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 fiscal period ended January 31, 2004

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

       For the transition period from __________________ to ______________

                        Commission file number: 1-14219

                Transnational Financial Network, Inc
-------------------------------------------------------------------------------
       (Exact name of small business issuer as specified in its charter)

        California                                      94-2964195
-------------------------------------------------------------------------------
(State or other jurisdiction                  (IRS Employer Identification No.)
of incorporation or organization)

401 Taraval Street, San Francisco, CA                           94116
-------------------------------------------------------------------------------
(Address of principal executive offices)                     (Zip Code)

                                 (415) 242-7800
                        -------------------------------
                         (Registrant's telephone number)


Check whether the issuer (1) filed all reports required to be filed by Section
13 or 15(d) of the Exchange Act during the past 12 months (or for such shorter
period that the registrant was required to file such reports), and (2) has been
subject to such filing requirements for the past 90 days. Yes X No ____



                      APPLICABLE ONLY TO CORPORATE ISSUERS

State the number of shares outstanding of each of the issuer's classes of common
equity, as of March 8, 2004: 6,827,640




<PAGE>






                      TRANSNATIONAL FINANCIAL NETWORK, INC.

                          Report On Form 10-QSB For The
                         Quarter Ended January 31, 2004

                                      INDEX




PART I.  FINANCIAL INFORMATION                                     PAGE NUMBER

Item 1.  Financial Statements:

         Condensed Balance Sheets as of January 31, 2004
                (Unaudited) and April 30, 2003 ..............................2

         Unaudited Condensed Statements of Operations for the
              Three and Nine Months Ended January 31, 2004 and 2003..........3

         Unaudited Condensed Statements of Cash Flows for the
              Nine Months Ended January 31, 2004 and 2003....................4

         Notes to Condensed Financial Statements.............................5

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

Item 3.  Controls and Procedures  ..........................................21


PART II.  OTHER INFORMATION

Item 4.  Submission of Matters to a Vote of Security Holders................22

Item 6.  Exhibits and Reports on Form 8-K...................................22


Signatures..................................................................23















<PAGE>



PART 1. FINANCIAL INFORMATION

Item 1.  Financial Statements


                      TRANSNATIONAL FINANCIAL NETWORK, INC.

                            CONDENSED BALANCE SHEETS
                               -----------------
<TABLE>
<CAPTION>


                            ASSETS                                                         JANUARY 31,           APRIL 30,
                                                                                             2004                  2003
                                                                                             ----                  ----
                                                                                          (unaudited)

<S>                                                                                      <C>                  <C>
  Cash and cash equivalents, unrestricted                                                $   2,387,816        $  1,847,996
  Restricted cash                                                                            2,000,000           2,650,000
  Short-term mortgage related accounts receivable                                              710,467           1,210,885
  Mortgage loans held for sale                                                                 212,488           1,146,049
  Fair value of derivative financial instruments                                               326,500             559,300
  Property and equipment, net                                                                  153,819             170,090
  Other assets                                                                                 140,783             164,008
  Goodwill                                                                                   5,022,065           4,933,847
                                                                                             ---------           ---------

         Total assets                                                                    $  10,953,938        $ 12,682,175
                                                                                         =============        ============


             LIABILITIES AND STOCKHOLDERS' EQUITY

  Warehouse lines of credit                                                              $           -        $    789,445
  Accrued interest payable                                                                      28,310              60,069
Accounts payable and accrued liabilities                                                       624,105             937,934
  Settlement payable                                                                           919,273           1,626,497
  Capital lease obligations                                                                     27,065              41,664
  Subordinated debt                                                                          1,112,000           2,047,000
                                                                                         -------------        ------------

          Total liabilities                                                                  2,710,753           5,502,609
                                                                                         -------------        ------------


Stockholders' equity:
  Preferred stock, no par value: 2,000,000 shares authorized; no shares
         issued or outstanding                                                                       -                   -
  Common stock, no par value: 20,000,000 shares authorized;
         6,825,556 and 6,760,181 shares issued and outstanding
         at January 31, 2004 and April 30, 2003, respectively.                              13,492,597          13,456,182
Accumulated deficit                                                                         (5,249,412)         (6,276,616)
                                                                                         --------------       -------------

         Total stockholders' equity                                                          8,243,185           7,179,566
                                                                                         -------------        ------------


         Total liabilities and stockholders' equity                                      $  10,953,938        $ 12,682,175
                                                                                         =============        ============
</TABLE>




         See accompanying notes to these condensed financial statements

                                       2
<PAGE>




                      TRANSNATIONAL FINANCIAL NETWORK, INC.

                       CONDENSED STATEMENTS OF OPERATIONS

                            -------------------
<TABLE>
<CAPTION>


                                                                             For the Three                     For the Nine
                                                                       Months Ended January 31,           Months Ended January 31,
                                                                       ------------------------           ------------------------
                                                                         2004               2003             2004            2003
                                                                      (unaudited)        (unaudited)      (unaudited)    (unaudited)
         Revenue:
<S>                                                                  <C>               <C>              <C>             <C>
           Net gain from sale of loans                               $ 1,438,553       $ 1,995,895      $ 5,520,706     $ 4,271,776
           Production income                                           1,495,656         3,674,158        7,640,815      10,669,875
           Other income                                                   21,309            18,917           54,107         111,391
                                                                     -----------       -----------       ----------     -----------

                  Total revenue                                        2,955,518         5,688,970       13,215,628      15,053,042
                                                                     -----------       -----------       ----------     -----------

         Direct expenses:
           Commissions and production incentives                         893,245         2,273,723        4,735,862       6,764,400
           Production expense                                            225,074           481,044        1,025,531       1,212,569
           Pair-off fees                                                   4,149            20,386           (4,987)         20,386
           Early loan payoff penalties                                    30,000            90,000          100,000         270,000
                                                                     -----------       -----------       ----------     -----------

                  Total direct expenses                                1,152,468         2,865,153        5,856,406       8,267,355
                                                                     -----------       -----------       ----------     -----------

         Interest income (expense):
           Interest income from loans in warehouse                       243,702           735,952          959,174       1,536,246
           Interest expense on warehouse financing                      (217,443)         (841,289)      (1,059,133)     (1,731,594)
                                                                     ------------      ------------      -----------    -----------

                  Net interest income (expense)                           26,259          (105,337)         (99,959)       (195,348)
                                                                     -----------       ------------      -----------    -----------

         Gross profit on mortgage activities                           1,829,309         2,718,480        7,259,263       6,590,339
                                                                     -----------       -----------       ----------     -----------

         Indirect expenses:
           Salaries and benefits                                       1,024,971         1,211,064        3,371,285       3,359,175
           General and administrative                                    480,660           818,259        1,620,025       2,140,454
           Occupancy                                                     171,799           179,526          526,085         580,793
           Depreciation and amortization                                  22,271            23,964           75,341          70,500
                                                                     -----------       -----------       ----------     -----------

                  Total indirect expenses                              1,699,701         2,232,813        5,592,736       6,150,922
                                                                     -----------       -----------       ----------     -----------

                  Operating income                                       129,608           485,667        1,666,527         439,417
                                                                     -----------       -----------       ----------     -----------

         Nonoperating income (expense):
           Other interest expense                                        (89,469)          (99,435)        (335,258)       (268,434)
           Other income (expense)                                         (1,900)         (151,600)        (232,800)        134,803
                                                                     ------------      ------------      -----------    -----------

                  Total nonoperating (expense)                           (91,369)         (251,035)        (568,058)       (133,631)
                                                                     ------------      ------------      -----------    -----------

                  Income before income taxes                              38,239           234,632        1,098,469         305,786

         Income tax provision                                              5,498                 -           71,265               -
                                                                     -----------       -----------       ----------     -----------

                  Net income                                         $    32,741       $   234,632      $ 1,027,204     $   305,786
                                                                     ===========       ===========      ===========     ===========

         Net income per share
             Basic                                                   $      0.00       $      0.03      $      0.15     $      0.05
             Diluted                                                 $      0.00       $      0.03      $      0.15     $      0.04

         Weighted averages shares outstanding
             Basic                                                     6,768,289         6,760,181        6,786,402       6,760,181
             Diluted                                                   7,038,979         6,770,125        7,036,605       6,825,987
</TABLE>








         See accompanying notes to these condensed financial statements
                                       3
<PAGE>


                      TRANSNATIONAL FINANCIAL NETWORK, INC.

