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

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

         For the quarterly period ended July 31, 1998

         [  ] 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.
           (Name of small business issuer as specified in its charter)


            Delaware                                        22-2328806
  (State or Other Jurisdiction of                        (I.R.S. 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 Securities 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, 1998: 500,970

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, 1998,       
           and January 31, 1998.                                            3-4

           Condensed  consolidated  statements  of  operations -- Three
           months ended July 31, 1998 and 1997; six months ended
           July 31, 1998 and 1997.                                            5

           Condensed consolidated statements of cash flows -- Six
           months ended July 31, 1998 and 1997.                               6

           Notes to condensed consolidated financial statements --
           July 31, 1998.                                                   7-9

 Item 2.   Management's Discussion and Analysis of Financial
           Condition and Results of Operations                            10-13


Part II.   OTHER INFORMATION

         Item 6.    Exhibits and Reports on Form 8-K                         14


SIGNATURES                                                                   14



                                       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,
                                                             1998         1998
                                                        ----------- ------------
Assets                                                  (Unaudited)    (Audited)
<S>                                                        <C>          <C>     

Current Assets:
  Cash                                                     $    420     $    471
  Accounts receivable                                         1,327          737
  Inventories                                                 1,242        1,412
  Other current assets                                          172          135
                                                        ----------- ------------

Total current assets                                          3,161        2,755



Machinery and equipment:
  Machinery and equipment                                   $ 2,783      $ 2,675
  Less accumulated depreciation                               2,047        1,927
                                                        ----------- ------------

Net machinery and equipment                                     736          748



Other assets:
  Repair and maintenance inventories, less provision
    for obsolescence                                            165          165
  Computer software, less amortization                          363          322
  Excess of cost over net assets of business acquired,
    less amortization                                         1,859        1,893
                                                        ----------- ------------

Total other assets                                            2,387        2,380
                                                        =========== ============

Total assets                                               $  6,284     $  5,883
                                                        =========== ============

</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,
                                                            1998         1998
                                                     ------------- -------------
Liabilities and stockholders' equity                   (Unaudited)     (Audited)
<S>                                                       <C>           <C>     
Current liabilities:
  Accounts payable                                        $    413      $    468
  Deferred maintenance revenue                                 751           641
  Accrued expenses                                             241           224
  Billings in excess of cost and estimated earnings            689           241
  Current portion of long-term debt                            230           215
                                                     ------------- -------------

Total current liabilities                                    2,324         1,789

Long-term debt, less current portion                         1,291         1,384

Stockholders' equity:
  Series B cumulative  convertible preferred stock, 
   $0.01 par value - authorized 100,000 shares;
   issued and outstanding 330 shares (liquidating 
   value $152,831)                                              76            76
  Common stock, $0.20 par value -authorized
    1,000,000 shares; issued and outstanding 500,970
    shares                                                     100           100
  Additional paid-in capital                                 8,485         8,479
  Accumulated deficit                                      (5,992)       (5,945)
                                                     ------------- -------------

Total stockholders' equity                                   2,669         2,710
                                                     ------------- -------------

Total liabilities and stockholders' equity                $  6,284      $  5,883
                                                     ============= =============

</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
                                                     ------------------------------         ------------------------------
                                                              1998            1997                     1998          1997
                                                     -------------- ---------------         ---------------- -------------
<S>                                                     <C>             <C>                      <C>           <C>       
Revenues                                                $    1,854      $    1,761               $    3,367    $    4,085
Cost of Sales                                                1,229           1,208                    2,311         2,917
                                                     -------------- ---------------         ---------------- -------------
Gross Margin                                                   625             553                    1,056         1,168

Selling expenses                                               206             141                      395           267
Research and development                                       132             146                      237           219
General and administrative expenses                            214             191                      401           377
                                                     -------------- ---------------         ---------------- -------------
                                                               552             478                    1,033           863
                                                     -------------- ---------------         ---------------- -------------
Operating income                                                73              75                       23           305

Interest expense                                                33              32                       70            60
                                                     -------------- ---------------         ---------------- -------------
Income (loss) before income tax                                 40              43                     (47)           245

Provision for income taxes                                       -               3                        -            14
                                                     -------------- ---------------         ---------------- -------------
Net income (loss) before extraordinary item                     40              40                     (47)           231

