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 October 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                          (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)

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 November 30, 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 --
             October 31, 2002, and January 31, 2002                          3-4

             Consolidated statements of operations -- Three
             months ended October 31, 2002 and 2001; nine months
             ended October 31, 2002 and 2001                                   5

             Consolidated statements of cash flows --
             Nine months ended October 31, 2002 and 2001                       6

             Notes to consolidated financial statements --
             October 31, 2002                                                7-9

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

     Item 3. Controls and procedures                                       14-15

Part II. OTHER INFORMATION

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

SIGNATURES                                                                    15

CERTIFICATIONS                                                             16-18


                                       2
<PAGE>

                          PART I. FINANCIAL INFORMATION

Item 1. Financial Statements

                         Transnational Industries, Inc.

                           Consolidated Balance Sheets

                             (Dollars in thousands)

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

Current Assets:
  Cash                                                    $  366       $  556
  Accounts receivable                                      1,653        1,857
  Inventories                                              2,466        2,348
  Deferred taxes                                             368          368
  Other current assets                                       363          341
                                                          ------       ------

Total current assets                                       5,216        5,470

Machinery and equipment:
  Machinery and equipment                                 $4,093       $3,732
  Less accumulated depreciation                            2,911        2,613
                                                          ------       ------

Net machinery and equipment                                1,182        1,119

Other assets:
  Repair and maintenance inventories, less provision
    for obsolescence                                         107          107
  Computer software, less amortization                       395          409
  Goodwill                                                 1,622        1,622
                                                          ------       ------

Total other assets                                         2,124        2,138
                                                          ------       ------

Total assets                                              $8,522       $8,727
                                                          ======       ======

See notes to consolidated financial statements.


                                       3
<PAGE>

                         Transnational Industries, Inc.

                     Consolidated Balance Sheets (continued)

                             (Dollars in thousands)

<TABLE>
<CAPTION>
                                                                                     October 31,     January 31,
                                                                                        2002            2002
                                                                                     -----------     -----------
Liabilities and stockholders' equity                                                 (Unaudited)      (Audited)

<S>                                                                                    <C>             <C>
Current liabilities:
  Accounts payable                                                                     $   525         $   486
  Deferred maintenance revenue                                                             705             680
  Accrued expenses                                                                         349             373
  Billings in excess of cost and estimated earnings                                        820           1,410
  Current portion of long-term debt                                                        218             320
                                                                                       -------         -------

Total current liabilities                                                                2,617           3,269

Long-term debt, less current portion                                                     1,796             897

Stockholders' equity:
  Series B cumulative convertible preferred stock, $0.01 par value -
    authorized 100,000 shares; issued and outstanding 318 shares
    (liquidating value $184,440)                                                            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                                                                    (4,448)         (3,996)
                                                                                       -------         -------
                                                                                         4,246           4,698
Less: Treasury stock                                                                      (137)           (137)
                                                                                       -------         -------
Total stockholders' equity                                                               4,109           4,561
                                                                                       -------         -------

Total liabilities and stockholders' equity                                             $ 8,522         $ 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              Nine months Ended
                                                       October 31                      October 31
                                                 -----------------------         ----------------------
                                                  2002             2001            2002           2001
                                                 -----------------------         ----------------------
<S>                                              <C>             <C>             <C>             <C>
Revenues                                         $ 2,019         $ 1,935         $ 6,300        $ 8,069
Cost of Sales                                      1,457           1,389           4,459          5,681
                                                 -----------------------         ----------------------
Gross Margin                                         562             546           1,841          2,388

Selling expenses                                     231             201             700            633
Research and development                             202             309             718            763
General and administrative expenses                  272             358             800            910
                                                 -----------------------         ----------------------
                                                     705             868           2,218          2,306
                                                 -----------------------         ----------------------
Operating income (loss)                             (143)           (322)           (377)            82

Interest expense                                      31              16              75             53
                                                 -----------------------         ----------------------
Income (loss) before income tax                     (174)           (338)           (452)            29