                       CONDENSED STATEMENTS OF CASH FLOWS

                               ------------------
<TABLE>
<CAPTION>

                                                                                                          For the Nine
                                                                                                    Months Ended January 31,
                                                                                                  ----------------------------
                                                                                                      2004            2003
                                                                                                   (unaudited)     (unaudited)
Cash flows from operating activities:
<S>                                                                                             <C>               <C>
Net income                                                                                      $   1,027,204     $    305,786
   Adjustments to reconcile net income to net cash
             provided by (used in) operating activities:
     Depreciation and amortization                                                                     75,341           70,500
     Net change in fair market value of financial derivatives                                         232,800                -
     Net change in provision for early payoff penalties                                                 9,532          270,000
   Net effect of changes in assets and liabilities:
     Other assets                                                                                      13,693         (686,819)
     Accrued interest payable                                                                         (31,759)          89,023
     Accounts payable and accrued liabilities                                                        (313,829)         135,586

   Net effect of changes in mortgage loans activity:
     Mortgage related short-term accounts receivable                                                  500,418                -
     Mortgage loans originated for sale                                                          (483,624,708)    (468,108,767)
     Mortgage loans proceeds from sale                                                            484,558,269      459,600,523
                                                                                                  -----------      -----------

         Net cash provided by (used in) operating activities                                        2,446,961       (8,324,168)
                                                                                                -------------     -------------

Cash flows from investing activities:
   Purchases of property and equipment                                                                (59,070)         (67,472)
   Decrease in restricted cash                                                                        650,000                -
                                                                                                -------------     ------------

         Net cash provided by (used in) investing activities                                          590,930          (67,472)
                                                                                                -------------     -------------

Cash flows from financing activities:
     Warehouse notes payable-net borrowings                                                          (789,445)       8,304,918
     Payments on settlement payable                                                                  (795,442)        (185,000)
   Proceeds from stock option exercises                                                                46,384                -
   Payments on capital lease obligations                                                              (14,599)         (13,891)
   Issuances of subordinated debt                                                                           -        1,052,000
   Payments on subordinated debt                                                                     (935,000)        (962,000)
   Common stock repurchased                                                                            (9,969)               -
                                                                                                --------------    ------------

         Net cash (used in)  provided by financing activities                                      (2,498,071)       8,196,027
                                                                                                -------------     ------------


Net increase (decrease) in cash and cash equivalents, unrestricted                                    539,820         (195,613)
                                                                                                -------------     ------------


Cash and cash equivalents, unrestricted, beginning of period                                        1,847,996        4,076,422
                                                                                                -------------     ------------


Cash and cash equivalents, unrestricted, end of period                                          $   2,387,816     $  3,880,809
                                                                                                =============     ============

Cash paid during the period for:
     Interest                                                                                   $   1,354,199     $  2,039,563
     Income taxes                                                                                     148,821                -

Schedule of non-cash investing and financing activities:
   Property and equipment acquired with capital leases                                          $           -     $     42,389
   Increase in goodwill and settlement payable                                                         88,218        1,625,267
</TABLE>



See accompanying notes to these condensed financial statements
                                       4
<PAGE>


                      TRANSNATIONAL FINANCIAL NETWORK, INC.

                     NOTES TO CONDENSED FINANCIAL STATEMENTS




     NOTE 1       General

     The accompanying condensed financial statements of Transnational Financial
     Network, Inc. (the "Company") as of and for the three and nine month
     periods ended January 31, 2004 and 2003, are unaudited and have been
     prepared pursuant to the rules and regulations of the Securities and
     Exchange Commission ("SEC"). Certain information and financial disclosures
     normally included in financial statements prepared in accordance with
     accounting principles generally accepted in the United States of America
     have been condensed or omitted pursuant to such rules and regulations. The
     April 30, 2003 condensed consolidated balance sheet is derived from the
     audited financial statements included in our Annual Report on Form 10-KSB
     for the fiscal year ended April 30, 2003, but does not include all
     disclosures required by accounting principles generally accepted in the
     United States of America. Accordingly, these unaudited condensed financial
     statements should be read in conjunction with the audited financial
     statements included in the Company's Form 10-KSB for the year ended April
     30, 2003.

     In our opinion, the accompanying unaudited condensed consolidated financial
     statements include all adjustments (consisting of normal recurring entries)
     necessary to present fairly our financial position as of January 31, 2004
     and the results of our operations and cash flows for the periods presented
     in conformity with accounting principles generally accepted in the United
     States of America. The results of operations of the Company for the three
     and nine months ended January 31, 2004 and 2003 are not necessarily
     indicative of the results to be expected for the full year.

     NOTE 2       Summary of Significant Accounting Policies

     Use of Estimates in the Preparation of Financial Statements - The
     preparation of financial statements in conformity with accounting
     principles generally accepted in the United States of America requires
     management to make certain estimates and assumptions that affect the
     reported amounts of assets and liabilities and disclosure of contingent
     liabilities at the date of the financial statements and the reported
     amounts of revenues and expenses during the reporting period. Such
     estimates include the depreciable lives of assets, the valuations of
     derivative instruments, goodwill and income tax net operating loss
     carryforwards. Actual results could differ from those estimates.

     Statement of Cash Flows - For purposes of the statement of cash flows, the
     Company considers only highly liquid instruments with original maturities
     of three months or less to be cash equivalents.

     Income Taxes - The Company uses the asset and liability method in
     accounting for deferred income taxes. Deferred tax assets and liabilities
     are calculated by applying applicable tax laws to the differences between
     the financial statement base and the tax base of assets and liabilities.
     The effect on deferred taxes of a change in tax rates is recognized in
     income in the period that includes the enactment date.

     Reclassifications - Certain amounts in the April 30, 2003 balance sheet
     have been reclassified to conform to the presentation for the period ended
     January 31, 2004.

     Stock-Based Compensation - The Company follows APB 25 in accounting for its
     employee stock options. The disclosure provision of SFAS 148 is effective
     for years ending after December 15, 2002 and has been incorporated into
     these financial statements and accompanying footnotes.

     The following table illustrates the effect on net income that would have
     resulted if the Company had applied the fair value recognition provisions
     of Financial Accounting Standard No. 123, Accounting for Stock-Based
     Compensation, to stock-based employee compensation.

                                       5
<PAGE>


                      TRANSNATIONAL FINANCIAL NETWORK, INC.

                     NOTES TO CONDENSED FINANCIAL STATEMENTS

                                   (continued)

<TABLE>
<CAPTION>

                                                     Quarter Ended                         Nine Months Ended
                                              -----------------------------        --------------------------------
                                                  January 31,     January 31,        January 31,       January 31,
                                                     2004            2003               2004              2003
                                                     ----            ----               ----              ----
Net income:
<S>                                              <C>            <C>                 <C>              <C>
   As reported                                   $    32,741    $   234,632         $ 1,027,204      $   305,786
   Pro forma                                     $   (23,763)   $   165,819         $   873,925      $    86,959

Basic income per common share:
   As reported                                   $      0.00    $      0.03         $      0.15      $      0.05
   Pro forma                                     $      0.00    $      0.02         $      0.13      $      0.01

Diluted income per common share:
   As reported                                   $      0.00    $      0.03         $      0.15      $      0.04
   Pro forma                                     $      0.00    $      0.02         $      0.12      $      0.01
</TABLE>



     There were 100,000 and 50,000 option grants during the quarter ended
     January 31, 2004 and 2003, respectively. The fair values of the stock
     options granted during the quarters ended January 31, 2004 and 2003 were
     estimated to be $0.93 and $0.17, respectively. These fair values were
     determined as of the date of grant, using the following assumptions:

                               Quarter Ended January     Quarter Ended January
                                   31, 2004                 31, 2003

       Annual Dividend                   0%                       0%
       Volatility                     139.06%                   109.29%
       Risk Free Interest Rate          3.15%                     3.05%
       Average Expected Life            5                         5

     New Accounting Pronouncement - In March 2004, the SEC issued Staff
     Accounting Bulletin No. 105, Application of Accounting Principles to Loan
     Commitments ("SAB 105"). SAB 105 provides the SEC's interpretation of the
     application of generally accepted accounting principles to loan commitments
     accounted for as derivative instruments. Specifically, SAB 105 provides
     guidance related to the recognition of servicing assets, the recognition of
     internally-developed intangible assets such as customer relationship
     intangible assets, and the related disclosures of loan commitments
     accounted for as derivative instruments. SAB 105 is required to be applied
     to loan commitments accounted for as derivatives entered into after March
     31, 2004. The Company will adopt SAB 105 beginning on April 1, 2004. The
     adoption of SAB 105 is expected to result in a non-cash charge to income of
     approximately $324,000 during the quarter ended April 30, 2004.