Extraordinary gain on elimination of debt                                      345                                    345
                                                     -------------- ---------------         ---------------- -------------
Net income (loss)                                               40             385                     (47)           576

Preferred dividend requirement                                   2              12                        4            24
                                                     ============== ===============         ================ =============
Income (loss) applicable to common shares              $        38       $     373              $      (51)      $    552
                                                     ============== ===============         ================ =============

Basic income (loss) per common share
   Before extraordinary item                            $     0.08       $    0.08               $   (0.10)      $   0.52
   Extraordinary gain on elimination of debt                     -            0.95                      --           0.87
                                                    ============== ===============         ================ =============
                                                        $     0.08       $    1.03               $   (0.10)      $   1.39
                                                     ============== ===============         ================ =============

Diluted income (loss) per common share
   Before extraordinary item                            $     0.07       $    0.08               $   (0.10)      $   0.52
   Extraordinary gain on elimination of debt                     -            0.95                       --          0.87
                                                     -------------- ---------------         ---------------- -------------
                                                        $     0.07       $    1.03               $   (0.10)      $   1.39
                                                     ============== ===============         ================ =============
</TABLE>

         See notes to condensed consolidated financial statements.


                                       5
<PAGE>



                         Transnational Industries, Inc.

                        Condensed Consolidated Statements
                                  of Cash Flows

                                   (Unaudited)
                                 (In thousands)

<TABLE>

                                                              Six Months Ended
                                                                    July 31,
                                                            --------------------
                                                                 1998      1997
                                                            ---------- ---------
<S>                                                           <C>         <C>           
       Net cash provided (used) by operating activities           186       172

                                                                          
       Net cash provided (used) by investing activities          (110)     (174)

                                                                          
       Net cash provided (used) for financing activities         (127)      (97)
                                                            ---------- ---------
                                                                       
       Increase (decrease) in cash                                (51)      (99)                                  
       Cash at beginning of period                                471       953
                                                            ---------- ---------
  
            Cash at end of period                              $  420     $ 854
                                                            ========== =========
       
</TABLE>

     See notes to condensed consolidated financial statements.


                                       6
<PAGE>


                         Transnational Industries, Inc.

              Notes to Condensed Consolidated Financial Statements

                                   (Unaudited)

                                  July 31, 1998

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, 1998, 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, 1998, contained in the Registrant's Annual Report on Form 10-KSB for
the year ended January 31, 1998.

Note B - NEW ACCOUNTING PRONOUNCEMENTS.

     SFAS No. 130, Reporting Comprehensive Income, establishes standards for the
reporting and display of comprehensive income in financial statements.  SFAS No.
131,  Disclosures  about  Segments of an  Enterprise  and  Related  Information,
changes  the way  public  companies  report  segment  information  in  financial
statements.  The Statements  become  effective for all financial  statements for
fiscal years  beginning  after December 15, 1997. The Company has reviewed those
Statements  and does not  believe  that they will have a material  impact on its
financial statements and related disclosures.


                                       7
<PAGE>

Note C - 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
                                                                 --------------------------     --------------------------
                                                                         1998         1997             1998          1997
                                                                 ------------- ------------     ------------ -------------
<S>                                                                 <C>          <C>             <C>            <C>      
Numerator (same for basic and dilutive):
Net income (loss) before extraordinary gain                         $      40    $      40       $     (47)     $     231
Preferred dividend requirement                                              2           12                4            24
                                                                 ------------- ------------     ------------ -------------
Net income (loss) before extraordinary
gain available to common stockholders                                      38           28             (51)           207
Extraordinary gain on elimination of debt                                  --          345               --           345
                                                                 ============= ============     ============ =============
Net income (loss) available to common 
stockholders                                                         $     38     $    373       $     (51)     $     552
                                                                 ============= ============     ============ =============

Denominator:
Weighted average shares outstanding for basic earnings per
share                                                                 500,970      360,524          500,970       396,829
Dilutive effect of employee stock options                               9,795        3,344               --         1,671
                                                                 ============= ============     ============ =============
Weighted average shares outstanding and assumed conversions
for dilutive earnings per share                                       510,765      363,868          500,970       398,500
                                                                 ============= ============     ============ =============

