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, 1999

         [ ]  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                        (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 Exchange Act during the past 12 months (which is the period
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, 1999: 502,470

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, 1999,
           and January 31, 1999.                                           3-4

           Condensed  consolidated  statements  of  operations -- Three
           months ended July 31, 1999 and 1998; six months ended
           July 31, 1999 and 1998.                                           5

           Condensed consolidated statements of cash flows -- Six
           months ended July 31, 1999 and 1998.                              6

           Notes to condensed consolidated financial statements --
           July 31, 1999.                                                  7-8

Item 2.    Management's Discussion and Analysis of Financial
           Condition and Results of Operations                            9-13


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,
                                                               1999          1999
                                                           ------------- -------------
Assets                                                      (Unaudited)     (audited)

<S>                                                           <C>           <C>
Current Assets:
  Cash                                                         $     79     $     455
  Accounts receivable                                             1,585         1,712
  Inventories                                                     1,671         1,281
  Other current assets                                              185            85
                                                            ------------ -------------

Total current assets                                              3,520         3,533



Machinery and equipment:
  Machinery and equipment                                         2,855         2,784
  Less accumulated depreciation                                   2,280         2,172
                                                            ------------ -------------

Net machinery and equipment                                         575           612



Other assets:
  Repair and maintenance inventories, less provision
    for obsolescence                                                165           165
  Computer software, less amortization                              524           501
  Excess of cost over net assets of business acquired,
    less amortization                                             1,791         1,825
                                                            ------------ -------------

Total other assets                                                2,480         2,491
                                                            ============ =============

Total assets                                                     $6,575        $6,636
                                                            ============ =============

</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,
                                                               1999          1999
                                                           ------------- -------------
Liabilities and stockholders' equity                        (Unaudited)     (Audited)

<S>                                                         <C>          <C>
Current liabilities:
  Accounts payable                                            $     661    $      366
  Deferred maintenance revenue                                      617           686
  Accrued expenses                                                  379           338
  Billings in excess of cost and estimated earnings               1,171         1,447
  Current portion of long-term debt                                 210           238
                                                            ------------ -------------

Total current liabilities                                         3,038         3,075

Long-term debt, less current portion                                557           731

Stockholders' equity:
 Series B cumulative convertible preferred stock,
   $0.01 par value - authorized  100,000 shares;
   issued and outstanding 318 shares (liquidating
   value $156,020)                                                   73            73
 Common stock, $0.20 par value -authorized
   1,000,000 shares; issued and outstanding 502,470
   shares                                                           100           100
 Additional paid-in capital                                       8,499         8,493
 Accumulated deficit                                            (5,692)        (5,836)
                                                            ------------ -------------

Total stockholders' equity                                        2,980         2,830
                                                            ------------ -------------

Total liabilities and stockholders' equity                    $   6,575   $     6,636
                                                            ============ =============
</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
                                                  -----------------------------      ------------------------------
                                                           1999           1998                  1999          1998
                                                  -------------- --------------      ---------------- -------------
<S>                                                     <C>            <C>                   <C>           <C>
Revenues                                                $ 2,114        $ 1,854               $ 4,664       $ 3,367
Cost of Sales                                             1,489          1,229                 3,297         2,311
                                                  -------------- --------------      ---------------- -------------
Gross Margin                                                625            625                 1,367         1,056

Selling expenses                                            217            206                   396           395
Research and development                                    161            132                   350           237
General and administrative expenses                         219            214                   429           401
                                                  -------------- --------------      ---------------- -------------
                                                            597            552                 1,175         1,033
                                                  -------------- --------------      ---------------- -------------
Operating income                                             28             73                   192            23

Interest expense                                             17             33                    37            70
                                                  -------------- --------------      ---------------- -------------
Income (loss) before income tax                              11             40                   155          (47)

Provision for income taxes                                    2              -                    11             -
                                                  -------------- --------------      ---------------- -------------
Net income (loss)                                             9             40                   144          (47)

