- -------------

Total other assets                                                         2,133         2,268
                                                                    ------------- -------------

Total assets                                                             $ 8,455      $ 10,289
                                                                    ============= =============

</TABLE>

See notes to condensed consolidated financial statements.


                                       3
<PAGE>

                         Transnational Industries, Inc.

                Condensed Consolidated Balance Sheets (continued)

                             (Dollars in thousands)

<TABLE>
<CAPTION>

                                                                     July 31,      January 31,
                                                                        2001           2001
                                                                  -------------- -------------
Liabilities and stockholders' equity                                (Unaudited)      (Audited)

<S>                                                                   <C>           <C>
 Current Liabilities:
  Accounts payable                                                      $    599    $   1,452
  Deferred maintenance revenue                                               677          671
  Accrued expenses                                                           551          581
  Billings in excess of cost and estimated earnings                        1,059        1,768
  Current portion of long-term debt                                          409          385
                                                                  -------------- -------------

Total current liabilities                                                  3,295        4,857

Long-term debt, less current portion                                         222          841


Stockholders' equity:
  Series B cumulative convertible preferred stock,
  $0.01 par value - authorized 100,000 shares;
  issued and outstanding 318 shares
  (liquidating value $173,509)                                                73           73
 Common stock, $0.20 par value -authorized
  1,000,000 shares; issued and outstanding 456,760
  (excluding 45,710 shares held in treasury)                                 100          100
 Additional paid-in capital                                                8,521        8,516
 Accumulated deficit                                                     (3,619)       (3,961)
                                                                  -------------  -------------
                                                                           5,075        4,728
Less: Treasury stock                                                       (137)        (137)
                                                                  -------------  -------------
Total stockholders' equity                                                 4,938        4,591
                                                                  -------------  -------------

Total liabilities and stockholders' equity                             $   8,455   $   10,289
                                                                  ============== =============

</TABLE>

See notes to condensed consolidated financial statements.


                                       4
<PAGE>


                         Transnational Industries, Inc.

                 Condensed Consolidated Statements of Operations

                                   (Unaudited)
                      (In thousands, except per share data)
<TABLE>
<CAPTION>
                                                Three Months Ended                  Six Months Ended
                                                      July 31                            July 31
                                             ----------------------------      ---------------------------
                                                     2001          2000                2001          2000
                                             ------------- -------------       ------------- -------------
<S>                                             <C>           <C>                 <C>           <C>
Revenues                                         $  2,475      $  3,203            $  6,134      $  6,205
Cost of Sales                                       1,701         2,203               4,292         4,269
                                             ------------- -------------       ------------- -------------
Gross Margin                                          774         1,000               1,842         1,936

Selling expenses                                      232           208                 432           422
Research and development                              207           243                 454           468
General and administrative expenses                   294           270                 552           509
                                             ------------- -------------       ------------- -------------
                                                      733           721               1,438         1,399
                                             ------------- -------------       ------------- -------------
Operating income                                       41           279                 404           537

Interest expense                                       18            34                  37            66
                                             ------------- -------------       ------------- -------------
Income before income tax                               23           245                 367           471

Provision for income taxes                              3            15                  25            29
                                             ------------- -------------       ------------- -------------
Net income                                             20           230                 342           442

Preferred dividend requirement                          2             2                   4             4
                                             ------------- -------------       ------------- -------------
Income applicable to common shares                 $   18       $   228              $  338        $  438
                                             ============= =============       ============= =============

Basic income per common share                      $ 0.04        $ 0.50              $ 0.74        $ 0.96
                                             ============= =============       ============= =============
Diluted income per common share                    $ 0.04        $ 0.48              $ 0.69        $ 0.93
                                             ============= =============       ============= =============
</TABLE>

         See notes to condensed consolidated financial statements.


                                       5
<PAGE>


                         Transnational Industries, Inc.

                        Condensed Consolidated Statements
                                  of Cash Flows

                                   (Unaudited)
                                 (In thousands)
<TABLE>
<CAPTION>

                                                               Six Months Ended
                                                                  July 31,
                                                            --------------------
                                                                 2001      2000
                                                            ---------- ---------
<S>                                                           <C>       <C>
       Net cash provided (used) by operating activities        $ 933    $  183


       Net cash provided (used) by investing activities         (272)      (65)


       Net cash provided (used) for financing activities        (800)     (180)
                                                            ---------- ---------

       Increase (decrease) in cash                              (139)      (62)
       Cash at beginning of period                               509       107
                                                            ---------- ---------
            Cash at end of period                             $  370    $   45
                                                            ========== =========
 </TABLE>

See notes to condensed consolidated financial statements.



