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

         (Mark One)

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

         For the quarterly period ended July 31, 2002

         [  ] 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)


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

                          Common stock, $0.20 par value
                   Outstanding at August 31, 2002: 456,760 shares

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




<PAGE>




                         TRANSNATIONAL INDUSTRIES, INC.

                                   INDEX                                    PAGE


Part I.    FINANCIAL INFORMATION

    Item 1.    Financial Statements

               Consolidated balance sheets --
               July 31, 2002, and  January 31, 2002.                        3-4

               Consolidated statements of operations -- Three
               months  ended July 31, 2002 and 2001; six months
               ended July 31, 2002 and 2001.                                  5

               Consolidated statements of cash flows --
               Six months ended July 31, 2002 and 2001.                       6

               Notes to consolidated financial statements --
               July 31, 2002.                                               7-9

    Item 2.    Management's Discussion and Analysis or Plan of Operation   10-14

    Item 3.    Controls and procedures                                       14


Part II.   OTHER INFORMATION

         Item 6.    Exhibits and Reports on Form 8-K                         15


SIGNATURES                                                                   15


CERTIFICATIONS                                                               16




                                       2
<PAGE>



                          PART I. FINANCIAL INFORMATION

Item 1.  Financial Statements


                         Transnational Industries, Inc.

                           Consolidated Balance Sheets

                             (Dollars in thousands)
<TABLE>
<CAPTION>

                                                                 July 31, 2002    January 31, 2002
                                                                ----------------- -----------------
Assets                                                             (Unaudited)         (Audited)

Current Assets:
<S>                                                                     <C>               <C>
  Cash                                                                   $   233            $  556
  Accounts receivable                                                      1,638             1,857
  Inventories                                                              2,636             2,348
  Deferred taxes                                                             368               368
  Other current assets                                                       358               341
                                                                ----------------- -----------------

Total current assets                                                       5,233             5,470



Machinery and equipment:
  Machinery and equipment                                                $ 4,051           $ 3,732
  Less accumulated depreciation                                            2,817             2,613
                                                                ----------------- -----------------

Net machinery and equipment                                                1,234             1,119



Other assets:
  Repair and maintenance inventories, less provision
    for obsolescence                                                         107               107
  Computer software, less amortization                                       422               409
  Goodwill                                                                 1,622             1,622
                                                                ----------------- -----------------

Total other assets                                                         2,151             2,138
                                                                ----------------- -----------------

Total assets                                                             $ 8,618           $ 8,727
                                                                ================= =================
</TABLE>

See notes to consolidated financial statements.


                                       3
<PAGE>

                         Transnational Industries, Inc.

                     Consolidated Balance Sheets (continued)

                             (Dollars in thousands)

<TABLE>
<CAPTION>

                                                                 July 31, 2002     January 31, 2002
                                                              ------------------- -------------------
Liabilities and stockholders' equity                                (Unaudited)           (Audited)

<S>                                                                     <C>              <C>
Current liabilities:
  Accounts payable                                                       $   613          $    486
  Deferred maintenance revenue                                               641               680
  Accrued expenses                                                           310               373
  Billings in excess of cost and estimated earnings                          963             1,410
  Current portion of long-term debt                                          243               320
                                                               ------------------ -----------------

Total current liabilities                                                  2,770             3,269

Long-term debt, less current portion                                       1,565               897


Stockholders' equity:
  Series B cumulative convertible preferred stock,
    $0.01 par value - authorized 100,000  shares;
    issued and outstanding 318 shares
    (liquidating value $182,254)                                              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               8,521
 Accumulated deficit                                                     (4,274)             (3,996)
                                                              ------------------- -------------------
                                                                           4,420               4,698
Less: Treasury stock                                                       (137)               (137)
                                                              ------------------- -------------------
Total stockholders' equity                                                 4,283               4,561
                                                              ------------------- -------------------

Total liabilities and stockholders' equity                              $  8,618           $   8,727
                                                              =================== ===================

</TABLE>

See notes to consolidated financial statements.


                                       4
<PAGE>

                         Transnational Industries, Inc.