Preferred dividend requirement                                2              2                     4             4
                                                  -------------- --------------      ---------------- -------------
Income (loss) applicable to common shares                 $   7          $  38                $  140       $  (51)
                                                  ============== ==============      ================ =============

Basic income (loss) per common share                     $ 0.01         $ 0.08                $ 0.28      $ (0.10)
                                                  ============== ==============      ================ =============
Diluted income (loss) per common share                   $ 0.01         $ 0.07                $ 0.28      $ (0.10)
                                                  ============== ==============      ================ =============
</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,
                                                            --------------------
                                                                 1999      1998
                                                            ---------- ---------
<S>                                                           <C>         <C>
       Net cash provided (used) by operating activities          (12)      186


       Net cash provided (used) by investing activities         (162)     (127)


       Net cash provided (used) for financing activities        (202)     (110)
                                                            ---------- ---------

       Increase (decrease) in cash                              (376)      (51)
       Cash at beginning of period                               455       471
                                                            ---------- ---------

            Cash at end of period                             $   79    $  420
                                                            ========== =========
</TABLE>

     See notes to condensed consolidated financial statements.

                                       6
<PAGE>


                         Transnational Industries, Inc.

              Notes to Condensed Consolidated Financial Statements

                                   (Unaudited)

                                  July 31, 1999

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, 1999, 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, 1999, contained in the Registrant's Annual Report on Form 10-KSB for
the year ended January 31, 1999.

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
                                                                  ---------------------------    --------------------------
                                                                           1999         1998            1999          1998
                                                                  -------------- ------------    ------------ -------------
<S>                                                                     <C>          <C>             <C>           <C>
Numerator (same for basic and dilutive):
Net income (loss)                                                          $  9        $  40           $ 144        $ (47)
Preferred dividend requirement                                                2            2               4             4
                                                                  -------------- ------------    ------------ -------------
Net income (loss) available to common  stockholders                        $  7         $ 38           $ 140        $ (51)
                                                                  ============== ============    ============ =============

Denominator:
Weighted average shares outstanding for basic earnings per
share                                                                   502,470      500,970         502,470       500,970
Dilutive effect of employee stock options                                12,338        9,795           6,332            --
                                                                  -------------- ------------    ------------ -------------
Weighted average shares outstanding and assumed conversions
for dilutive earnings per share                                         514,808      510,765         508,802       500,970
                                                                  ============== ============    ============ =============

Basic income (loss) per share                                             $ .01        $ .08           $ .28       $ (.10)
                                                                  ============== ============    ============ =============
Dilutive income (loss) per share                                          $ .01        $ .07           $ .28       $ (.10)
                                                                  ============== ============    ============ =============
</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 and 1,941 in each of periods ended July 31, 1999 and
1998, respectively.

Note C -- 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 it is likely that the parties  will reach an agreement to resolve
the dispute  short of  litigation.  The Company is unable 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, 1999.