                                       6
<PAGE>

                         Transnational Industries, Inc.

              Notes to Condensed Consolidated Financial Statements

                                   (Unaudited)

                                  July 31, 2001

Note A -- BASIS OF PRESENTATION

The accompanying unaudited condensed consolidated financial statements have been
prepared in accordance with generally accepted accounting principles for interim
financial  information  and with the  instructions to Form 10-QSB and Regulation
S-B.  Accordingly,  they do not include  all of the  information  and  footnotes
required by generally  accepted  accounting  principles  for complete  financial
statements.  In the opinion of management,  all adjustments considered necessary
for a fair presentation have been included. All such adjustments are of a normal
recurring  nature.  Operating  results for the three month and six month periods
ended  July 31,  2001,  are not  necessarily  indicative  of the  results  to be
expected for the fiscal year. For further information, refer to the consolidated
financial  statements and footnotes thereto for the year ended January 31, 2001,
contained in the  Registrant's  Annual  Report on Form 10-KSB for the year ended
January 31, 2001.

Note B - EARNINGS PER SHARE

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

<TABLE>
<CAPTION>

                                                                      Three Months Ended            Six Months Ended
                                                                           July 31                       July 31
                                                                  -------------------------    -------------------------
                                                                         2001         2000            2001         2000
                                                                  ------------ ------------    ------------ ------------
<S>                                                                   <C>          <C>             <C>          <C>
Numerator (same for basic and diluted):
Net income                                                              $  20       $  230           $ 342        $ 442
Preferred dividend requirement                                              2            2               4            4
                                                                  ------------ ------------    ------------ ------------

Net income available to common  stockholders                            $  18       $  228           $ 338        $ 438
                                                                  ============ ============    ============ ============

Denominator:
Weighted average shares outstanding for basic earnings per
share                                                                 456,760      456,760         456,760      456,760
Dilutive effect of employee stock options                              36,489       15,006          36,323       13,859
                                                                  ------------ ------------    ------------ ------------
Weighted average shares outstanding and assumed conversions
for diluted earnings per share                                        493,249      471,766         493,083      470,619
                                                                  ============ ============    ============ ============

Basic income per share                                                  $ .04        $ .50           $ .74        $ .96
                                                                  ============ ============    ============ ============
Diluted income per share                                                $ .04        $ .48           $ .69        $ .93
                                                                  ============ ============    ============ ============
</TABLE>

                                       7
<PAGE>

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 in each of periods ended July 31, 2001 and 2000.

Note C - Supplemental Cash Flow Information

Non-cash financing  transactions  consist of machinery and equipment of $205,000
acquired through a capital lease in April 2001.


                                       8
<PAGE>

        Item 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
                       CONDITION AND RESULTS OF OPERATIONS

Results of operations

Revenues  in the second  quarter  and first six months of the fiscal year ending
January 31, 2002 ("Fiscal  2002") were  $2,475,000  and  $6,134,000  compared to
$3,203,000  and  $6,205,000 in the  comparable  periods of the fiscal year ended
January  31, 2001  ("Fiscal  2001").  The  decreases  of $728,000  (23%) for the
quarter and $71,000 (1%) for the six-month  period were due principally to lower
dome revenues.  ImmersaVision revenues were $636,000 and $1,582,000 in the first
quarter and first six months of Fiscal 2002, compared to $808,000 and $1,389,000
in the first  quarter and first six months of Fiscal  2001,  respectively.  Dome
revenues were $945,000 and $2,425,000 in the second quarter and first six months
of Fiscal 2002 compared to $1,622,000 and  $3,348,000 in the comparable  periods
of Fiscal 2001, a decrease of $677,000  (42%) and $923,000 (28%) for the quarter
and the  six-month  period,  respectively.  The  decrease in dome  revenues  was
attributable to lower revenues from ride simulation attractions and, to a lesser
degree, from film theaters.  Otherwise,  dome revenues from planetarium theaters
increased and dome revenues from special projects remained relatively  constant.
Special  project domes  consisted of a special  effects  attraction for a casino
completed in May 2001 which  replaced the revenues in the previous year from the
special theater dome for a major European automobile maker. Planetarium revenues
were  $894,000  and  $2,127,000  in the second  quarter  and first six months of
Fiscal 2002  compared to $773,000 and  $1,468,000 in the  comparable  periods of
Fiscal  2001,  an  increase  of $121,000  and  $659,000  for the quarter and the
six-month  period,  respectively.  The  increase  in  planetarium  revenues  was
attributable  to higher  volume  from the sale of  systems  for the  educational
market.  Planetarium revenues  attributable to the sale of maintenance and parts
were  relatively  constant for the period at $285,000 and $588,000 in the second
quarter and first six months of Fiscal 2002 compared to $285,000 and $598,000 in
the comparable periods of Fiscal 2001.