                      Consolidated Statements of Operations

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

                                                        Three Months Ended                  Six Months Ended
                                                             July 31                             July 31
                                                   -----------------------------      ------------------------------
                                                            2002           2001                  2002          2001
                                                   -------------- --------------      ---------------- -------------

<S>                                                     <C>            <C>                   <C>           <C>
Revenues                                                 $ 2,103        $ 2,475               $ 4,281       $ 6,134
Cost of Sales                                              1,465          1,701                 3,002         4,292
                                                   -------------- --------------      ---------------- -------------
Gross Margin                                                 638            774                 1,279         1,842

Selling expenses                                             254            232                   469           432
Research and development                                     288            207                   516           454
General and administrative expenses                          267            294                   528           552
                                                   -------------- --------------      ---------------- -------------
                                                             809            733                 1,513         1,438
                                                   -------------- --------------      ---------------- -------------
Operating income (loss)                                    (171)             41                 (234)           404

Interest expense                                              25             18                    44            37
                                                   -------------- --------------      ---------------- -------------
Income (loss) before income tax                            (196)             23                 (278)           367

Provision for income taxes                                     -              3                     -            25
                                                   -------------- --------------      ---------------- -------------
Net income (loss)                                          (196)             20                 (278)           342

Preferred dividend requirement                                 2              2                     4             4
                                                   -------------- --------------      ---------------- -------------
Income (loss) applicable to common shares                $ (198)         $   18              $  (282)        $  338
                                                   ============== ==============      ================ =============

Basic income (loss) per common share                    $  (.43)         $  .04             $  ( .62)        $  .74
                                                   ============== ==============      ================ =============
Diluted income (loss) per common share                  $  (.43)         $  .04             $  ( .62)        $  .69
                                                   ============== ==============      ================ =============

</TABLE>

         See notes to consolidated financial statements.


                                       5
<PAGE>


                         Transnational Industries, Inc.
                             Consolidated Statements
                                  of Cash Flows
                                   (Unaudited)
                                 (In thousands)
<TABLE>
<CAPTION>

                                                                        Six Months ended
                                                                            July 31,
                                                                 --------------- ---------------
                                                                           2002            2001
                                                                 --------------- ---------------

<S>                                                                    <C>              <C>
Operating activities
Net income (loss)                                                       $  (278)         $  342
Adjustments to reconcile net income (loss) to net cash
provided by operating activities:
    Depreciation and amortization                                           272             322
    Provision for obsolescence                                               20              20
    Compensation from stock options                                           -               5
    Changes in operating assets and liabilities, net:
        Accounts receivable                                                 219           1,393
        Inventories                                                         (19)            134
        Other current assets                                                (17)            (52)
        Billings net of cost and estimated earnings on contracts           (736)           (354)
        Accounts payable                                                    127            (853)
        Accrued expenses                                                   (102)            (24)
                                                                 --------------- ---------------
Net cash provided by (used in) operating activities                        (514)            933
                                                                 --------------- ---------------

Investing activities
Capital expenditures                                                       (174)           (272)
                                                                 --------------- ---------------
Net cash used in investing activities                                      (174)           (272)
                                                                 --------------- ---------------

Financing activities
Proceeds from revolving line of credit                                    1,875             250
Payments on revolving line of credit                                     (1,250)           (850)
Payments on capital leases                                                 (166)           (107)
Scheduled payments on long term debt                                        (94)            (93)
                                                                 --------------- ---------------
Net cash provided by (used in) financing activities                         365            (800)
                                                                 --------------- ---------------

Increase (decrease) in cash                                                (323)           (139)
Cash at beginning of period                                                 556             509
                                                                 --------------- ---------------
Cash at end of period                                                   $   233         $   370
                                                                 =============== ===============

</TABLE>

     See notes to consolidated financial statements.


                                       6
<PAGE>

                         Transnational Industries, Inc.

                   Notes to Consolidated Financial Statements

                                   (Unaudited)

                                  July 31, 2002

Note A -- BASIS OF PRESENTATION

The accompanying  unaudited consolidated financial statements have been prepared
in accordance with accounting principles generally accepted in the United States
of America 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  for  complete  financial   statements  by
accounting principles generally accepted in the United States of America. 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, 2002, 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, 2002,  contained
in the Registrant's  Annual Report on Form 10-KSB for the year ended January 31,
2002.