                                       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 ended
January  31, 2000  (Fiscal  2000) were  $2,114,000  and  $4,664,000  compared to
$1,854,000 and $3,367,000 in the comparable periods of Fiscal 1999. The increase
of  $260,000  (14%) for the quarter  was due to higher  ImmersaVision  revenues,
which were partially  offset by lower dome revenues.  The increase of $1,297,000
(39%) for the six-month  period  resulted  from higher  revenues from all of the
Company's  products.  ImmersaVision  revenues  were $286,000 and $760,000 in the
first quarter and first six months of Fiscal 200,  respectively,  compared to no
ImmersaVision  revenue in Fiscal 1999. The ImmersaVision  revenue in Fiscal 2000
was  attributable to the two orders received at the end of Fiscal 1999.  Revenue
from ImmersaVision is expected to continue at this level through Fiscal 2000 and
into the following  year as work  continues on the two current orders as well as
other anticipated new sales.  Planetarium  revenues were $813,000 and $1,553,000
in the second  quarter and first six months of Fiscal 2000  compared to $814,000
and  $1,184,000 in the  comparable  periods of Fiscal 1999, a decrease of $1,000
for the quarter and an increase of $369,000 (31%) for the six-month period.  For
the quarter,  planetarium  revenues from the sale of systems decreased  slightly
while revenue from maintenance and parts increased.  The increase in planetarium
revenues  for  the  six-month  period  was  due to  several  orders  for new and
refurbished   systems  for  the  educational   market  booked  in  fiscal  1999.
Planetarium  revenues  attributable  to the sale of  maintenance  and parts were
$330,000 and $628,000 in the second  quarter and first six months of Fiscal 2000
compared to $294,000 and $582,000 in the  comparable  periods of Fiscal 1999, an
increase  of $36,000  (12%) and  $46,000  (8%),  respectively.  The  increase in
maintenance  and parts  revenues was due to higher  sales to  customers  without
preventive  maintenance  agreements  as well as the  timing  of  performance  on
preventive maintenance agreements.  Dome revenues were $1,015,000 and $2,351,000
in the second quarter and first six months of Fiscal 2000 compared to $1,040,000
and $2,183,000 in the  comparable  periods of Fiscal 1999, a decrease of $25,000
(2%) for the quarter and an increase of $168,000 (8%) for the six-month  period.
The lower dome revenues for the quarter were  attributable to the lower revenues
from film and military  simulator  domes,  which were partially offset by higher
revenues from planetarium and ride simulator domes.

Revenues  are  expected  to continue  at higher  than  historical  level for the
remainder of Fiscal 2000 as work  continues on sales booked  through late Fiscal
1999. The backlog of unearned revenue remained healthy by historical  comparison
at  $6,366,000,  but  declined due to the low bookings of new sales in the first
six months of Fiscal 2000.  Although  bookings were lower than expected,  it was
not a result of lost orders to competition  but rather the delay of decisions by
sales  prospects.  Sales  prospects  remain strong and the Company still expects
significant revenue contributions from ImmersaVision products in future years as
the  installed  base grows and new  applications  of the product are  developed.
While revenue levels are expected to continue at  historically  high levels over
the next year, uncertainty in the timing and delivery of sales may cause revenue
levels to continue to fluctuate in interim periods.

Gross margins  decreased to 29.6% and 29.3% in the second  quarter and first six


                                       9
<PAGE>

months of Fiscal 2000 compared to 33.7% and 31.4% in the  comparable  periods of
Fiscal 1999.  The lower margins were mostly  attributable  to the  ImmersaVision
sales, which include many purchased components that command a lower mark-up than
the Company's manufactured products. Although the gross margins on ImmersaVision
sales are generally  lower,  significant  profits result from the revenue volume
generated  from the sale of the  high  cost  components.  Also,  as the  Company
develops more proprietary technology for ImmersaVision, it expects more sales of
higher margin software and integration  services to the new markets that open up
for ImmersaVision.  Otherwise, in Fiscal 2000, margin improvements resulted from
volume-related  efficiencies and successful  efforts on many dome projects.  The
improved  gross  margins  were also weighed  down by expected  lower  margins on
subcontracted  work for a special device to rotate a large film theater dome and
higher costs  related to the first  deliveries  of a newly  updated  planetarium
system.

Selling  expenses  increased  $11,000 (5%) and $1,000 in the second  quarter and
first six months of Fiscal  2000  compared to the  comparable  periods of fiscal
1999 due to greater  sales and marketing  efforts  through the  reassignment  of
personnel and a sales staff addition.  The increase resulting from the new sales
and marketing  activities  was  partially  offset by the reduction of the Fiscal
1999  high use of  engineering  resources  for  selling  efforts.  Research  and
development  expenses  increased  $29,000 (22%) and $113,000 (48%) in the second
quarter and first six months of Fiscal 2000 compared to the  comparable  periods
of Fiscal  1999.  The increase in research  and  development  expenses is due to
product   development   efforts  to  meet  delivery   obligations  for  existing
ImmersaVision  customers  as well as  continuing  research  and  development  of
proprietary   programming   tools   for   software   content   development   for
ImmersaVision,  improvements to  ImmersaVision  subsystems,  and improvements to
optical  planetarium  products.  General and  administrative  expenses increased
$5,000 (2%) and $28,000  (7%) in the second  quarter and the first six months of
Fiscal  2000  compared to the  comparable  periods of Fiscal  1999.  General and
administrative  expenses  increased  due  primarily  to the use of  professional
services for information system improvements and strategic planning.  The effect
of the  increase  was less  obvious  due to a  $25,000  charge  to  account  for
questionable accounts receivable in fiscal 1999.