The  backlog  of  unearned  revenue  as  of  July  31,  2001  was  approximately
$5,300,000.  There are many promising  sales  prospects for all of the Company's
products.  The Company  expects that this will lead to significant  orders which
will  impact  revenues  during the next year;  however,  the  initial  impact on
revenues in Fiscal 2002 will be limited due to the timing of expected deliveries
for such orders.  As a result,  the Company expects lower revenue levels for the
second half of Fiscal  2002.  This is an example of the  temporary  fluctuations
resulting  from the timing of  customer  projects.  The strong  sales  prospects
combined with the successful  operations of the new  ImmersaVision  theaters are
expected to sustain long-term revenue growth beyond Fiscal 2002.

Gross margins were relatively  constant at 31.3% and 30.0% in the second quarter
and first  six-month  periods of Fiscal  2002  compared  to 31.2% in each of the
comparable periods of Fiscal 2001. Dome gross margins continued to be strong and
ImmersaVision  margins  continued  to  lag,  while  planetarium  margins  showed
improvement  due to volume  related  efficiencies.  Selling  expenses  increased
$24,000 (11%) in the second  quarter and $10,000 (2%) in the first six months of
Fiscal 2002 compared to the  comparable  periods of Fiscal 2001. The increase in
selling  expense  was due to  higher  engineering  resources  devoted  to  sales
proposal  efforts  and  the  timing  of  sales  related  travel.   Research  and
development  expenses  decreased  $36,000  (15%) and $14,000  (3%) in the second


                                       9
<PAGE>

quarter and first six months of Fiscal 2002 compared to the  comparable  periods
of Fiscal 2001.  The decrease in research  and  development  expenses was due to
higher use of engineering  resources for customer projects,  sales proposals and
the installation of new factory machinery.  General and administrative  expenses
increased  $24,000  (9%) and  $43,000  (8%) in the second  quarter and first six
months of Fiscal 2002  compared to the  comparable  periods of Fiscal 2001.  The
increase in general  and  administrative  expenses  was due  primarily  to costs
related to information system improvements and strategic planning.

Net interest  expense  amounted to $18,000 and $37,000 in the second quarter and
first six  months  of  Fiscal  2002  compared  to  $34,000  and  $66,000  in the
comparable  periods  of  Fiscal  2001.  The  decrease  in  interest  expense  is
attributable  to the  scheduled  pay down of term debt and lower use of the bank
line of credit.  The $18,000 and $37,000 reported in the first quarter and first
six months of Fiscal  2002  consisted  of $5,000 and  $15,000  paid on bank debt
agreements plus $15,000 and $25,000 paid on capital lease obligations  offset by
$2,000 and $3,000 of interest  income.  The $34,000 and $66,000  reported in the
first  quarter  and first six months of Fiscal  2001  consisted  of $24,000  and
$44,000  paid on bank debt  agreements  plus $10,000 and $22,000 paid on capital
lease  obligations.  The Company  continues  to pay no federal  income  taxes as
federal  taxable  income is  offset by the  utilization  of net  operating  loss
carryforwards.  The  provision  for state  income  taxes  amounted to $3,000 and
$25,000 in the second  quarter and first six months of Fiscal  2002  compared to
$15,000 and $29,000 in the comparable periods of Fiscal 2001. As a result of the
above,  the Company  reported  net income of $20,000 and  $342,000 in the second
quarter and first six months of Fiscal 2002 compared to of $230,000 and $442,000
for the comparable periods of Fiscal 2000.