Provision for income taxes                            --             (18)             --              7
                                                 -----------------------         ----------------------
Net income (loss)                                   (174)           (320)           (452)            22

Preferred dividend requirement                         2               2               6              6
                                                 -----------------------         ----------------------
Income (loss) applicable to common shares        $  (176)        $  (322)        $  (458)        $   16
                                                 =======================         ======================

Basic income (loss) per common share             $  (.39)        $ (0.70)        $ (1.00)        $ 0.04
                                                 =======================         ======================
Diluted income (loss) per common share           $  (.39)        $ (0.70)        $ (1.00)        $ 0.03
                                                 =======================         ======================
</TABLE>


                 See notes to consolidated financial statements.


                                       5
<PAGE>

                         Transnational Industries, Inc.
                             Consolidated Statements
                                  of Cash Flows
                                   (Unaudited)
                                 (In thousands)

<TABLE>
<CAPTION>
                                                                        Nine months ended
                                                                           October 31,
                                                                      ---------------------
                                                                        2002          2001
                                                                      ---------------------
<S>                                                                   <C>           <C>
Operating activities
Net income (loss)                                                     $  (452)      $    22
Adjustments to reconcile net income (loss) to net cash
provided by operating activities:
    Depreciation and amortization                                         393           481
    Provision for obsolescence                                             30            30
    Compensation from stock options                                        --             5
    Changes in operating assets and liabilities, net:
        Accounts receivable                                               204         2,154
        Inventories                                                       (66)         (462)
        Other current assets                                              (22)          (57)
        Billings net of cost and estimated earnings on contracts         (672)         (294)
        Accounts payable                                                   39        (1,016)
        Accrued expenses                                                    1          (225)
                                                                      ---------------------
Net cash provided by (used in) operating activities                      (545)          638
                                                                      ---------------------

Investing activities
Capital expenditures                                                     (216)          (91)
                                                                      ---------------------
Net cash used in investing activities                                    (216)          (91)
                                                                      ---------------------

Financing activities
Proceeds from revolving line of credit                                  2,775           250
Payments on revolving line of credit                                   (1,875)         (850)
Payments on capital leases                                               (235)         (182)
Scheduled payments on long term debt                                      (94)         (139)
                                                                      ---------------------
Net cash provided by (used in) financing activities                       571          (921)
                                                                      ---------------------

Increase (decrease) in cash                                              (190)         (374)
Cash at beginning of period                                               556           509
                                                                      ---------------------
Cash at end of period                                                 $   366       $   135
                                                                      =====================
</TABLE>

                 See notes to consolidated financial statements.


                                       6
<PAGE>

                         Transnational Industries, Inc.

                   Notes to Consolidated Financial Statements

                                   (Unaudited)

                                October 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  nine-month  periods  ended
October 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>
                                                        Three Months Ended              Nine months Ended
                                                            October 31                      October 31
                                                     -------------------------       ------------------------
                                                        2002           2001             2002           2001
                                                     -------------------------       ------------------------
<S>                                                  <C>             <C>             <C>             <C>
Numerator (same for basic and diluted):
Net income (loss)                                    $    (174)      $    (320)      $    (452)      $     22
Preferred dividend requirement                               2               2               6              6
                                                     -------------------------       ------------------------
Net income (loss) available to common
stockholders                                         $    (176)      $    (322)      $    (458)      $     16
                                                     =========================       ========================

Denominator:
Weighted average shares outstanding for basic
earnings per share                                     456,760         456,760         456,760        456,760
Dilutive effect of employee stock options               15,769          32,830          27,771         35,159
                                                     -------------------------       ------------------------
Weighted average shares outstanding and assumed
conversions for diluted earnings per share             472,529         489,590         484,531        491,919
                                                     =========================       ========================

Basic income (loss) per share                        $    (.39)      $   (0.70)      $   (1.00)      $    .04
                                                     =========================       ========================
Diluted income (loss) per share                      $    (.39)      $   (0.70)      $   (1.00)      $    .03
                                                     =========================       ========================
</TABLE>