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>
1
                                                                      Three Months Ended             Six Months Ended
                                                                           July 31                        July 31
                                                                  ---------------------------    --------------------------
                                                                       2002          2001             2002          2001
                                                                  ------------ --------------    ------------ -------------
<S>                                                                   <C>            <C>             <C>           <C>
Numerator (same for basic and diluted):
Net income (loss)                                                      $ (196)         $  20          $ (278)        $ 342
Preferred dividend requirement                                              2              2               4             4
                                                                  ------------ --------------    ------------ -------------
Net income (loss) available to common  stockholders                    $ (198)         $  18          $ (282)        $ 338
                                                                  ============ ==============    ============ =============

Denominator:
Weighted average shares outstanding for basic
earnings per share                                                    456,760        456,760         456,760       456,760
Dilutive effect of employee stock options                              37,889         36,489          33,772        36,323
                                                                  ------------ --------------    ------------ -------------
Weighted average shares outstanding and assumed
conversionsfor diluted earnings per share                             494,649        493,249         490,532       493,083
                                                                  ============ ==============    ============ =============

Basic income (loss) per share                                         $ (.43)          $ .04         $( .62)         $ .74
                                                                  ============ ==============    ============ =============
Diluted income (loss) per share                                       $ (.43)          $ .04          $(.62)         $ .69
                                                                  ============ ==============    ============ =============

                                       7
<PAGE>

</TABLE>

Common shares  potentially  issuable under the contractual  conversion rights of
the Series B cumulative  convertible preferred 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 Series B  cumulative  convertible  preferred  B shares
amounted to 1,871 shares in each of three-month  periods ended July 31, 2002 and
2002.

Note C-FASB STATEMENT OF FINANCIAL  ACCOUNTING  STANDARD NO. 142,  "GOODWILL AND
OTHER INTANGIBLE ASSETS"

In July 2001, the FASB issued  Statement of Financial  Accounting  Standards No.
142,  "Accounting for Goodwill and Intangible  Assets" ("SFAS 142").  Under SFAS
142,  goodwill is no longer  amortized  but rather is tested for  impairment  at
least annually at the reporting unit level. Transnational Industries,  Inc. (the
"Company") adopted SFAS 142 on February 1, 2002. The adoption of this accounting
standard  discontinues  the  amortization  of goodwill by $67,800 per year.  The
Company  has  completed  the first of the  impairment  tests of  goodwill  as of
January 31, 2002 which concluded there was no impairment of goodwill.

The following  information describes the impact the adoption of SFAS No. 142 had
on the Company  during the periods  reported  (dollars in  thousands  except per
share data):

<TABLE>
<CAPTION>

                                                   Three Months Ended             Six Months Ended
                                                        July 31                        July 31
                                               ---------------------------    --------------------------
                                                   2002          2001             2002         2001
                                               ------------- -------------    ------------- ------------

<S>                                                 <C>             <C>            <C>            <C>
Reported net income (loss)                          $ (196)         $  20          $ (278)        $ 342
Add back goodwill amortization                           -             17               -            34
                                               ------------- -------------    ------------- ------------
Adjusted net income (loss)                          $ (196)         $  37          $ (278)        $ 378
                                               ============= =============    ============= ============

Basic income (loss) per share:
      Reported income (loss) per share              $ (.43)         $ .04          $( .62)        $ .74
      Goodwill amortization                              -          $ .04               -         $ .08
                                               ------------- -------------    ------------- ------------
      Adjusted income (loss) per share              $ (.43)         $ .08          $( .62)        $ .82
                                               ============= =============    ============= ============

Diluted income (loss) per share:
      Reported income (loss) per share              $ (.47)         $ .04           $(.62)        $ .69
      Goodwill amortization                              -          $ .03               -         $ .06
                                                ------------ -------------    ------------- ------------
     Adjusted income (loss) per share               $ (.47)         $ .07          $( .62)        $ .75
                                               ============= =============    ============= ============
</TABLE>

Note D - Debt

On July 18, 2002 the Revolving Credit Agreement  originally executed on June 12,
1997 and amended in July 2000 was modified again. Under the second  modification
the borrowing limit was increased from $1,100,000 to $2,000,000. All other terms
of the bank debt agreements remain unchanged.