Basic income (loss) per share:
Before extraordinary gain                                            $    .08   $      .08       $    (.10)      $    .52
Extraordinary gain on elimination of debt                                  --          .95               --           .87
                                                                 ============= ============     ============ =============
Total                                                                 $   .08    $    1.03        $   (.10)      $   1.39
                                                                 ============= ============     ============ =============

Dilutive income (loss) per share:
Before extraordinary gain                                             $   .07   $      .08        $   (.10)      $    .52
Extraordinary gain on elimination of debt                                  --          .95               --           .87
                                                                 ============= ============     ============ =============
Total                                                                 $   .07    $    1.03        $   (.10)      $   1.39
                                                                 ============= ============     ============ =============
</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 1,941 and 10,259 in each of periods  ended July
31, 1998 and 1997, respectively.

                                       8
<PAGE>

Note D -- CONTINGENCIES

     In 1995, Spitz became involved in a dispute in connection with a public bid
for the supply of  planetarium  equipment  for an expansion  project at a public
community  college.  Spitz's  subcontract  bid was the lowest  submitted and the
general  contractor for the project allegedly used Spitz's pricing in submitting
its total  contract bid to the college.  After the total contract was awarded to
the general  contractor,  however,  the college's architect alleged that Spitz's
equipment did not conform to the bid  specifications.  The bid for the equipment
which the architect  deemed to be in  conformance  with the  specifications  was
allegedly approximately $150,000 higher than Spitz's bid. Because the Contractor
has been forced to supply the more  expensive  equipment,  it is  attempting  to
recover the $150,000  price  differential  plus alleged  related  amounts due to
adverse impacts on the project schedule from various parties.  At various times,
the  Contractor  has threatened to assert its claim against Spitz because it has
been  unsuccessful  in its  attempts  to recover its  alleged  damages  from the
College or other involved parties.  The Company believes the bid specifications,
to the extent that they  excluded  Spitz's  equipment,  constituted  an improper
sole-source  of equipment  which violates  competitive  bidding laws because the
specifications  appear to have been copied from a  competitor's  equipment.  The
Company also believes that the Spitz equipment meets all of the valid functional
requirements in the bid specifications.  No lawsuit has been filed against Spitz
or the  Company  and  the  parties  have  discussed  settling  the  matter.  The
Contractor has not communicated  any threats to carry out its assertion  against
Spitz since July 1996, but it has indicated to Spitz that  proceedings  continue
in an effort to recover  damages from the other  parties  involved.  The Company
believes that the parties will reach an agreement to resolve the dispute without
litigation  involving  Spitz. It is too early to estimate a probable outcome and
its effect, if any, on Spitz. Accordingly,  no liability for the potential claim
has been recorded at July 31, 1998.

                                       9
<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  fiscal  1999 were
$1,854,000  and  $3,367,000   compared  to  $1,761,000  and  $4,085,000  in  the
comparable  periods of fiscal 1998. The increase of $93,000 (5%) for the quarter
was due to higher planetarium revenues which were partially offset by lower dome
revenues.  The decrease of $718,000 (18%) for the six month period resulted from
lower  revenues  from all of the Company's  products.  There was no revenue from
ImmersaVision  in the first six months of fiscal  1999  compared  to $22,000 and
$177,000 in the first quarter and first six months of fiscal 1998, respectively.
The  ImmersaVision  revenue in fiscal 1998 was attributable to the first sale of
an ElectricSky system which was completed in May 1997. Planetarium revenues were
$814,000  and  $1,184,000  in the second  quarter and first six months of fiscal
1999  compared to $599,000 and  $1,449,000 in the  comparable  periods of fiscal
1998,  an increase of $215,000  (36%) for the quarter and a decrease of $265,000
(18%) for the six month  period.  The increase in  planetarium  revenues for the
quarter  was due to several new orders for new and  refurbished  systems for the
educational  market booked in the second  quarter of fiscal 1999.  For the first
six  months of fiscal  1999,  the  second  quarter  increase  was  offset by low
planetarium  revenues in the first  quarter  resulting  from the winding down of
work on previous orders.  Planetarium  revenues include amounts  attributable to
the sale of maintenance and parts of $294,000 and $582,000 in the second quarter
and first six months of fiscal 1999  compared to  $375,000  and  $702,000 in the
comparable  periods of fiscal  1998,  a decrease of $81,000  (22%) and  $120,000
(17%),  respectively.  The decrease in maintenance and parts revenues was due to
lower sales to customers without  preventive  maintenance  agreements as well as
the timing of performance on preventive  maintenance  agreements.  Dome revenues
were  $1,040,000  and  $2,183,000 in the second  quarter and first six months of
fiscal 1999 compared to $1,140,000 and  $2,459,000 in the comparable  periods of
fiscal 1998, a decrease of $100,000 (9%) and $276,000 (11%),  respectively.  The
lower 1999 dome  revenues  were  attributable  to the  absence  of special  dome
projects  compared  to 1998  which  benefited  from the  completion  of  special
exterior  and  interior  domes  for a new  museum  and a dome used for a special
projection application at a retail complex. Otherwise, higher 1999 revenues from
film and military  simulation  domes were mostly  offset by lower  revenues from
ride simulator domes.