                                       7
<PAGE>

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 October 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           Nine months Ended
                                                  October 31                   October 31
                                            ----------------------       ---------------------
                                              2002          2001           2002         2001
                                            ----------------------       ---------------------
<S>                                         <C>           <C>            <C>           <C>
Reported net income (loss)                  $  (174)      $   (320)      $  (452)      $    22
Add back goodwill amortization                   --             17            --            51
                                            ----------------------       ---------------------
Adjusted net income (loss)                  $  (174)      $   (303)      $  (452)      $    73
                                            ======================       =====================

Basic income (loss) per share:
      Reported income (loss) per share      $  (.39)      $   (.70)      $  (.62)      $   .04
      Goodwill amortization                      --            .04            --       $   .11
                                            ----------------------       ---------------------
      Adjusted income (loss) per share      $  (.39)      $   (.66)      $  (.62)      $   .15
                                            ======================       =====================

Diluted income (loss) per share:
      Reported income (loss) per share      $  (.39)      $   (.70)      $ (1.00)      $   .03
      Goodwill amortization                      --            .04            --       $   .11
                                            ----------------------       ---------------------
      Adjusted income (loss) per share      $  (.39)      $   (.66)      $ (1.00)      $   .14
                                            ======================       =====================
</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 and $437,000
acquired  through  capital  leases in the nine months ended October 31, 2002 and
2001, respectively.


                                       9
<PAGE>

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

Results of Operations

Revenues  in the third  quarter  and first nine months of the fiscal year ending
January 31, 2003 ("fiscal  2003") were  $2,019,000  and  $6,300,000  compared to
$1,935,000  and  $8,069,000 in the  comparable  periods of the fiscal year ended
January 31, 2002  ("fiscal  2002"),  an increase of $84,000 (4%) for the quarter
and a decrease of $1,769,000 (22%) for the nine-month  period.  The increase for
the quarter was attributable to higher dome revenues, which was mostly offset by
lower revenues from other products. As expected, the decrease for the nine-month
period was due to lower revenue from all of the  Company's  products as a result
of reduced  backlog and the completion of a several large  customer  projects in
the  first  half of fiscal  2002.  ElecticSky(TM)  revenues  were  $201,000  and
$1,494,000 in the third quarter and first nine month of fiscal 2003, compared to
$316,000 and $1,898,000 in the comparable  periods of fiscal 2002,  resulting in
decreases of $115,000  (36%) and $404,000  (21%) for the third quarter and first
nine months, respectively. The decrease in ElecticSky(TM) revenue in fiscal 2003
was attributable to higher volume of activity in the first nine 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 nine
months of fiscal 2003, one installed in the third quarter, and one scheduled for
installation early next year.  Planetarium revenues were $601,000 and $1,946,000
in the third  quarter and first nine months of fiscal 2003  compared to $930,000
and $3,057,000 in the comparable  periods of fiscal 2002, a decrease of $329,000
(35%)  and  $1,111,000  (36%)  for  the  quarter  and  the  nine-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 $348,000 and $909,000 in the
third  quarter  and first nine months of fiscal  2003  compared to $356,000  and
$944,000 in the comparable periods of fiscal 2002, a decrease of $8,000 (2%) and
$35,000 (4%) for the quarter and first nine 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  $1,217,000  and  $2,860,000  in the third quarter and first nine months of
fiscal 2003  compared to $689,000 and  $3,114,000 in the  comparable  periods of
fiscal  2002,  an increase  of $528,000  (77%) for the quarter and a decrease of
$254,000 (8%) for the nine-month  period. The higher dome revenues for the third
quarter  were  attributable  to higher  activity  in all of the  markets for the
Company's dome products.  The lower dome revenues for the first nine 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 nine
months of fiscal 2003 due to work completed on a theme park attraction in China.