     NOTE 3       Financing Facilities

     As of January 31, 2004, the Company had a maximum mortgage loan financing
     capacity of $75,000,000 as described below.

         A. Warehouse Lines Of Credit

         The Company maintained two revolving warehouse lines of credit with a
         combined borrowing capacity of $29,500,000 to fund mortgage loan
         originations. In order to reduce our borrowing costs, we terminated
         these warehouse lines of credit during the quarter ended January 31,
         2004. One of the lines was not used during the quarter ended January
         31, 2004. The second line had a maximum capacity of $20,000,000, and

                                       6

<PAGE>

         provided for interest at Prime plus 1.00%, for an average rate of
         5.17%. This line was used during November 2003 and then subsequently
         discontinued during the quarter ended January 31, 2004.

         B. Master Sale Agreements

         The Company maintained three master sale agreements. Under these
         arrangements, the lending financial institutions purchase a 100% loan
         participation interest in each loan upon the Company obtaining a firm
         forward sale delivery commitment from investors and upon the financial
         institutions' approval of the loan based on their underwriting
         criteria. The Company recognizes income from loans transferred under
         these lines as a gain on sale immediately upon the purchase and funding
         of the loans by the financial institutions.

         In connection with these agreements, the Company may be required to
         repurchase certain loans that, subsequent to acquisition by the
         financial institutions, fail to meet certain representations and
         warranties set forth in the agreements at the date of the sale. During
         the fiscal periods ended January 31, 2004 and 2003, the Company was
         required to make repurchases of certain loans in the amount of $29,762
         and $140,286, respectively. These loans are included in mortgage loans
         held for sale in the balance sheet.

         Loan interest charges incurred in connection with the sale are
         estimated and recognized as a reduction in sales proceeds immediately
         upon the loan being transferred. Loan interest expense is calculated
         based on the number of days the loan remains with the financial
         institution, until it is ultimately resold to a third party investor.
         During the intervening period the Company sub-services the loans on
         behalf of the financial institutions.

         I.    The first Master Sale Agreement provides a credit facility of
               $30,000,000 as of January 31, 2004. Under this arrangement, an
               additional bulge capacity of $10,000,000 is available if needed,
               bringing the total capacity under this arrangement to
               $40,000,000. The Company has not used this interim bulge capacity
               to date. Interest on the $30,000,000 portion of the line is at
               Prime Rate plus 1.0%, or 5.00%, whichever is higher. Prime was
               4.00% at January 31, 2004. Interest on the remaining $10,000,000
               of the line is 0.05% higher than that charged on the $30,000,000
               portion. The rate paid by the Company on this line as of January
               31, 2004 was 5.00%. The Company is required to maintain a
               non-interest bearing cash collateral deposit with this lender of
               $1,000,000, which has been included as restricted cash in the
               condensed balance sheets.

         II.   The second Master Sale Agreement provides a credit facility of
               $15,000,000 as of January 31, 2004. Interest on the facility is
               the greater of LIBOR or the Federal Funds rate plus 2.75%. The
               rate paid by the Company on this line as of January 31, 2004 was
               3.85%. The Company was required to maintain an interest bearing
               cash collateral deposit with this lender of $900,000, which has
               been included as restricted cash in the condensed balance sheets.

         III.  The third Master Sale Agreement provides a credit facility of
               $20,000,000 as of January 31, 2004. Interest on the facility is
               at LIBOR plus a margin ranging from 2.25% to 2.75%. The rate paid
               by the Company on this line as of January 31, 2004 was 3.50%. The
               Company is required to maintain an interest bearing cash
               collateral deposit with this lender of $100,000, which has been
               included as restricted cash in the condensed balance sheets.

                                       7

<PAGE>

               These three Master Sale Agreements are for each for a one-year
               period and are typically renewed annually. However, the
               agreements give each party the right to terminate the agreement
               upon 30 days' written notice.

               The financing facilities, as disclosed above, have various
               financial and operational covenants with which the Company must
               comply. As of January 31, 2004, the Company was not in compliance
               with one of the financial covenants of one of its facilities, but
               was back in compliance on February 29, 2004. The CEO and the
               President of the Company have both personally guaranteed the
               above financing facilities.


     NOTE 4       Goodwill

     Goodwill resulted from the purchase of the Company's Campbell branch
     (formerly LRS, Inc.) in 1999 and the related purchase agreement contained
     an earn-out provision. The increase in goodwill from April 30, 2003 to
     January 31, 2004 of $88,218 arises from the additional purchase
     consideration related to the earn-out payments.

     In accordance with SFAS 142, Accounting for Goodwill and Other Intangible
     Assets, the Company evaluated goodwill as of January 31, 2004 and
     determined that no impairment had arisen as of that date.

     NOTE 5       Subordinated Debt

     All subordinated debt bears interest at 15% and has maturity dates ranging
     from March 31, 2004 to April 30, 2006. Subordinated debt interest expense
     was $206,750 and $224,960 during the nine months ended January 31, 2004 and
     2003, respectively.

     NOTE 6       Settlement Payable

     This obligation arises from the December 2002 settlement of litigation
     related to the purchase price of the Campbell branch (formerly LRS, Inc.)
     The balance of the obligation includes unpaid principal and accrued
     interest. Pursuant to the Settlement Agreement, the Company is making
     monthly payments of $100,000 and will continue doing so until the debt is
     fully paid sometime in the fourth calendar quarter of 2004. Interest
     accrues at an annual rate of 10% on the unpaid balance.

     NOTE 7       Stock Option Programs and Warrants to Purchase Common Stock

     As of January 31, 2004, the Company had options outstanding as described
     below.

     In March 1999, four Directors of the Company were granted 240,000
     non-qualifying options to purchase common stock at an exercise price of
     $7.50 per share. The options were vested on the grant date and expire in
     March 2009. Of the total grant, 160,000 options may be exercised only in
     the event of a change in control as defined in the option agreement. There
     are no forfeiture provisions associated with the options granted.
     Accordingly, the options granted to three of the four directors who
     subsequently resigned remain outstanding until they are exercised or
     expire.

     The Company has two incentive stock option plans: The 1998 Stock
     Compensation Plan ("1998 Plan") for employees and the 2000 Stock Incentive
     Plan ("2000 Plan") for directors, officers and other employees, which
     replaced the 1998 Plan in February, 2000.

     Options issued and outstanding from the 1998 Plan will continue to be
     honored, but no additional options may be issued under the 1998 Plan. As of
     January 31, 2004, there were a total of 51,000 share options outstanding
     under the 1998 Plan, all with an exercise price of $7.50 per option.


                                       8
<PAGE>


     Under the 2000 Plan, a total of 750,000 shares were initially reserved. The
     options typically vest over four to five years. As of January 31, 2004,
     there were 876,004 options outstanding under the 2000 Plan. The share
     reserve increases by 4% of total common shares outstanding each year,
     beginning on January 1, 2001. The maximum annual increase in the share
     reserve is limited to 400,000 shares. Accordingly, the following is a
     rollforward of the share reserve limit through January 31, 2004:

                                                  Number of Options
        Initially Reserved                                  750,000
        January 1, 2001                                     171,172
        January 1, 2002                                     205,503
        January 1, 2003                                     270,407
        January 1, 2004                                     272,640
                                                            -------
        Reserve amount at January 31, 2004                1,669,722
                                                          =========

     In June 2002, the Board of Directors of the Company unanimously granted to
     Joseph Kristul, its Chief Executive Officer, an option to purchase 300,000
     shares of the Company's common stock at a price of $0.73 per share. The
     shares will be unregistered. The options vest evenly over four years, or
     immediately upon the occurrence of certain events including a change in
     control, or 60 days after the cessation of Mr. Kristul's full-time
     employment by the Company, whichever events occur first. The options expire
     in four years, unless previously exercised pursuant to the above.

     In January 2004, the Board of Directors of the Company unanimously granted
     to Jack Thrift, its Chief Financial Officer, an option to purchase 100,000
     shares of the Company's common stock at a price of $1.05 per share. This
     option has a 10 year life and only vests if there is a change in control
     (as defined).

     The table below summarizes aggregate activity for all options programs for
     the fiscal period ended January 31, 2004:

                                  All Programs
                             ---------------------
                                                                        Weighted
                                                                         Average
                                                              Stock     Exercise
                                                             Options       Price
                                                          ----------     -------
       Outstanding at November 1, 2003:                   1,486,254       $2.13
          Options granted                                   100,000        1.05
          Options forfeited                                 (94,583)       0.30
          Options exercised                                 (24,667)       0.47
                                                            --------

       Outstanding at January 31, 2004                    1,467,004       $2.20
                                                          ---------


     As of January 31, 2004, there were 53,000 warrants to purchase shares of
     the Company's common stock, which are not included in the above table. The
     exercise prices of the warrants ranged from $0.55 to $7.50.