                                       8
<PAGE>


Note E - Supplemental Cash Flow Information

Non-cash  financing  transactions  consist of  equipment  of  $226,000  acquired
through a capital lease in May 2002.

                                       9
<PAGE>


Item 2.  MANAGEMENT'S DISCUSSION AND ANALYSIS OR PLAN OF OPERATION

Results of Operations

Revenues  in the second  quarter  and first six months of the fiscal year ending
January 31, 2003 ("fiscal  2003") were  $2,103,000  and  $4,281,000  compared to
$2,475,000  and  $6,134,000 in the  comparable  periods of the fiscal year ended
January 31, 2002 ("fiscal  2002"),  a decrease of $372,000  (15%) and $1,853,000
(30%) for the quarter and  six-month  period,  respectively.  As  expected,  the
decrease was due to lower revenue from all of the Company's products as a result
of reduced  backlog and the timing of new  contract  deliveries.  ElecticSky(TM)
revenues were $546,000 and $1,293,000 in the second quarter and first six months
of fiscal 2003, compared to $636,000 and $1,582,000 in the comparable periods of
fiscal 2002,  resulting in decreases of $90,000 (14%) and $289,000 (18%) for the
second   quarter  and  first  six   months,   respectively.   The   decrease  in
ElecticSky(TM)  revenue  in fiscal  2003 was  attributable  to higher  volume of
activity in the first six months of fiscal 2002 on six ElecticSky(TM) systems in
various phases of production and installation.  This compared to the two systems
in  production  in the  first  six  months of  fiscal  2003 in  preparation  for
installation  later  in  the  year.   Planetarium  revenues  were  $605,000  and
$1,345,000 in the second quarter and first six months of fiscal 2003 compared to
$894,000 and $2,127,000 in the comparable  periods of fiscal 2002, a decrease of
$289,000  (32%) and  $782,000  (37%) for the quarter and the  six-month  period,
respectively.  The decrease in planetarium  revenues was  attributable  to lower
volume from the sale of systems for the educational market. Planetarium revenues
include sales of maintenance and parts amounting to $261,000 and $561,000 in the
second  quarter  and first six months of fiscal 2003  compared  to $285,000  and
$588,000 in the  comparable  periods of fiscal  2002, a decrease of $24,000 (8%)
and  $27,000  (5%) for the  quarter  and first  six  months,  respectively.  The
decrease in maintenance and parts revenues was due to lower sales of spare parts
and  service  to  customers  without  preventive  maintenance  agreements.  Dome
revenues were $952,000 and $1,643,000 in the second quarter and first six months
of fiscal 2003 compared to $945,000 and $2,425,000 in the comparable  periods of
fiscal  2002,  an  increase  of $7,000  (1%) for the  quarter  and a decrease of
$782,000 (32%) for the six-month  period.  The lower dome revenues for the first
six  months  were  attributable  to lower  sales of film  theaters,  planetarium
theaters,  and special  projects,  as a large dome for a casino  attraction  was
completed in May 2001. Otherwise, dome revenues from ride simulators were higher
in the first six  months of fiscal  2003 due to work  completed  on a theme park
attraction in China.  In the second  quarter of fiscal 2003 higher dome revenues
from special  projects offset continued lower revenues from planetarium and film
theaters. Special dome projects in the second quarter consisted of architectural
treatments for a museum in the United States and a theme park in Germany.