Net interest  expense  amounted to $17,000 and $37,000 in the second quarter and
first six  months  of  Fiscal  2000  compared  to  $33,000  and  $70,000  in the
comparable  periods  of Fiscal  1999.  The  decrease  in  interest  expense  was
attributable  mainly to lower use of the bank line of credit.  The  $17,000  and
$37,000  reported  in the first  quarter  and first  six  months of Fiscal  2000
consisted  of $13,000 and $29,000 paid on bank debt  agreements  plus $5,000 and
$11,000  paid on  capital  lease  obligations,  offset by $1,000  and  $3,000 of
interest income earned on cash invested. 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 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 2000.

As a result of the above, the Company reported net income of $9,000 and $144,000
in the second quarter and first six months of Fiscal 2000 compared to net income
of $40,000 in the second  quarter of fiscal  1999 and a net loss of $47,000  for
the first six months of Fiscal 1999.

                                       10
<PAGE>

Liquidity and Capital Resources

Net cash used by  operating  activities  was  $12,000 in the first six months of
Fiscal  2000  compared  to  $186,000  provided in the first six months of Fiscal
1999.  The  $12,000  used by  operations  in the first six months of Fiscal 2000
consisted of $380,000  provided from earnings offset by $392,000 used by changes
in operating assets and liabilities.  The $186,000 provided by operations in the
first six months of Fiscal 1999  consisted of $133,000  provided  from  earnings
plus $53,000 provided from changes in operating assets and liabilities.

In addition to the $12,000 used by  operations in the first six months of Fiscal
2000,  $202,000 was used for principal  payments on revolving  credit debt, term
debt and  capital  leases and  $162,000  was  invested  in capital  assets.  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 net result was a $376,000 reduction in
cash balances during the first six months of Fiscal 2000 compared to a reduction
of $51,000 during the first six months of Fiscal 1999.

The $162,000  invested in capital  assets in the first six months of Fiscal 2000
consisted of $94,000 in computer  software and $68,000 of various  machinery and
equipment  additions.   Also  in  the  first  six  months  of  Fiscal  2000  the
installation of a new computer infrastructure began for the purpose of improving
the Company's  information systems.  Initial hardware installation was completed
in August 1999 at a cost of approximately $85,000. The Company is financing this
cost along with new  computer  software to be installed in Fiscal 2000 through a
capital lease.  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. In addition, $32,000 of computer hardware for
the development of  ImmersaVision  software was financed through a capital lease
in the first six months of Fiscal 1999.

At July 31, 1999 the balance on the revolving  credit note was $75,000  compared
to $150,000 at January 31, 1999. This resulted in unused  borrowing  capacity of
$725,000 at July 31, 1999  compared to $650,000 at January 31,  1999.  Remaining
cash  balances of $79,000 at July 31,  1999  compared to $455,000 at January 31,
1999 provided additional liquidity. The next source of liquidity, trade accounts
receivable,  decreased to  $1,585,000 at July 31, 1999 compared to $1,712,000 at
January 31, 1999. The demand on liquidity by contracts in progress  decreased as
billings  exceeded  revenue  recorded by  $185,000 at July 31, 1999  compared to
$763,000 at January 31,  1999.  Contracts  in progress at July 31, 1999 will use
the other sources of liquidity as performance catches up to the billings through
the  completion  of each  project.  The payment  terms on new  contracts  remain
uncertain and will also affect liquidity.