     NOTE 8       Basic and Diluted Net Income Per Share

     Basic net income per share is computed by dividing net income by the
     weighted average common shares outstanding during the period. Diluted net
     income per share is computed based on the weighted average number of common
     shares outstanding adjusted for potentially dilutive securities. For the
     three months ended January 31, 2004 and 2003, the effect of including
     potentially dilutive securities in the calculation of diluted net income
     per share decreased basic earnings per share by $0.00 and $0.00 per share,
     respectively. For the nine months ended January 31, 2004 and 2003, the
     effect of including potentially dilutive securities in the calculation of
     diluted net income per share decreased basic earnings by $0.00 and $0.01
     per share, respectively. Potentially dilutive securities were 906,780 and
     848,135 as of January 31, 2004 and 2003, respectively.

                                       9
<PAGE>

     NOTE  9      Fair Value of Financial Instruments

     A summary of the total contract value of the Company's exposure to
     off-balance sheet credit risk as of January 31, 2004 and April 30, 2003,
     including financial instruments whose contract amount represents credit
     risk only is as follows:

                                       January 31, 2004        April 30, 2003
                                       ----------------        --------------

Commitments to extend credit           $     38,167,407        $    90,722,206
Mandatory forward delivery commitments        5,000,000             16,000,000


     Commitments to extend credit are contractual agreements entered into with
     customers to fund mortgage loans, which remain in effect as long as there
     is no violation of any condition established in the contract. These
     commitments generally have fixed expiration dates or other termination
     clauses. Since many of the commitments are expected to expire without being
     drawn upon, the total commitment amounts do not necessarily represent
     future cash outlay requirements. The fair value of these contracts included
     in the condensed balance sheets was $326,500 and $601,000 at January 31,
     2004 and April 30, 2003, respectively.

     The Company is exposed to credit risk on its mandatory forward delivery
     commitments when the Company's position in these instruments becomes
     positive (i.e. "in-the-money") and the Company is a net creditor to the
     counter party to the agreement. If the Company cannot deliver the
     agreed-upon loans into the commitment by the expiration date, the Company
     is subject to a financial penalty ("pair-off fee"). The fair value of these
     contracts included in the condensed balance sheets was $0 and $(41,700) as
     of January 31, 2004 and April 30, 2003, respectively.


     NOTE  10     Subsequent Event

     Subsequent to January 31, 2004 and through February 29, 2004, the Company
     repaid 15% notes payable in the amount of $350,000 and issued new 10%
     subordinated debt for total proceeds of $750,000, thereby subsequently
     increasing the amount of subordinated debt outstanding from $1,112,000 to
     $1,512,000 as of January 31, 2004 and February 29, 2004, respectively.
     Additionally, the Company subsequently refinanced $250,000 of its
     previously outstanding 15% notes payable for 10% subordinated debt,
     effective April 1, 2004.

                                       10
<PAGE>



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

The following discussion and analysis should be read in conjunction with the
condensed financial statements and the notes thereto included as Item 1 of this
Report. The discussion of results and trends does not necessarily imply that
these results and trends will continue.

The Management's Discussion and Analysis of Financial Condition and Results of
Operations and other sections of the Form 10-QSB contain forward-looking
information. The forward-looking information involves risks and uncertainties
that are based on current expectations, estimates, and projections about the
Company's business, management's beliefs and assumptions made by management.
Words such as "expects", "anticipates", "intends", "plans", "believes", "seeks",
"estimates", and variations of such words and similar expressions are intended
to identify such forward-looking information. Therefore, actual outcomes and
results may differ materially from what is expressed or forecasted in such
forward-looking information due to numerous factors, including, but not limited
to, availability of financing for operations, successful performance of internal
operations, impact of competition and other risks detailed below, as well as
those discussed elsewhere from time to time in the Company's Securities and
Exchange Commission filings and reports. In addition, general economic and
market conditions and growth rates could affect such statements.

GENERAL

Transnational Financial Network, Inc. ("TFN" or the "Company") is a wholesale
and retail mortgage banker which originates, funds and sells mortgage loans
secured by one to four family residential properties, principally in the San
Francisco Bay Area, Southern California, and Arizona.

Since 1985, when the Company was incorporated, it has been engaged in the
origination of retail mortgage loans, and currently maintains wholly owned
retail offices in San Francisco and Campbell, California. In addition, the
Company maintains Net Branches in association with local mortgage brokerage
companies. The purpose of the Net Branch relationship is for the brokerage to
send its loan production to the Company, and for the Company, in return, to
provide loan processing, accounting and payroll services to them. The legal form
of the relationship requires that their revenues and expenses be included in the
Company's income statement. However, there is no impact on net income since any
profits are returned to the owner of the Net Branch. Conversely, if there are
losses, the owner of the Net Branch must reimburse the Company. The Net Branches
are a vehicle, operating under the Company's California Real Estate License, to
capture more mortgage loan flow for its wholesale operations. Since these Net
Branches are independently owned, they have not historically maintained their
affiliations with fully licensed mortgage bankers on a long-term basis. As of
January 31, 2004, the Company had a relationship with a Net Branch in San Diego,
California. The Company expects to continue its policy of adding and subtracting
Net Branches from its branch network on an opportunistic basis in the future.

In 1995, the Company began a wholesale division to close and fund loans
originated by independent third party mortgage brokers as well as those
originated through the Company's retail division. The Company maintains
wholesale offices in San Francisco, Moreno Valley, and Tustin, California, as
well as Phoenix, Arizona. The Company operates in one business segment -
mortgage banking.

                                       11
<PAGE>

The Company's loan production and results of operations are affected by mortgage
interest rates, with origination volumes increasing in periods of declining
interest rates, and declining during periods of increasing interest rates.
Increasing mortgage rates raises the qualifying income required of a homebuyer
and reduces housing affordability. Interest rate increases also cause mortgage
refinance activity to decline because fewer homeowners can successfully obtain a
mortgage at a lower interest rate than their original mortgage. Higher interest
rates increase the cost of home ownership resulting in diminished demand for
mortgage loans, whether the purpose of the mortgage loan is for the purchase of
a home, refinancing of a home to obtain a lower rate or longer term, home
improvement, debt consolidation, or obtaining cash. When rates are high, the
mortgage loan financing that does occur usually takes the form of variable rate
mortgage loans, that is, mortgage loans that have interest rates that frequently
change and, consequently, have lower initial interest rates than those charged
on longer term fixed interest rate mortgage loans.

To diminish the overall effects of a variable interest rate market, the Company
has employed other measures to stabilize business. These measures include
offering a broad range of products, delivering mortgages to the secondary market
in volume packages, and expanding both the nature and scope of mortgage
originations. Wholesale operations are centralized in two regional centers for
both conventional and government programs to provide greater economic
efficiency. Nonetheless, the Company's origination volume trends have been and
will continue to be heavily influenced by both the level and trend of interest
rates.

During the last year, the Company has entered into forward delivery
commitments with secondary mortgage market buyers. Within these commitments, the
Company agrees to deliver a specified dollar volume of mortgages during a set
period, typically six months. In return for the Company agreeing to the forward
delivery commitment, the secondary market buyer agrees to make a Forward
Commitment Payout Fee to the Company. The Forward Commitment Payout Fee so
negotiated is variable, based upon the type of mortgages delivered to the buyer,
and varies between 1/8% and 3/8% of the dollar amount delivered. This Forward
Payout Fee is contingent upon the following:

First, the company must deliver at least the total dollar volume specified in
the Commitment within the time period specified.

Second, the company must achieve certain targeted pull-through ratios. A
"pull-through" ratio is the percentage of loans that are initially locked with
the (secondary market) buyer, which are then actually funded by the Company and
then sold to the (secondary market) buyer. Typically, the Company receives the
full Forward Payout Fee if it achieves a pull-through ratio of 65% or more. If
the Company achieves a pull-through ratio of 60-65%, the Forward Payout Fee is
paid at a 50% rate. If the pull-through ratio is less than 60%, the Company then
receives no Forward Payout Fee on the commitment.

The data in the table below is presented to provide context for the discussion
that follows the table.

                                       12
<PAGE>



                      Transnational Financial Network, Inc.