The  backlog  of  unearned  revenue  as of October  31,  2002 was  approximately
$4,200,000,  all of which is scheduled  to be earned in the next twelve  months.
The Company has been notified by several prospects of the intent to purchase the
Company's products and is in contract negotiations, which are expected to result
in significant  new orders in the fourth quarter of fiscal 2003.  There are many
additional sales prospects for all of the Company's products. Many prospects are


                                       10
<PAGE>

evaluating  new  planetarium  systems   demonstrated  by  the  Company  and  its
competitors at recent trade  conferences.  Also, the Company has been conducting
demonstrations  of  its  new   ImmersaVision(TM)   Theater  at  its  plant.  The
ImmersaVision(TM) Theater, formally named ElectricHorizon(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 nine 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, which
is expected to restore revenue to profitable levels early in fiscal 2004.

Gross margins were 27.8% and 29.2% in the third quarter and first nine months of
fiscal  2003  compared  to 28.2% and 29.6% 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  $30,000 (15%) in the third quarter and $67,000 (11%) in the
first nine 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  decreased
$107,000  (35%) and $45,000  (6%) in the third  quarter and first nine months of
fiscal 2003 compared to the  comparable  periods of fiscal 2002. The decrease in
research  and   development   expenses  was  due  to  the   development  of  the
ImmersaVision(TM)  Theater  system in fiscal  2002.  General and  administrative
expenses  decreased  $86,000  (24%) and $110,000  (12%) in the third quarter and
first nine 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  and a consulting  engagement  for strategic  planning in the last
half of fiscal 2002.

Interest  expense amounted to $31,000 and $75,000 in the third quarter and first
nine  months of fiscal 2003  compared  to $16,000 and $53,000 in the  comparable
periods of fiscal 2002.  The  increase in interest  expense is  attributable  to
higher use of the bank line of credit.  The $31,000 and $75,000  reported in the
first  quarter  and first nine months of fiscal  2003  consisted  of $19,000 and
$36,000  paid on bank debt  agreements  plus $12,000 and $39,000 paid on capital
lease  obligations.  The $16,000 and $53,000  reported in the first  quarter and
first nine months of fiscal 2002  consisted  of $4,000 and $19,000  paid on bank
debt  agreements  plus  $15,000 and $40,000  paid on capital  lease  obligations
offset by $3,000 and $6,000 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  recorded in fiscal 2002
consists of state income taxes of $7,000.  As a result of the above, the Company
reported a net loss of $174,000 and $452,000 in the third quarter and first nine
months of fiscal 2003 compared to a net loss of $320,000 in the third quarter of
fiscal 2002 and net income of $22,000 in the first nine months 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


                                       11
<PAGE>

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
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 $50,850
for the third  quarter and first nine 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 $545,000 in the first nine months of
fiscal  2003,  compared to $638,000  provided in the first nine months of fiscal
2002.  The $545,000 of net cash used by operating  activities  in the first nine
months of fiscal 2003 was produced  from  $516,000  used by changes in operating
assets and $29,000 in cash  absorbed by the $452,000 net loss after  considering
the effects of $423,000 in non cash  charges.  The $638,000 of net cash provided
by operating  activities in the first nine months of fiscal 2002 was produced by
adding $100,000 of cash provided by changes in operating  assets and liabilities
and  $516,000  of  non-cash  charges  to $22,000  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  $545,000  of net  cash  used by  operating  activities  plus an  additional
$216,000  used by investing  activities  offset  $571,000  provided by financing
activities  in the first nine months of fiscal 2003.  The  $638,000  provided by
operations  in the first nine months of fiscal 2002 was offset by $921,000  used
by financing activities and $91,000 used by investing activities. The net result
was a $190,000  decrease in cash balances during the first nine months of fiscal
2003  compared to a decrease of $374,000  during the first nine months of Fiscal
2002.