The  backlog  of  unearned  revenue  as  of  July  31,  2002  was  approximately
$5,200,000,  all of which is scheduled  to be earned in the next twelve  months.
There are many promising sales prospects for all of the Company's products. Many
prospects are evaluating new planetarium systems demonstrated by the Company and
its  competitors  at a biannual  trade show held in late July  2002.  Also,  the


                                       10
<PAGE>

Company  has  several  prospects   scheduled  for   demonstrations  of  its  new
ImmersaVision(TM)  Theater recently created at its plant. The  ImmersaVision(TM)
Theater, formally named ElectrcHorizon(TM),  displays digital cinema on a curved
screen using a high performance digital projector and a customized lens combined
with surround sound. The  ImmersaVision(TM)  Theater creates an immersive visual
and audio experience, which is being targeted as an entertainment attraction for
various  visitor  centers.  The  current  backlog and new orders  expected  from
current  negotiations  are expected to sustain revenue levels  comparable to the
first six months for the remainder of fiscal 2003.  Strong sales  prospects from
the Company's traditional markets along with new prospects for ImmersaVision(TM)
Theaters  are  expected to yield new orders later in fiscal 2003 and into fiscal
2004, which should return long-term revenue growth.

Gross margins were 30.3% and 29.9% in the second quarter and first six-months of
fiscal  2003  compared  to 31.3% and 30.0% in the  comparable  periods of Fiscal
2002.  Dome  gross  margins   continued  to  be  strong  while  ElectricSky  and
planetarium  margins continued to lag, but showed improvement.  However,  poorer
overhead  absorption  from the loss of volume  related  efficiencies  offset the
improvement  resulting in slightly  lower gross margins in fiscal 2003.  Selling
expenses  increased  $22,000 (9%) in the second  quarter and $37,000 (9%) in the
first six months of fiscal  2003  compared to the  comparable  periods of Fiscal
2002. The increase in selling  expense was due to higher  expenditures on travel
and trade conference  activities.  Research and development  expenses  increased
$81,000  (39%) and $62,000  (14%) in the second  quarter and first six months of
fiscal 2003 compared to the  comparable  periods of fiscal 2002. The increase in
research and development expenses was due to higher use of engineering resources
for the  development of new products  introduced at the biannual trade show held
in late July 2002.  General and  administrative  expenses decreased $27,000 (9%)
and  $24,000  (4%) in the second  quarter  and first six  months of fiscal  2003
compared to the  comparable  periods of fiscal 2002. The decrease in general and
administrative  expenses  was  due  primarily  to the  elimination  of  goodwill
amortization as a result of a new accounting pronouncement.

Interest expense amounted to $25,000 and $44,000 in the second quarter and first
six months of fiscal 2003  compared  to $18,000  and  $37,000 in the  comparable
periods of fiscal 2002.  The  increase in interest  expense is  attributable  to
higher use of the bank line of credit.  The $25,000 and $44,000  reported in the
first  quarter  and first six months of fiscal  2003  consisted  of $11,000  and
$18,000  paid on bank debt  agreements  plus $14,000 and $26,000 paid on capital
lease  obligations.  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 Company continues to pay no
federal income taxes as federal  taxable income is offset by the  utilization of
net operating loss  carryforwards.  Income tax expense  consists of state income
taxes of $3,000 and $25,000 in the second quarter and first six months of fiscal
2002. As a result of the above,  the Company reported a net loss of $196,000 and
$278,000 in the second  quarter and first six months of fiscal 2003  compared to
net income of $20,000 and $342,000 for the comparable periods of Fiscal 2002.

New Accounting Pronouncements

In July 2001, the FASB issued  Statement of Financial  Accounting  Standards No.
142,  "Accounting for Goodwill and Intangible  Assets" ("SFAS 142").  Under SFAS
142,  goodwill is no longer  amortized  but rather is tested for  impairment  at
least  annually at the  reporting  unit level.  The Company  adopted SFAS 142 on
February 1, 2002.  Any  write-down  of  goodwill  would be charged to results of
operations  in the periods in which the recorded  value of goodwill is more than


                                       11
<PAGE>

its fair  value.  The  adoption of this  accounting  standard  discontinues  the
amortization  of  goodwill  by  $67,800  per  year.  As a  result,  there was no
amortization of goodwill recorded in fiscal 2003 compared to $16,950 and $33,900
for the second  quarter and first six months of fiscal 2002,  respectively.  The
Company  has  completed  the first of the  impairment  tests of  goodwill  as of
January 31, 2002, in accordance with SFAS No. 142 and has concluded there was no
impairment of goodwill.