                Condensed Statements of Operations and Production

                                   (Unaudited)
<TABLE>
<CAPTION>


                                               For the Three Months Ended                         For the Nine Months Ended
                                               --------------------------                         -------------------------
                                                 January 31,  January 31,                 January 31,   January 31,
                                                        2004         2003  % Chng.               2004          2003   % Chng.
-----------------------------------------------------------------------------------------------------------------------------

Revenue:
<S>                                              <C>          <C>               <C>        <C>          <C>             <C>
    Net gain on sale of mortgages                $ 1,438,553  $ 1,995,895      -28%        $ 5,520,706  $ 4,271,776       29%
    Production revenue                             1,495,656    3,674,158      -59%          7,640,815   10,669,875      -28%
    Other revenue                                     21,309       18,917       13%             54,107      111,391      -51%
                                                 -----------  -----------                  -----------  -----------

    Total revenue                                  2,955,518    5,688,970      -48%         13,215,628   15,053,042      -12%

Direct expense:
    Commission and production incentives             893,245    2,273,723      -61%          4,735,862    6,764,400      -30%
    Production expense                               225,074      481,044      -53%          1,025,531    1,212,569      -15%
    Pair-off fees                                      4,149       20,386      -80%             (4,987)      20,386     -124%
    Provision for early payoff penalties              30,000       90,000      -67%            100,000      270,000      -63%
                                                 -----------  -----------                  -----------  -----------

    Total direct expense                           1,152,468    2,865,153      -60%          5,856,406    8,267,355      -29%

Net interest income (expense)
    Interest income on loans in warehouse            243,702      735,952      -67%            959,174    1,536,246      -38%
    Interest expense on loans in warehouse          (217,443)    (841,289)     -74%         (1,059,133)  (1,731,594)      -39%
                                                 -----------  -----------                 ------------  -----------

    Net interest income                               26,259     (105,337)      nm             (99,959)    (195,348)     -49%
                                                 -----------  ------------                 -----------  -----------

Gross profit on mortgage activities                1,829,309    2,718,480      -33%          7,259,263    6,590,339       10%

Indirect expense

    Salaries and benefits                          1,024,971    1,211,064      -15%          3,371,285    3,359,175        0%
    General                                          480,660      818,259      -41%          1,620,025    2,140,454      -24%
    Occupancy                                        171,799      179,526       -4%            526,085      580,793       -9%
    Depreciation                                      22,271       23,964       -7%             75,341       70,500        7%
                                                 -----------  -----------                  -----------  -----------

    Total indirect expense                         1,699,701    2,232,813      -24%          5,592,736    6,150,922       -9%
                                                 -----------  -----------                  -----------  -----------

    Operating income                                 129,608      485,667      -73%          1,666,527      439,417      279%

Non-operating income (expense):
    Other interest expense                           (89,469)     (99,435)     -10%           (335,258)    (268,434)      25%
    Other income (expense), including
     SFAS 133 adjustment                              (1,900)    (151,600)     -99%           (232,800)     134,803     -273%
                                                 ------------ ------------                 -----------  -----------

    Total non-operating income (expense)             (91,369)    (251,035)     -64%           (568,058)    (133,631)     325%
                                                 ------------ ------------                 -----------  -----------

Income before taxes                                   38,239      234,632      -84%          1,098,469      305,786      259%

Provision for income taxes                             5,498            -       nm              71,265            -        nm
                                                 -----------  -----------                  -----------  -----------

                       Net income                $    32,741  $   234,632      -86%        $ 1,027,204  $   305,786      236%
                                                 ===========  ===========                  ===========  ===========


Production ($ millions):
Wholesale                                        $       103  $       197      -48%        $       485  $       471        3%
Retail                                                    88          242      -64%                487          700      -30%
                                                 -----------  -----------                  -----------  -----------
    Total production                             $       191  $       439      -57%        $       972  $     1,171      -17%
</TABLE>




                                       13
<PAGE>


The following table shows the Company's wholesale and retail production trends
by fiscal quarter for the last nine fiscal quarters:
<TABLE>
<CAPTION>
                                                              Origination Volumes
                                                                  ($ millions)

Fiscal Quarter Ended     1-31-04   10-31-03    7-31-03   4-30-03    1-31-03  10-31-02  7-31-02   3-31-02   12-31-01
                         -------   --------    -------   -------    -------  --------  -------   -------   --------

<S>                      <C>       <C>         <C>       <C>        <C>      <C>       <C>       <C>       <C>
Wholesale                $  103    $  135      $ 247     $   194    $  197   $   179   $    95   $   116   $  195
Retail                       88       183        216         247       242       253       205       172      202
                         ------    ------      -----     -------    ------   -------   -------   -------   ------

Total                    $  191    $  318      $ 463     $   441    $  439   $   432   $   300   $   288   $  397
                         ======    ======      =====     =======    ======   =======   =======   =======   ======
</TABLE>


QUARTER AND NINE MONTHS ENDED JANUARY 31, 2004 COMPARED TO QUARTER AND NINE
MONTHS ENDED JANUARY 31, 2003

Introduction

While appearing generally positive, the year-over-year revenue and profit
comparisons for the nine months ending January 31st mask substantially divergent
trends.

During the first three quarters of fiscal 2003, the Company was experiencing
internally-based accelerating wholesale loan production, coming off the
reorganization of its wholesale account executive organization at the beginning
of calendar 2002. This acceleration was compounded on both the wholesale and
retail sides of our business by the industry-wide boom in mortgage applications.

In sharp contrast, the industry trends in the Company's first three quarters of
the current fiscal year moved in diametrically opposite directions. During the
first quarter, we, like the industry as a whole, experienced the benefits of the
highest industry-wide mortgage application rates in recorded history. During our
second and third fiscal quarters, however, and responding to the increase in
mortgage rates that began late in the first fiscal quarter, we, like the
industry, saw a dramatic fall-off in our loan production. This cyclical fall-off
was magnified in the recently ended quarter by seasonal factors. In the absence
of rapidly declining interest rates, such as we saw in the third fiscal quarter
of last year, we normally experience a temporary weakening of mortgage
applications and associated fundings in our third fiscal quarter. We attribute
this to the effects of the Thanksgiving and Christmas holidays which focus many
borrowers' attention elsewhere.

Our wholesale production declined 45% in the second quarter from the first
quarter, and declined a further 24% in the third quarter from the second
quarter, thus declining a total of 58% from the peak of the first quarter to
what appears to be the trough of the third fiscal quarter. The peak in our
retail production was in the fourth fiscal quarter of last year, and quarterly
production declined a total of 64% from the peak to the level shown in the most
recently ended quarter.

Revenue Analysis

Total revenues for the fiscal quarter ended January 31, 2004 decreased 48% to
$3.0 million from $5.7 million in the year earlier period. The decline in
revenues was less than the 56% decline in our loan production due to the
recognition of a total of $335,161 in Forward Payout Fees during the recently
ended quarter. The bulk of these fees were for completing $73 million of a $100
million forward delivery contract that was completed after January 31, 2004. The
balance of this contract was completed in February and a minimum of $101,250 of
Forward Commitment Payout Fees associated with this contract will be recognized
in our fourth fiscal quarter.

Had these Forward Commitment Payout Fees not been received, revenues would have
declined 54% in the year-over-year comparisons, or approximately the same as the
decline in our total loan production.

                                       14
<PAGE>

Total revenues for the nine months ended January 31, 2004 declined 12% from the
year earlier period. There were two countervailing factors affecting the
year-over-year comparisons. During the first fiscal quarter of 2003, our
wholesale production experienced a trough that resulted from the restructuring
of our account executive organization in early calendar 2002. At the other
extreme, during this past first fiscal quarter, we experienced an absolute peak
in wholesale loan production as a result of historically high loan refinancing
in the mortgage industry. The magnitude of this swing is evident in the 29%
increase in our Gain on Sale revenues and 39% increase in wholesale loan
production in the year-over-year nine-month comparisons.

The year-over-year change in the Company's total revenues for the third fiscal
quarter were subject to the following principal influences:

First, wholesale and retail loan originations declined 48% and 64% respectively.
This reflects the dramatic downturn in industry-wide mortgage originations
beginning in August of last year. The Company is taking steps to increase its
wholesale loan production, including adding account executives and expanding its
Net Branch relationships. However, these steps occurred late in the second
quarter and into the third quarter. Furthermore, interest rates were relatively
stable during our third quarter. As a result, there was no major impetus to
action by borrowers, and our production was negatively affected by the
traditional seasonal effects of the Thanksgiving and Christmas holiday periods
in our recently ended quarter.