In the second  quarter of fiscal 1999, the Company  received  orders for several
new and refurbished  school  planetarium  systems totaling over $1,500,000 which
are scheduled for installation over the next year. Also in the second quarter of
fiscal 1999,  the Company  received  notifications  that it has been selected to
supply two ElectricSky systems,  with optical planetarium  projectors and domes,
for two new visitor  attractions.  The Company has received the contract for one
of the new ElectricSky systems, at a price of approximately  $1,800,0000,  to be
installed in 1999 at a new domestic  science center.  The contract for the other
ElectricSky  system, to be installed in 2001 at a new foreign science center, is
expected  within the next quarter at a price in excess of $1,500,000  (depending
on the selection of system options).  In addition,  bookings and sales prospects
remain  strong in all of the  various  dome  markets.  The new  orders and other
promising  sales  prospects  are expected to positively  impact  revenues in the
later part of fiscal  1999 and  beyond.  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 future interim
periods.  

                                       10
<PAGE>

Gross margins  increased to 33.7% and 31.4% in the second  quarter and
first six months of fiscal 1999  compared  to 31.4% and 28.6% in the  comparable
periods  of  fiscal  1998.  In the  first six  months  of  fiscal  1999,  margin
improvements  resulting from successful  efforts on most of the current projects
were  partially  offset  by  a  lower  margin  on a  project  which  required  a
subcontract  to supply a special  device to rotate a large  film  theater  dome.
Gross  margins in the first six months of fiscal 1998 were  weighted down by low
gross  margins  on  dome  installation   activity,   cost  overruns  on  certain
planetarium  projects  and  introductory  pricing  on  the  sale  of  the  first
ImmersaVision  system.  The low margins on dome  installation  activity resulted
from the lower  profit  margins on change  orders to recover  costs  overruns as
dictated  by  construction  contract  terms  inherent  in many of the  Company's
customer contracts.  Selling expenses increased $65,000 (46%) and $128,000 (48%)
in the  second  quarter  and first six  months of fiscal  1999  compared  to the
comparable  periods of fiscal 1998.  The increase in selling  expenses is due to
the use of engineering  resources in sales proposal  efforts,  increased  travel
expense for foreign sales  presentations,  and the introduction of ImmersaVision
products.  Research and  development  expenses  decreased  $14,000  (10%) in the
second quarter but increased $18,000 (8%) in the first six months of fiscal 1999
compared to the comparable periods of fiscal 1998. The fluctuating  research and
development expenses are attributable to the deployment of engineering personnel
to work on selling and customer contract related tasks.  Through  organizational
changes and a more  constant  volume of customer  contract  activity the Company
plans to deploy a more constant level of  engineering  resources to research and
development  projects  as  the  business  grows.  Research  and  development  of
proprietary programming tools for software content development for ImmersaVision
and  improvements  to optical  planetarium  products are expected to continue at
increasing levels.  General and administrative  expenses increased $23,000 (12%)
and $24,000  (6%) in the second  quarter and the first six months of fiscal 1999
compared to the  comparable  periods of fiscal  1998.  The increase was due to a
$25,000  charge to account  for  questionable  accounts  receivable.  Otherwise,
general and administrative expenses were relatively constant.