Liquidity and Capital Resources

Net cash used by  operating  activities  was $514,000 in the first six months of
fiscal  2003,  compared to  $993,000  provided in the first six months of fiscal
2002.  The  $514,000 of net cash used by operating  activities  in the first six
months of fiscal 2003 was produced  from  $528,000  used by changes in operating
assets and liabilities which offset $14,000 in cash provided by the $278,000 net
loss after considering the effects of $292,000 in non cash charges. 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 change in  operating  assets and  liabilities  from time to time is
primarily   attributable  to  progress  payment  terms  on  particular  customer
contracts.  The Company expects changes in operating assets and liabilities from
period to period to remain both material and variable.

The  $514,000  of net  cash  used by  operating  activities  plus an  additional
$174,000  used by investing  activities  offset  $365,000  provided by financing
activities  in the first six months of fiscal  2003.  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 net result
was a $323,000  decrease in cash balances  during the first six months of fiscal
2003  compared to a decrease  of $139,000  during the first six months of Fiscal
2002.

Financing  activities  in the first six months of fiscal 2003  consisted  of net
proceeds of $625,000 on the revolving  credit note, less payments of $166,000 on
capital leases and the final scheduled  principal payments on the bank term note
of $94,000.  Non cash financing  transactions  in the first six months of fiscal
2003 consisted of $226,000 of machinery and equipment  acquired  through capital
leases. 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 of $93,000 on the bank term note.
Non cash financing transactions in the first six months of fiscal 2002 consisted
of $205,000 of machinery and equipment acquired through capital leases.

Investing activities in the first six months of fiscal 2003 consisted of $93,000
of machinery and equipment  additions and the  development of computer  software
amounting  to $81,000.  Investing  activities  in the first six months of fiscal
2002 consisted of $272,000 of machinery and equipment additions.

The balance on the Company's  revolving  credit note was  $1,225,000 at July 31,
2002 compared to $600,000 at January 31, 2002. This resulted in unused borrowing
capacity of $775,000 under the amended  $2,000,000  borrowing  limit at July 31,
2002 compared to $500,000 under the $1,100,000  limit at January 31, 2002.  Cash
balances of $233,000 provided additional  liquidity at July 31, 2002 compared to
$556,000 at January 31, 2002. The next source of liquidity, accounts receivable,
decreased to  $1,638,000  at July 31, 2002 compared to $1,857,000 at January 31,


                                       12
<PAGE>

2002.  This resulted in a $267,000  decrease in liquidity  available  from cash,
borrowing capacity and accounts  receivable at July 31, 2002 compared to January
31, 2002. As  anticipated,  contracts in progress began  absorbing  liquidity in
fiscal 2003. This contributed to the decrease in liquidity  available from cash,
borrowing  capacity and accounts  receivable  by way of a $737,000  reduction in
funding from  contracts in progress.  The $737,000  reduction is measured by the
net revenue in excess of  billings  of  $322,000 at July 31, 2002  compared to a
$415,000  excess of billings  over recorded  revenue at January 31, 2002.  While
this  creates a decrease in the first line of  liquidity  sources,  contracts in
progress  will begin to  provide  liquidity  as  billings  catch up to  recorded
revenue.  Also noteworthy is the decreased  demand for liquidity  resulting from
the reduced level of customer  contracts.  Still, near term liquidity  pressures
are expected,  as revenues remain low and work on new customer  contracts begin.
Timing of bookings and payments on  prospective  customer  contracts will affect
liquidity  significantly.  To provide  relief to the  liquidity  pressures,  the
revolving  credit  agreement was modified in July 2002  increasing the borrowing
limit to $2,000,000.

The Company's new 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.

Critical Accounting Policies and Estimates

The financial statements and related disclosures,  which are prepared to conform
with accounting  principles  generally accepted in the United States of America,
require  estimates and assumptions  that affect the reported  amounts of assets,
liabilities,  revenues and accounts  receivable  and expenses  during the period
reported.  Also required is the disclosure of contingent  assets and liabilities
at the date of the financial statements.  Actual results in future periods could
differ  from  those   estimates.   Estimates   and   assumptions   are  reviewed
periodically,  and the effects of revisions  are  reflected in the  Consolidated
Financial  Statements in the period they are determined.  The Company  considers
the following accounting  policies,  which involve a high degree of judgment and
complexity, significant to the financial statements.