Financing  activities  in the first nine months of fiscal 2003  consisted of net
proceeds of $900,000 on the revolving  credit note, less payments of $235,000 on
capital leases and the final scheduled  principal payments on the bank term note
of $94,000.  Non cash financing  transactions in the first nine months of fiscal
2003 consisted of $226,000 of machinery and equipment  acquired  through capital
leases.  Financing  activities in the first nine months of fiscal 2002 consisted
of net payments of $600,000 on the revolving  credit note,  payments of $182,000
on capital  leases and monthly  principal  payments of $139,000 on the bank term
note.  Non cash financing  transactions  in the first nine months of fiscal 2002
consisted  of $437,000 of  machinery  and  equipment  acquired  through  capital
leases.

Investing  activities  in the first  nine  months of fiscal  2003  consisted  of
$129,000 of machinery and equipment  additions and the  development  of computer
software amounting to $87,000.  Investing activities in the first nine months of
fiscal 2002  consisted of $57,000 of machinery and  equipment  additions and the
development of computer software amounting to $34,000.

The balance on the Company's revolving credit note was $1,500,000 at October 31,
2002 compared to $600,000 at January 31, 2002. This resulted in unused borrowing
capacity of $500,000 under the amended $2,000,000 borrowing limit at October 31,
2002 compared to $500,000 under the $1,100,000  limit at January 31, 2002.  Cash
balances of $366,000 provided additional  liquidity at October 31, 2002 compared


                                       12
<PAGE>

to  $556,000  at  January  31,  2002.  The next  source of  liquidity,  accounts
receivable,  decreased to  $1,653,000 at October 31, 2002 compared to $1,857,000
at January 31, 2002. This resulted in a $394,000 decrease in liquidity available
from cash,  borrowing  capacity  and  accounts  receivable  at October  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 $674,000  reduction  in funding from  contracts  in progress.  The $674,000
reduction  is  measured  by the net revenue in excess of billings of $259,000 at
October 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.


                                       13
<PAGE>

Forward-Looking Information

The statements in this  Quarterly  Report on Form 10-QSB that are not statements
of historical fact constitute "forward-looking statements." Said forward-looking
statements  involve risks and uncertainties  which may cause the actual results,
performance or achievements  of the Company to be materially  different from any
future results, performances or achievements,  expressly predicted or implied by
such forward-looking statements. These forward-looking statements are identified
by  their  use of  forms of such  terms  and  phrases  as  (without  limitation)
"expects," "intends," "goals," "estimates,"  "projects," "plans," "anticipates,"
"should," "future," "believes," and "scheduled."

The  important  factors  which  may cause  actual  results  to  differ  from the
forward-looking statements contained herein include, but are not limited to, the
following:  general economic and business  conditions;  competition;  success of
operating initiatives; operating costs; advertising and promotional efforts; the
existence  or absence of adverse  publicity;  changes in  business  strategy  or
development plans; the ability to retain key management; availability, terms and
deployment   of  capital;   business   abilities   and  judgment  of  personnel;
availability  of  qualified   personnel;   labor  and  employee  benefit  costs;
availability and costs of raw materials and supplies; and changes in, or failure
to comply with, government  regulations.  Although the Company believes that the
assumptions  underlying  the  forward-looking  statements  contained  herein are
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

Evaluation of disclosure controls and procedures

Our  Chief  Executive  Officer  and  Chief  Financial  Officer  (together,   the
"Certifying  Officers"),  after  evaluating the  effectiveness of our disclosure
controls and procedures  (as defined in the Securities  Exchange Act of 1934 and
Rules  13a-14(c) and  15-d-14(c)  thereunder) as of a date within 90 days before
the filing date of this quarterly report,  have concluded that as of the date of
the evaluation, our disclosure controls and procedures were:

(i)    effective to ensure that the information  required to be disclosed in the
       reports that we file or submit under the Securities  Exchange Act of 1934
       is recorded,  processed,  summarized and reported within the time periods
       specified in the SEC's rules and forms, and

(ii)   designed  to ensure  that  material  information  relating  to us that is
       required  to be  disclosed  by us in  such  reports  is  accumulated  and
       communicated  to the Certifying  Officers by others within our company to
       allow timely decisions regarding disclosure.