Liquidity and Capital Resources

Net cash  provided by operating  activities  was $933,000 in first six months of
Fiscal 2002,  compared to $183,000 in the first six months of Fiscal  2001.  The
$933,000 of net cash provided by operating activities in the first six months of
Fiscal  2002 was  produced  by adding  $244,000  of cash  provided by changes in
operating assets and liabilities and $347,000 of non-cash charges to $342,000 of
net income.  The $183,000 of net cash  provided by operating  activities  in the
first six months of Fiscal  2001 was  produced  by adding  $259,000  of non-cash
charges  to  $442,000  of net income and  subtracting  $518,000  of cash used by
changes in operating assets and liabilities. 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
period to period to remain both material and variable.

The $933,000  provided by  operations in the first six months of Fiscal 2002 was
offset by $800,000 used by financing  activities  and $272,000 used by investing
activities.  The  $183,000  provided  by  operations  in the first six months of
Fiscal 2001 was offset by $180,000 used by financing activities and $65,000 used
by investing activities. The net result was a $139,000 decrease in cash balances
during the first six months of Fiscal  2002  compared  to a decrease  of $62,000
during the first six months of Fiscal 2001.

Financing  activities  in the first six months of Fiscal 2002  consisted  of net
payments of  $600,000  on the  revolving  credit  note,  payments of $107,000 on
capital leases and monthly principal  payments on the bank term note of $93,000.
Non cash financing transactions in the first six months of Fiscal 2002 consisted
of  $205,000  of  machinery  and  equipment  acquired  through  capital  leases.
Financing  activities  in the first six months of Fiscal 2001  consisted  of net
proceeds  of  $115,000  from the  revolving  credit  note  offset by payments of
$74,000 on capital leases,  monthly principal  payments on the bank term note of
$84,000 and the purchase of treasury stock at a cost of $137,000.

                                       10
<PAGE>

Total debt at July 31,  2001 was  $631,000,  a  decrease  of  $595,000  from the
$1,226,000 at January 31, 2001. In summary,  the decrease resulted from $600,000
of net  payments on the  revolving  credit note,  $93,000 of scheduled  payments
applied  to term  debt  and  $107,000  of  payments  applied  to  capital  lease
obligations, offsetting a new capital lease of $205,000.

Investing  activities  in the first  six  months of  Fiscal  2002  consisted  of
$272,000 of various  machinery and equipment  additions,  compared to $65,000 of
the same in first six months of Fiscal 2001.

At July 31, 2001 there was no balance on the revolving credit note,  compared to
a $600,000  balance at January  31,  2001.  This  resulted  in unused  borrowing
capacity  of  $1,100,000  at July 31,  2001  compared to $500,000 at January 31,
2001. Cash balances of $370,000 provided  additional  liquidity at July 31, 2001
compared to $509,000 at January 31, 2001. The next source of liquidity, accounts
receivable,  decreased to  $2,092,000 at July 31, 2001 compared to $3,485,000 at
January 31, 2001.  This resulted in a $932,000  decrease in liquidity  available
from cash,  borrowing capacity and accounts receivable at July 31, 2001 compared
to January 31, 2001.  Contributing  to the decrease in liquidity  available from
cash,  borrowing  capacity and accounts  receivable was a $354,000  reduction in
funding from contracts in progress,  as billings  exceeded  revenue  recorded by
$214,000 at July 31, 2001 compared to the $568,000 at January 31, 2001.

The bank  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.


Forward-Looking Information

The statements in this  Quarterly  Report on Form 10-QSB 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  (without  limitation)
"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


                                       11
<PAGE>

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.


                                       12
<PAGE>

                              II. OTHER INFORMATION

Items 1-5

  None

6.   Exhibits and Reports on Form 8-K

(a)  Exhibits



(b)  The Registrant did not file any reports on Form 8-K during the three months
     ended July 31, 2001.





                                   SIGNATURES

     In accordance  with the  requirements  of the Exchange Act, the  Registrant
caused this report to be signed on its behalf by the undersigned, thereunto duly
authorized.


                                              TRANSNATIONAL INDUSTRIES, INC.



                                              /s/   Paul L. Dailey, Jr.
                                              -------------------------
        Date:  September 14, 2001             Paul L. Dailey, Jr.
                                              Secretary-Treasurer

                                              Signing on Behalf of Registrant
                                              and as Chief Financial Officer


                                       13