Revenues  from sales of domes,  planetarium  and  ImmersaVision(TM)  systems are
recognized in accordance  with the  percentage of completion  method.  Under the
percentage of completion method, revenue is computed by measuring the percentage
of cost incurred to the  estimated  total cost for each  customer  contract.  As
such, the amount of revenue and earnings  recognized is affected by the estimate
of the cost to complete each customer  contract.  Contract  billing terms do not
necessarily  mirror the  revenue  recognized.  Often,  the timing of billings is
significantly  different  than the  timing  of the  revenue  recorded.  Revenues
recognized  but not yet billed are recorded with inventory as Cost and Estimated
Earnings  in Excess of  Billings.  Conversely,  billings  in  advance of revenue
recognized  are recorded with current  liabilities as Billings in Excess of Cost
and Estimated Earnings.

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


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<PAGE>

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
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.


Item 3. CONTROLS AND PROCEDURES

Not applicable  since this Quarterly Report on Form 10-QSB is filed for a period
that ended prior to August 29, 2002.


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<PAGE>

                           PART II. OTHER INFORMATION

Item 6.  Exhibits and Reports on Form 8-K

(a) Exhibits:

10.14  Line of Credit Second Modification Agreement dated July 18, 2002, between
       First Keystone  Federal Savings Bank,  Transnational  Industries Inc. and
       Spitz Inc.

10.15  Second Renewal Line of Credit Note dated July 18, 2002, of  Transnational
       Industries Inc. and Spitz Inc. to First Keystone Federal Savings Bank.

99.1   Certification  of  Principal  Executive  Officer  pursuant  to 18  U.S.C.
       Section  1350, as adopted  pursuant to Section 906 of the  Sarbanes-Oxley
       Act of 2002

99.2   Certification  of  Principal  Financial  Officer  pursuant  to 18  U.S.C.
       Section  1350, as adopted  pursuant to Section 906 of the  Sarbanes-Oxley
       Act of 2002

(b) Reports on Form 8-K:

       The  Registrant  did not file any  reports  on Form 8-K  during the three
       months ended July 31, 2002.



                                   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.

                                  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 15, 2002             Paul L. Dailey, Jr.
                                              Secretary-Treasurer

                                              Signing on Behalf of Registrant
                                              and as Chief Financial Officer



                                       15
<PAGE>




                                 CERTIFICATIONS



         I, Jonathan A. Shaw, certify that:

       1. I have reviewed this quarterly  report on Form 10-QSB of Transnational
Industries, Inc.;

       2. Based on my  knowledge,  this  quarterly  report  does not contain any
untrue  statement of a material fact or omit to state a material fact  necessary
to make the  statements  made,  in light of the  circumstances  under which such
statements  were made, not misleading with respect to the period covered by this
quarterly report;

       3. Based on my knowledge,  the financial statements,  and other financial
information  included in this quarterly  report,  fairly present in all material
respects the financial  condition,  results of operations  and cash flows of the
registrant as of, and for, the periods presented in this quarterly report;

Date: September 15, 2002

                                      /s/ Jonathan A. Shaw
                                     ------------------------------
                                     Jonathan A. Shaw
                                     President and Chief Executive Officer



         I, Paul L. Dailey, certify that:

       1. I have reviewed this quarterly  report on Form 10-QSB of Transnational
Industries, Inc.;

       2. Based on my  knowledge,  this  quarterly  report  does not contain any
untrue  statement of a material fact or omit to state a material fact  necessary
to make the  statements  made,  in light of the  circumstances  under which such
statements  were made, not misleading with respect to the period covered by this
quarterly report;

       3. Based on my knowledge,  the financial statements,  and other financial
information  included in this quarterly  report,  fairly present in all material
respects the financial  condition,  results of operations  and cash flows of the
registrant as of, and for, the periods presented in this quarterly report;

Date: September 15, 2002

                                       /s/ Paul L. Dailey
                                      --------------------------
                                      Paul L. Dailey
                                      Executive Vice President and
                                      Chief Financial Officer



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