                                       14
<PAGE>

Changes in internal controls

There were no significant changes in our internal controls or, to our knowledge,
in other factors,  that could  significantly  affect our disclosure controls and
procedures subsequent to their evaluation.

                           PART II. OTHER INFORMATION

Item 6. Exhibits and Reports on Form 8-K

(a)   Exhibits:

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 October 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.

                                                 TRANSNATIONAL INDUSTRIES, INC.


Date: December 15, 2002                          /s/ Paul L. Dailey
      -----------------                          ------------------
                                                 Paul L. Dailey
                                                 Executive Vice President
                                                 (Principal Financial Officer)
                                                 (Chief Accounting 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;

4.    The registrant's other certifying officers and I are responsible for
      establishing and maintaining disclosure controls and procedures (as
      defined in Exchange Act Rules 13a-14 and 15d-14) for the registrant and we
      have:

      a)    Designed such disclosure controls and procedures to ensure that
            material information relating to the registrant, including its
            consolidated subsidiaries, is made known to us by others within
            those entities, particularly during the period in which this
            quarterly report is being prepared;

      b)    Evaluated the effectiveness of the registrant's disclosure controls
            and procedures as of a date within 90 days prior to the filing date
            of this quarterly report (the "Evaluation Date"); and

      c)    Presented in this quarterly report our conclusions about the
            effectiveness of the disclosure controls and procedures based on our
            evaluation as of the Evaluation Date;

5.    The registrant's other certifying officers and I have disclosed based on
      our most recent evaluation, to the registrant's auditors and the audit
      committee of registrant's board of directors (or persons performing the
      equivalent function):

      a)    All significant deficiencies in the design or operation of internal
            controls which could adversely affect the registrant's ability to
            record, process, summarize and report financial data and have
            identified for the registrant's auditors and material weaknesses in
            internal controls; and

      b)    Any fraud, whether or not material, that involves management or
            other employees who have a significant role in the registrant's
            internal controls; and


                                       16
<PAGE>

6.    The registrant's other certifying officers and I have indicated in this
      quarterly report whether or not there were significant changes in internal
      controls or in other factors that could significantly affect internal
      controls subsequent to the date of our most recent evaluation, including
      any corrective actions with regard to significant deficiencies and
      material weaknesses.

Date: December 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;

4.    The registrant's other certifying officers and I are responsible for
      establishing and maintaining disclosure controls and procedures (as
      defined in Exchange Act Rules 13a-14 and 15d-14) for the registrant and we
      have:

      d)    Designed such disclosure controls and procedures to ensure that
            material information relating to the registrant, including its
            consolidated subsidiaries, is made known to us by others within
            those entities, particularly during the period in which this
            quarterly report is being prepared;

      e)    Evaluated the effectiveness of the registrant's disclosure controls
            and procedures as of a date within 90 days prior to the filing date
            of this quarterly report (the "Evaluation Date"); and

      f)    Presented in this quarterly report our conclusions about the
            effectiveness of the disclosure controls and procedures based on our
            evaluation as of the Evaluation Date;

5.    The registrant's other certifying officers and I have disclosed based on
      our most recent evaluation, to the registrant's auditors and the audit
      committee of registrant's board of directors (or persons performing the
      equivalent function):


                                       17
<PAGE>

      c)    All significant deficiencies in the design or operation of internal
            controls which could adversely affect the registrant's ability to
            record, process, summarize and report financial data and have
            identified for the registrant's auditors and material weaknesses in
            internal controls; and

      d)    Any fraud, whether or not material, that involves management or
            other employees who have a significant role in the registrant's
            internal controls; and

6.    The registrant's other certifying officers and I have indicated in this
      quarterly report whether or not there were significant changes in internal
      controls or in other factors that could significantly affect internal
      controls subsequent to the date of our most recent evaluation, including
      any corrective actions with regard to significant deficiencies and
      material weaknesses.

Date: December 15, 2002


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


                                       18