Second, the Company's Gain on Sale revenues (solely from its wholesale business)
declined 28% in the third quarter from the year earlier period. In the absence
of the $335,161 Forward Payout Fees previously mentioned, the Gain on Sale
revenues would have declined by 45%, approximately the same rate at which our
wholesale production declined.

Third, the Company's basic (before Forward Payout Fee) Gain on Sale of 107 basis
points was 6% higher than in the like period a year ago.

Fourth, our Production Revenue declined 59%, approximately at the same rate as
the decline in our overall production.

As shown in the table below, the Company has increased its Gain on Sale
substantially over the last two years.
<TABLE>
<CAPTION>

                                               Wholesale Gain on Sale
                                                   (Basis Points)

Fiscal Quarter Ending       1-31-04   10-31-03   7-31-03   04-30-03  01-31-03   10-31-02   7-31-02    3-31-02   12-31-01
                            -------   --------   -------   --------  --------   --------   -------    -------   --------

<S>                         <C>       <C>        <C>       <C>       <C>        <C>        <C>        <C>       <C>
Gain On Sale                140       133        93        128       101        88         74         71        66
</TABLE>


The Company's gain on sale margin peaked during three of the last four
consecutive quarters. On balance, and excluding Forward Payout Fees, the Company
has historically priced its products to achieve a 90-95 basis point margin. When
interest rates are declining rapidly, as they were during the last half of the
company's prior fiscal year, the Company's typical margin will increase
temporarily to a level above the Company's operational target.

During the recently ended quarter the Company received net Forward Payout Fees
of $335,161. In the absence of the receipt of these Forward Payout Fees , the
Company's Gain on Sale for the third quarter of fiscal 2004 would have been 107
basis points. Similarly, the Company received net Forward Payout Fees of
$528,000 and $428,000 in the second quarter of this fiscal year and the fourth
quarter of the last fiscal year, respectively. In the absence of these fees, the
Gain on Sale would have been 94 and 106 basis points, respectively.

                                       15


<PAGE>

In the current environment, the Company expects to continue to earn such Forward
Commitment Payout Fees from time to time, but does not expect such Fees
necessarily to occur at regular intervals within its fiscal quarterly reporting
periods or necessarily be of the same orders of magnitude as the last three that
were received. Furthermore, since the Fee levels are dependent upon achieving a
targeted pull-through rate on a total forward delivery commitment, the Forward
Payout Fee is not earned, nor can it be accrued for, until the forward delivery
commitment is completed, and the actual pull-through rate is determined.

The Company continues to work to achieve these Forward Commitment Payout Fees,
but achievement of them and the timing thereof will continue to be irregular.
Furthermore, the Company is seeking to incorporate the Forward Payout Fees into
its normal pricing structure with its secondary market buyers. To the extent
that it is successful, it will see an increase in its basic gain on sale and a
reduction in the receipt of the periodic Forward Payout Fees. Management
believes that the 107 basis point basic (before Forward Commitment Payout Fees)
gain on sale in the recently ended third quarter reflects positive progress it
is making in incorporating these Forward Payout Fees into is normal pricing
structure with its secondary market buyers.

Gross Profit Analysis

Gross Profits for the quarter just ended declined 33% from the year earlier
period, a rate substantially less than the 48% decline in Total Revenue. In the
absence of the receipt of the Forward Commitment Payout Fees in this year's
third quarter, Gross Profits would have declined 45%, or approximately at the
same rate as revenues.

Gross profits for the nine months ended January 31, 2004 increased 10% from the
like period a year ago. Again, this is largely due to the countervailing factors
experienced in our wholesale business in the first quarter of this year when
compared to the first quarter of a year ago. We experienced very strong
wholesale production, along with the attendant strong gross profitability, in
the first fiscal quarter this year. In contrast, we experienced just the reverse
in the first fiscal quarter last year.

As shown in the table below, the Company has experienced generally increasing
gross margins over the last two years, although there has been
quarter-to-quarter variability due to various special factors. The peak gross
margin shown in the fourth calendar quarter of 2001 was primarily due to an
adjustment in the Company's Provision for Early Loan Payoffs. In the absence of
this adjustment, the gross margin for the quarter ended December 31, 2001 would
have been approximately 50%. Similarly, the gross margin in the quarter ended
October 31, 2002 was depressed due to the low wholesale originations in that
period.

As previously discussed, the Company's gross margins in the recently ended
quarter, the second fiscal quarter of this year and the fourth fiscal quarter of
last year were enhanced by the receipt of Forward Commitment Payout Fees. In the
absence of these Fees, the Company's gross margin for the recently ended quarter
would have been approximately 50.6%, 47.5% in the second fiscal quarter of this
year, and 50% in the fourth fiscal quarter of last year.
<TABLE>
<CAPTION>
                           Gross Profit Margin Trends

Fiscal Quarter Ending     1-31-04   10-31-03   7-31-03    4-30-03   1-31-03   10-31-02    7-31-02    3-31-02  12-31-01
---------------------     -------   --------   -------    -------   -------   --------    -------    -------  --------
<S>                       <C>       <C>        <C>        <C>       <C>       <C>         <C>        <C>      <C>
Gross Profit Margin       61.9%     53.7%      52.3%      53.8%     47.1%     43.9%       38.8%      45.7%    58.5%
</TABLE>


The gross margin variability in the last four quarters principally reflects the
following three factors:

                                       16

<PAGE>

First, the Company's wholesale originations have higher gross profitability than
retail mortgage originations. Hence, relatively small changes in our total
wholesale originations, as percentage of our total originations, will have a
larger impact on our corporate-wide gross margin. As shown earlier, the
percentage of our total originations coming from the wholesale side of our
business increased from 40% in the nine months ending January 31, 2003 to 50% in
the nine months ended January 31, 2004. This effect has been magnified in the
recently ended second and third fiscal quarters, as well as in the fourth fiscal
quarter of last year by the receipt of the Forward Commitment Payout Fees,
previously mentioned.

Second, as previously discussed, the Company benefited from changes it made to
its product mix as well as from increased market demand for its product types.
As a result, the Company's Gain on Sale margin has steadily increased, thus
magnifying the effects of the mix factor change. While the Company is continuing
to work to increase its gain on sale, we expect future improvements, if they
occur, to be smaller than in the past. Furthermore, it is possible that
competitive pressures stemming from a generally slow mortgage production
environment could create some erosion in our Gain on Sale in the future.

Third, Net Warehouse Interest Expense in the quarter, changed from a net
negative expense of $105,337 in fiscal 2003 to a positive net interest income of
$26,259 in fiscal 2004, a swing of $131,596. Interest Expense declined
disproportionately as a result of better financing terms on both new warehouse
lines and renegotiated older warehouse credit facilities. By the end of the
recently ended quarter, the Company had shifted to having positive Net Interest
Income on its loan financing activities.

The year-over-year shift in the third quarter to a Net Interest Income (from a
net expense) contrasts sharply with the presence of a net interest expense for
the full nine months of the current fiscal year. This disparity is the result of
two factors. First, the changes in lending rates with our lenders only occurred
during the recently ended second fiscal quarter. Hence, their effects were not
felt in the prior quarters. Second, the peak of mortgage originations that
occurred in our first fiscal quarter this year were all done with the prior, and
less favorable, lending terms, thus exacerbating our warehouse borrowing
expenses.

Indirect Expense Analysis

While aggregate Indirect Expenses declined 24% to $1.7 million in the quarter
ended January 31, 2004 when compared to the like period a year earlier, they
increased to 57.5% of revenues. This increase, as a percentage of revenues, is
due to revenues declining faster than expenses. Notwithstanding the increase in
our Indirect Expense ratio, total absolute spending on Indirect Expenses for the
quarter just ended was approximately $100,000 lower than it was in the
immediately preceding second fiscal quarter.