Net interest  expense  amounted to $33,000 and $70,000 in the second quarter and
first six  months  of  fiscal  1999  compared  to  $32,000  and  $60,000  in the
comparable periods of fiscal 1998. The $33,000 and $70,000 reported in the first
quarter  and first six months of fiscal  1999  consisted  of $26,000 and $54,000
paid on bank debt  agreements  plus  $7,000 and  $16,000  paid on capital  lease
obligations. The $32,000 and $60,000 reported in the first quarter and first six
months of  fiscal  1998  consisted  of  $34,000  and  $69,000  paid on bank debt
agreements plus $4,000 and $8,000 paid on capital lease  obligations,  offset by
$6,000 and  $17,000 of  interest  income  earned on cash  invested.  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 income
taxes  consists of state income taxes on net income  reported  through the first
six months of fiscal 1998.

As a result of the  above,  the  Company  reported  net income of $40,000 in the
second  quarter and a net loss of $47,000 in the first six months of fiscal 1999
compared to net income before extraordinary item of $40,000 and $231,000 for the
comparable  periods of fiscal 1998.  In the second  quarter of fiscal  1998,  an
extraordinary  gain from the  elimination  of debt of $345,000 was recorded as a
result of the refinancing of the Company's debt agreements.  The addition of the
extraordinary  gain  resulted in net income of  $385,000  and  $576,000  for the
second quarter and first six months of fiscal 1998.

Liquidity and Capital Resources

Net cash provided by operating  activities  was $186,000 in the first six months
of fiscal 1999  compared to $172,000  provided in the first six months of fiscal
1998. The $186,000 provided by operations in the first six months of fiscal 1999


                                       11
<PAGE>

consisted of $133,000  provided from earnings plus $53,000 provided from changes
in operating assets and liabilities.  The $172,000 provided by operations in the
first six months of fiscal 1999  consisted of $392,000  provided  from  earnings
offset by $220,000 used by changes in operating assets and liabilities.

The $186,000  provided by  operations in the first six months of fiscal 1999 was
offset by $110,000 of  scheduled  principal  payments  on debt  obligations  and
$127,000 invested in capital assets.  The $172,000 provided by operations in the
first six months of fiscal  1998 was offset by  $97,000 of  scheduled  principal
payments  on debt  obligations,  payment  of  $77,000  of  expenses  related  to
refinancing transactions, and $97,000 invested in capital assets. The net result
was a $51,000  decrease in cash  balances  during the first six months of fiscal
1999 compared to a $99,000 decrease during the first six months of fiscal 1998.

The $127,000  invested in capital  assets in the first six months of fiscal 1999
consisted of $91,000 of computer  software and $36,000 of various  machinery and
equipment  additions.  The $97,000  invested in capital  assets in the first six
months of fiscal 1998  consisted of $29,000 of computer  software and $68,000 of
various machinery and equipment additions. In addition,  $32,000 and $235,000 of
computer  hardware for the  development of  ImmersaVision  software was financed
through  capital  leases in the first six months of fiscal 1999 and fiscal 1998,
respectively.

At July 31, 1998 the balance on the  revolving  credit note remained at $600,000
as it was at January 31,  1998.  The unused  borrowing  capacity on the $800,000
revolving  credit  agreement was $200,000 at July 31, 1998 and January 31, 1998.
Additional liquidity was provided by remaining cash balances of $420,000 at July
31, 1998 compared to $471,000 at January 31, 1998. The next sources of liquidity
are  trade  accounts  receivable  and  contracts  in  process.   Trade  accounts
receivable  increased  $590,000  to  $1,327,000  at July 31,  1998  compared  to
$737,000 at January 31,  1998.  Liquidity  available  from  contracts in process
decreased by $411,000  during the six month period.  At July 31, 1998,  billings
exceeded  net revenue by $39,000  compared to $372,000 of net revenues in excess
of billings at January 31, 1998.

Total  debt at July 31,  1998 was  $1,521,000,  a decrease  of $78,000  from the
$1,599,000 at January 31, 1998. The decrease resulted from $110,000 of principal
payments  on debt and lease  obligations  offset by a new lease  obligation  for
$32,000.

The existing 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  "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


                                       12
<PAGE>

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>



                              II. OTHER INFORMATION

6.   Exhibits and Reports on Form 8-K

(a)  Exhibits

Exhibit
   No.   Description of Document

   27    Financial Data Schedules


(b) The  Registrant did not file any reports on Form 8-K during the three months
ended July 31, 1998.



                                   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, 1998                 Paul L. Dailey, Jr.
                                               Secretary-Treasurer

                                               Signing on Behalf of Registrant
                                               and as Chief Financial Officer