Total debt at July 31,  1999 was  $767,000,  a  decrease  of  $202,000  from the
$969,000 at January 31, 1999.  The decrease  resulted from $147,000 of scheduled
principal  payments on debt and lease obligations and $75,000 in net payments on
revolving credit debt.

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.

Year 2000 Impact

The Year  2000  Issue  is the  result  of  computer  programs  being  unable  to


                                       11
<PAGE>

distinguish  between  the year  1900 and  2000.  This  could  result 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.

The  Company  currently  uses  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. The mini computer
applications are not currently Year 2000 compliant. Vendors and consultants have
proposed year 2000 corrections to the mini computer  applications;  however, the
Company  believes that such changes could be costly and uncertain.  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
has concluded that it would be better served by an alternative solution. As part
of this wider  objective  to improve its  information  systems,  the Company has
evaluated its overall data  processing  resources and plans to make  substantial
changes in the fiscal year ending January 31, 2000. In this process, the Company
has  selected  new  products  that are Year  2000  compliant.  The  Company  has
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 has been  selected  after an  evaluation of several
products, which will require additional computer hardware installed in September
1999 at a cost of approximately $40,000.  Installation and implementation of the
enterprise  software is being planned to take place in phases over the next year
with  the  objective  of  replacing  critical  applications  which  rely on date
sensitive  applications  of the current mini computer system by the end of 1999.
Cost of the enterprise software, installation and implementation is estimated at
$300,000.  The cost will be capitalized  and funded through  operating cash flow
and leasing of computer hardware and software.

The  Company  is not  integrated  with and does not rely  heavily  on  vendors',
clients'  and other third  parties'  data  processing  systems.  The bulk of the
Company's  revenue  is  generated  from  new  public  or  commercial   projects.
Maintenance  and parts revenue comes from repeat  customers,  mainly museums and
schools.  As such,  revenue is  generally  not  dependent  upon repeat  sales to
commercial  customers'  inventory  management  systems  or  enterprise  resource
planning  systems the way many  businesses may be. The Company uses a network of
vendors  to  obtain  its  parts  and  supplies.  Many  parts  and  supplies  are
commodities  available from numerous  sources.  The effect of critical  vendors'
ability  to  continue  to  supply  the  Company  though  Year  2000 has not been
determined.  However,  the Company  believes that the lack of  integration  with
vendors  systems  and  numerous  available  sources  will  reduce  the risk from
vendors' Year 2000 potential problems.

The  Company's  products  rely on a number of widely used third  party  software
products,  which claim to be Year 2000 compliant or do not perform date-oriented
tasks.  Evaluation  and testing of the Year 2000 impact on software  used in the
Company's products is planned in conjunction with other research and development
efforts  over the next year.  Evaluation  and any required  corrections  are not
expected to have a material cost impact.

As a contingency  plan,  in the event that all of the necessary  changes are not


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<PAGE>

completed  by the Year 2000,  the portions of the  operations  that rely on date
sensitive data can be accommodated by manual  procedures and date adjustments to
selective existing software applications.  The Company believes this contingency
plan could be  accomplished  without a material  interruption  to the  Company's
business.

In addition to the specific  anticipated costs described above, the Company will
incur additional costs as salaried  personnel utilize their time to work on Year
2000 matters. The Company does not anticipate that the use of internal personnel
will have a material  adverse effect upon the Company's  operations or earnings;
however,  the  Company is not yet able to quantify  such costs and,  because the
Company has not reserved  any amounts  therefore,  any amounts so expended  will
reduce the Company's earnings.  In addition,  in the event that the economy as a
whole is materially and adversely  effected by widespread  interruptions,  or by
failures of key  infrastructure  providers (such as banks and utilities),  it is
likely that the Company's financial condition and results of operations would be
materially adversely effected.

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
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.


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<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, 1999.



                                    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, 1999                Paul L. Dailey, Jr.
                                               Secretary-Treasurer

                                               Signing on Behalf of Registrant
                                               and as Chief Financial Officer



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