Indirect Expenses for the nine months ended January 31, 2004 declined 9% when
compared to the like period a year earlier. Indirect Expenses peaked in the
first fiscal quarter of this year as a result of spending that was needed to
keep up with the surge in mortgage applications. This was reflected in most line
items during that quarter.
<TABLE>
<CAPTION>

                                               Indirect Expense and Components
                                                 (As a Percent of Revenues)

Fiscal Quarter Ending     1-31-04  10-31-03   7-31-03   4-30-03    1-31-03  10-31-02   7-31-02   3-31-02   12-31-01
---------------------     -----------------------------------------------------------------------------------------
<S>                        <C>       <C>       <C>       <C>        <C>       <C>       <C>       <C>        <C>
Total Indirect Expenses    57.5%     40.5%     35.9%     33.6%      38.6%     38.9%     47.5%     52.7%      47.7%

Selected Components:
Salaries and Benefits      34.5%     24.7%     21.4%     19.0%      20.4%     21.1%     27.0%     34.7%      29.7%
General and Admin.         16.3%     11.4%     10.9%     11.3%      14.5%     13.6%     15.1%     12.1%       4.5%
</TABLE>

                                       17
<PAGE>


While Salaries and Benefits increased as a percentage of revenues from both the
like period a year ago and the preceding first and second fiscal quarters, we
have taken substantial steps to reduce expenses. This is reflected in the 18%
decline in Salaries and Benefits from the first fiscal quarter level and a 7%
decline from the level shown in the immediately preceding second fiscal quarter.
We do not expect to see further declines in this line item in the coming
quarters.

The Company took aggressive action to reduce its General and Administrative
expenses as origination volumes declined. This is reflected in the $152,000
reduction in the spending level of the first fiscal quarter, and the $23,000
reduction from the level of the second fiscal quarter. We do not expect to see a
further reduction in the next fiscal quarter.

The year-over-year decline in General and Administrative expenses for both the
quarter and nine months recently ended was magnified by a material reduction of
Professional fees. Professional fees in the quarter and nine months just ended
declined $133,183 and $358,634, respectively from the levels in the previous
year. This was the result of two factors. First, legal expenses declined
dramatically as a result of settling a legal claim in December 2002. Second,
auditing expenses declined as a result of the Company changing its outside
auditor in the third fiscal quarter of last year. The remainder of the reduction
was spread across most expense categories, reflecting management's cost control
efforts.

Non-Operating Expense Analysis

The Company's Non-Operating Expenses consist of two types.

First, the Company incurs Other Interest Expense. This is interest expense not
directly associated with the Company's mortgage lending activities (warehouse
loans). It results largely from two obligations. First, the subordinated debt
the Company has incurred to bolster its capital base accounted for approximately
$62,000 of quarterly interest expense. During the nine month period ended
January 31, 2004, the Company repaid $935,000 of subordinated debt. Subsequent
to the end of the third fiscal quarter, the Company repaid $350,000 of
subordinated debt that came due, renewed $250,000 of debt at a 10% rate
effective April 1, 2004, and placed an additional 750,000 of debt at 10%. As a
result of these actions, the Company expects that its quarterly interest expense
from subordinated debt will be approximately $44,000.

Second, the obligation related to an acquisition the Company made in 1999,
accounted for approximately $27,000 of quarterly interest expense. By contract,
this latter obligation (principal and accrued interest) will be repaid no later
than sometime in the fourth calendar quarter of 2004. As a result, this
particular interest expense will decline at an accelerating rate over the next
four quarters.

The second part of the Company's Non-Operating Expense is labeled "Other
Income/Expense". It consists almost entirely of non-cash charges or credits that
derive from the application of Statement of Financial Accounting Standard Number
133 relating to the accounting for mortgage loan derivative instruments. This
figure will be either positive or negative from quarter to (consecutive)
quarter, principally based upon whether or not the Company's locked mortgage
pipeline (mortgages where the Company has committed, or locked in, to a buyer to
fund a mortgage for a specific amount at a specific rate) rises or falls from
the immediately preceding quarter.

In the quarter just ended, there was a negative adjustment to this SFAS 133
asset of approximately $2,000. This reflects the fact that the Company's locked
pipeline decreased in size very modestly at January 31, 2004, compared to what
it was at October 31, 2003. This charge contrasts to a negative adjustment of
$152,000 the Company experienced in the third fiscal quarter a year ago.
Accordingly, the Company's Income Before Taxes benefited by approximately
$150,000 in the year-over-year comparisons as a result of the application of
SFAS 133.

                                       18
<PAGE>

Based upon the SEC's recently issued accounting guidance in SAB 105, the
application of SFAS 133 with respect to locked mortgage pipelines will change in
the Company's fourth fiscal quarter after the adoption of this new pronouncement
on April 1, 2004. Without addressing the complexities of this new method of
application, it will have the net effect of writing off almost all of the
Company's "Fair value of derivative financial instruments" asset during the
fourth fiscal quarter. As of January 31, 2004, this asset on the Company's
balance sheet was $324,000. Depending upon the level of mortgage originations
the Company experiences at that time, this accounting change could have the
effect of causing the Company to report a loss for accounting purposes during
the fourth quarter. This accounting change will have no effect on the Company's
cash flows, just as the application of SFAS 133 in the past has had no effect on
the Company's cash flows. Management regards this change in accounting treatment
as favorable in that it will enable the Company's periodic financial reports to
approximate more closely the actual cash the Company generates, and dampen the
artificial volatility created by the prior application of SFAS 133.

Liquidity and Capital Resources

Our operations are funded through internally generated funds with warehouse
lines of credit (as set forth below) providing the funding necessary to fund
mortgage loans pending the mortgage loan's resale to investors. Our unrestricted
cash position for the nine months ended January 31, 2004, increased by $539,820.

Significantly, our unrestricted cash position decreased by $579,350 for the
three month period ended January 31, 2004. Most of this reduction is
attributable to the repayment of $935,000 in subordinated debt during the third
quarter. It was also impacted by settlement payments (discussed below). Finally
as a result of the discontinued use of certain warehouse facilities, we were
able to reduce the amount of cash classified as restricted, and reclassify
approximately $600,000 to unrestricted cash.

Significant factors affecting that cash flow are summarized below.

As set forth in the discussion, the cash flows resulting from mortgage loan
financing activities depend upon the financing facility used and whether that
financing facility is regarded as a sale or traditional lending arrangement. In
the cash flow statement, sales are treated as cash flows from operating
activities and traditional warehouse lines are treated as financing activities.
To understand our mortgage loan funding activities, these lines must be
aggregated together with mortgage related short-term accounts receivable, that
is, mortgage loans that are funded by us and not through any facility.

Operational cash flows for the nine months ended January 31, 2004 other than
mortgage loan financing.

With the exception of income taxes payable and non-cash accruals, including
depreciation, the cash effect reflected in the Company's statement of operations
is usually realized within 30 days of the close of the accounting period.
Accordingly, by adding depreciation of $75,341, the net change in the provision
for early payoff penalties of $9,532 and the accrual of $232,800 in expense for
the net change in fair market value of financial derivatives (an accrual that
does not have a cash effect), to net income of $994,463, the Company realized
$1,344,877 in cash from operations for the nine month period ended January 31,
2004.

Offsetting this $1,344,877 increase in cash are reductions in interest payable,
accounts payable and accrued liabilities and the acquisition of other assets for
a total of $331,895 use of cash.

Operations, excluding mortgage loan financing activities, thus generated
$1,012,982 for the nine month period ended January 31, 2004.

Cash flows related to mortgage loan financing activities.

Our mortgage loans are funded through traditional warehouse facilities as well
as Master Sale Agreements. When we fund a loan utilizing Master Sales Agreement
facilities, the loan is considered sold to the lending facility, and the asset
and liability related to loans funded in this manner do not appear on the
Company's balance sheet. These are considered sales even though we will

                                       19

<PAGE>

repurchase these mortgages and sell them at a later date. These transactions are
included as operational cash flows. At January 31, 2004, we had $16,110,723
outstanding under these Master Sales Agreements.

Borrowings on the traditional warehouse facilities do appear on the Company's
balance sheet but will not be recognized as revenues until subsequently sold.
These amounts are listed as financing activities in the cash flow statement and
at January 31, 2004 we had no amounts outstanding under these lines of credit,
all of them having been terminated.

For the nine months ended January 31, 2004, we decreased our usage of all of
these facilities by $144,116, resulting in a positive cash flow in that amount.
Added to this amount of cash was a reduction in receivables from mortgage loans
the Company owns of $500,418 for a total generation of $644,534 in cash from our
mortgage loan financing activities for the nine months ended January 31, 2004.

When these amounts are added to the operational cash flows discussed above, we
generated cash $1,657,516 for the nine month period ended January 31, 2004.

Cash flows related to debt payment

In December 2002, we settled certain litigation related to our acquisition of
LRS, Inc. The settlement requires us to pay the former principals of that entity
$100,000 per month. Nine such payments were made in the fiscal year to date
period ended January 31, 2004. At January 31, 2004, the Company owed $919,273 on
this obligation (principal plus accrued interest).

In addition, in fiscal 2004 a total of $500,000 of our 15% subordinated debt was
scheduled to mature. During the nine month period ended January 31, 2004, the
Company paid off $935,000 of this subordinated debt, bringing the outstanding
amount to $1,112,000 as of January 31, 2004. Subsequent to January 31, 2004 and
through February 29, 2004, the Company repaid an additional $350,000 of such
debt.

In February 2004, we raised $750,000 in new subordinated debt, with annual
interest of 10% per annum. Additionally, we subsequently refinanced $250,000 of
15% subordinated debt into 10% subordinated debt, effective April 1, 2004.
Therefore, we subsequently had $1,512,000 of subordinated debt outstanding as of
February 29, 2004 at a weighted average annual interest rate of 11.8%.

Of the $1,512,000 subordinated debt outstanding at February 29, 2004, $112,000
matures on December 31, 2004 and $400,000 matures July 29, 2005. The balance,
$1,000,000 matures March 31, 2007.

Of the $750,000 raised in February 2004, the spouse of our Chief Financial
Officer, Jack Thrift, loaned $200,000 to us, and J. Peter Gaskins, one of our
directors, loaned $300,000 to us. Of the $250,000 of subordinated debt
refinanced in February 2004, $150,000 was refinanced by a trust of which Mr.
Gaskins' spouse is the beneficial owner.

Restricted Cash

At January 31, 2004, we maintained an aggregate of $2,000,000 in cash deposits
with institutions providing our warehouse lines of credit, whether pursuant to
Master Sales Agreements or traditional warehouse facilities.

Summary of Financing Facilities

The capital resources utilized by the Company to fund its mortgage lending
activities are primarily provided by warehouse lenders that fund the mortgage
loans through Master Sales Agreements. The size of the Company's financing
facilities is based on the Company's net worth and cash resources. As of January
31, 2004, the Company had a total of three financing facilities for a maximum
financing capacity of up to $75 million, of which approximately $59 million was
available as of January 31, 2004.

The funding facilities have various financial and operational covenants with
which the Company must comply, including the requirement that the Company
maintain cash deposits with certain lenders as compensating balances.
Collectively, these facilities require compensating balances of $2.0 million. As

                                       20
<PAGE>

of January 31, 2004, the Company was in compliance with all of its operational
convenants and was not in compliance with one of its financial covenants of one
of its facilities, but was back in compliance as of February 29, 20004. The
agreements are renewable on an annual basis, subject to the lenders` evaluation
of the Company's financial position at that time. However, despite the fact that
the agreements are for a year at a time, other provisions included in the
agreements give both the lender and the Company the right to terminate the
agreement without cause; either immediately upon notification or with 30 days
written notice. Termination of any of these facilities could have a material
adverse effect on the Company's operations and its financial performance by
constraining its ability to fund loans. If termination were to occur, the
Company would need to seek alternative sources of financing, possibly under less
favorable terms. Joseph Kristul, CEO, and Maria Kristul, President, have both
personally guaranteed the three facilities in place at January 31, 2004. The
Company believes that its relationships with its existing lenders is
satisfactory at the current time.

The level of financing facilities the Company can obtain is a multiple of the
Company's equity. For every dollar increase in the Company's equity, it can
expect a $15 to $20 increase in financing facility capacity. Conversely, every
dollar reduction in equity has the potential to constrain the Company's
financing facilities by $15 to $20. Given the improvement in the Company's
results over the past year, management was able to renegotiate the interest
rates it pays on one significant facility, lowering the rate paid by 1.50%, or
150 basis points, effective August 1, 2003. The Company will negotiate for more
favorable terms from its other lenders, as well as seek to obtain other
financing facilities at favorable rates. Given the lower level of current
fundings, the Company has reduced the committed amount under one facility and
eliminated two others. The Company continues to review its existing facilities
in an ongoing attempt to improve net interest income (expense), which has been a
significant contributor to prior years' operating losses.

The Company's overall funding strategy is to use committed facilities,
summarized as of January 31, 2004:
<TABLE>
<CAPTION>

                             Committed      Outstanding        Required      Interest Rate
Type of Facility               Facility        Balance       Cash Deposit    January 31, 2004    Maturity
----------------             -------------  ------------     ------------    ----------------    --------

<S>                          <C>            <C>              <C>               <C>              <C>
Master sale agreement (1)    $40,000,000    $ 5,839,812      $1,000,000        5.00%(2)         Annual or 30 days notice
Master sale agreement (1)     15,000,000        627,200         900,000        3.85%(3)         Annual or 30 days notice
Master sale agreement (1)     20,000,000      9,643,711         100,000        3.50%(4)         Annual or 30 days notice
                              ----------      ---------       ---------

Totals                       $75,000,000    $16,110,723      $2,000,000
                              ==========     ==========       =========
</TABLE>



(1) The Company accounts for the loans underlying these facilities as sold as of
    January 31, 2004.
(2) The contractual interest rate on these facilities is 5.00% or Prime plus
    1.00%, whichever is greater.
(3) The contractual interest rate on this facility is the greater of LIBOR or
    the Fed Funds rate plus 2.75%.
(4) The contractual interest rate on this facility is the greater of LIBOR plus
    a margin ranging from 2.25% to 2.75%.

The Company is a party to financial instruments with off-balance sheet risk in
the normal course of business to meet the financing needs of its customers.
These financial instruments include commitments to extend credit in the form of
loans, and mandatory forward delivery commitments. These instruments involve, to
varying degrees, elements of credit and interest rate risk in excess of the
amounts recognized in the balance sheet. The mandatory forward delivery
commitments also involve the risk of nonperformance on the part of the Company.
The Company manages these risks by entering into these agreements with major,
well-known financial institutions. The contract amounts of these instruments
reflect the extent of involvement the Company has in particular classes of
financial instruments.

                                       21
<PAGE>

The notional value of financial instruments, whose contract amounts represent
credit and risk at the indicated dates, are as follows:

                                            January 31,              April 30,
                                               2004                     2003
                                            -----------------------------------

Commitments to extend credit                $  38,167,407       $  90,722,206
Mandatory forward delivery commitments          5,000,000          16,000,000


Commitments to extend credit are agreements to lend to a customer as long as
there are no violations of any conditions established in the contract on the
part of the customer. Commitments generally have fixed expiration dates or other
termination clauses. Since many of the commitments to extend credit are expected
to expire without being drawn upon, the total commitment amounts do not
necessarily represent future cash outlay requirements.

ITEM 3.  CONTROLS AND PROCEDURES

The Company maintains disclosure controls and procedures that are designed to
ensure that information required to be disclosed in the Company's Securities
Exchange Act reports is recorded, processed, summarized and reported within the
time periods specified in the Securities and Exchange Commission's rules and
forms, and that such information is accumulated and communicated to the
Company's management, including its Chief Executive Officer and Chief Financial
Officer, as appropriate, to allow timely decisions regarding required
disclosure. During the 90-day period prior to the date of this report, an
evaluation was performed under the supervision and with the participation of the
Company's management, including the Chief Executive Officer and the Chief
Financial Officer, of the effectiveness of the design and operation of the
Company's disclosure controls and procedures. Based upon that evaluation, the
Chief Executive Officer and the Chief Financial Officer concluded that the
Company's disclosure controls and procedures were effective. There have been no
significant changes in the Company's internal controls or in other factors that
could significantly affect these controls, and no corrective actions taken with
regard to significant deficiencies or material weaknesses in such controls,
subsequent to the date of the Company's most recent evaluation of internal
controls.



                                       22
<PAGE>


PART 2. OTHER INFORMATION

Item 6.  EXHIBITS AND REPORTS ON FORM 8-K

   (a)   EXHIBITS

         31.1     Certification of the Chief Executive Officer pursuant to 18
                  U.S.C. Section 1350 as adopted pursuant to Section 302 of the
                  Sarbanes-Oxley Act of 2002
         31.2     Certification of the Chief Financial Officer pursuant to 18
                  U.S.C. Section 1350 as adopted pursuant to Section 302 of the
                  Sarbanes-Oxley Act of 2002
         32.1     Certification of the Chief Executive Officer pursuant to 18
                  U.S.C. Section 1350 as adopted pursuant to Section 906 of the
                  Sarbanes-Oxley Act of 2002
         32.2     Certification of the Chief 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

           NONE



                                       23
<PAGE>




                                   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 Financial Network, Inc.

Date: March 8, 2004               /s/ Joseph Kristul
                                  -------------------------------------------
                                  Joseph Kristul, Chief Executive Officer


Date: March 8, 2004               /s/ Jack Thrift
                                  -------------------------------------------
                                   Jack Thrift, Chief Financial Officer










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