U.S. Securities and Exchange Commission
                             Washington, D.C. 20549

                                   Form 10-QSB


(Mark One)

[X] QUARTERLY REPORT UNDER SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF
    1934
                For the quarterly period ended September 30, 2000

[ ] 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  of                        (IRS Employer
   incorporation  or organization)                        Identification No.)

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 October 20, 2000: 4,279,310


<PAGE>




                      TRANSNATIONAL FINANCIAL NETWORK, INC.

                               SEPTEMBER 30, 2000

                                    UNAUDITED



                    TABLE OF CONTENTS                   PAGE NUMBER


PART 1     ITEM 1   FINANCIAL INFORMATION


                    Condensed Balance Sheets as of
                    September 30, 2000 and
                    December 31, 1999                           2


                    Condensed Statements of Operations
                    For the Three and Nine Months
                    Ended September 30, 2000 and 1999           3

                    Condensed Statements of Cash Flows
                    for the Nine Months Ended
                    September  30, 2000  and 1999               4


                    Notes to Condensed Financial Statements     5

           ITEM 2   Management's Discussion and Analysis
                    of Financial Condition and Results
                    of Operations                               8


                    SIGNATURES                                 14








<PAGE>



                      TRANSNATIONAL FINANCIAL NETWORK, INC.

                            CONDENSED BALANCE SHEETS
<TABLE>
<CAPTION>

                                                                               September 30,      December 31,
                                                                                    2000              1999
                                                                             ----------------   ---------------
                                                                             ----------------   ---------------
                                                                                (Unaudited)
ASSETS
<S>                                                                          <C>                 <C>
               Cash and cash equivalents                                     $    1,638,394      $      862,257
               Mortgage loans held for sale                                      27,224,066           2,009,092
               Accrued interest receivable                                           69,396              40,126
               Due from Shareholders                                                 25,428                   0
               Investment in Loan Link, LLC                                               0             300,000
               Receivable from Loan Link, LLC                                       300,000             200,000
               Notes receivable                                                     100,000             135,819
               Investment in real estate                                                  0             190,671
               Goodwill                                                           3,529,040           3,758,827
               Property and equipment, net                                          349,971             577,079
               Other assets                                                         962,660             988,930
                                                                              -------------       -------------

TOTAL ASSETS                                                                 $   34,198,955      $    9,062,801
                                                                              =============       ==============



LIABILITIES AND SHAREHOLDERS' EQUITY

LIABILITIES:
              Warehouse notes payable                                        $   26,864,753      $            0
              Accrued interest payable                                              256,839             164,278
              Real estate mortgage                                                        0             140,283
              Due to shareholders                                                         0              22,043
              Accounts payable and accrued liabilities                              513,446              80,392
              Long term liabilities- Subordinated debt                              560,000                   0
                                                                              -------------       -------------

TOTAL LIABILITIES                                                                28,195,038             406,996
                                                                              -------------       -------------


SHAREHOLDERS' EQUITY
              Preferred stock, no par value: 2,000,000 shares
                 authorized, no shares issued or outstanding                              0                  0
              Common stock, no par value: 10,000,000 shares
                 authorized: 4,279,310 shares issued and outstanding,
                 as of June 30, 2000 and December 31, 1999                       10,594,450          10,558,709
              Accumulated deficit                                                (4,590,533)         (1,902,904)
                                                                              -------------       -------------

TOTAL SHAREHOLDERS' EQUITY                                                        6,003,917           8,655,805
                                                                              -------------       -------------


TOTAL LIABILITIES AND SHAREHOLDERS' EQUITY                                   $   34,198,955      $    9,062,801
                                                                              =================   =============
</TABLE>


         See accompanying notes to condensed financial statements.
<PAGE>


                     TRANSNATIONAL FINANCIAL NETWORK, INC.

                       CONDENSED STATEMENTS OF OPERATIONS

                                   (Unaudited)

<TABLE>
<CAPTION>


                                                                 For the Three                  For the Nine
                                                                  Months Ended                  Months Ended
                                                                 September 30,                  September 30,
                                                          ----------------------------     ----------------------------

                                                              2000           1999            2000           1999
                                                              ----           ----            ----           ----

INCOME

<S>                                                        <C>             <C>             <C>            <C>
                 Net gain on sale of mortgage loans        $    561,696    $   920,010     $ 1,435,302    $ 3,255,114
                 Production income                            1,268,356      1,472,620       3,910,249      2,976,591
                 Interest Income                                538,651        587,445       1,415,468      2,087,817
                 Other                                           43,976         21,305         250,129         41,423
                                                            -----------     ----------      ----------     ----------
                                                              2,412,679      3,001,380       7,011,148      8,360,945
                                                            -----------     ----------      ----------     ----------


EXPENSES

                 Interest expense                               613,156        495,191       1,542,222      1,839,598
                 Salaries and benefits                        1,725,181      2,574,334       5,698,424      5,361,527
                 General and administrative                     655,666        885,611       2,143,222      1,891,124
                 Occupancy                                      164,190        185,335         534,099        371,363
                                                            -----------    -----------      ----------     ----------
                                                              3,158,193      4,140,471       9,917,967      9,463,612
                                                            -----------    -----------      ----------     ----------


LOSS BEFORE INCOME TAXES                                       (745,514)    (1,139,091)     (2,906,819)    (1,102,667)


INCOME TAX (BENEFIT) EXPENSE                                   (219,190)       (14,987)       (219,190)             0


                                                            -----------    -----------      ----------     ----------

NET (LOSS)                                                 $   (526,324)  $ (1,124,104)    $(2,687,629)   $(1,102,667)
                                                            ============   ===========      ==========     ==========



NET (LOSS) INCOME  PER SHARE

                 Basic and diluted                         $    (0.12)    $     (0.27)     $   (0.63)     $    (0.29)


WEIGHTED AVERAGE SHARES OUTSTANDING
                  Basic and diluted                           4,279,310      4,090,405       4,279,310      3,831,565
</TABLE>
See accompanying notes to condensed financial statements.
<PAGE>




                      TRANSNATIONAL FINANCIAL NETWORK, INC.

                       CONDENSED STATEMENTS OF CASH FLOWS

                                   (Unaudited)
<TABLE>
<CAPTION>

                                                                                              For the Nine
                                                                                              Months Ended
                                                                                             September 30,
                                                                                        2000                  1999
                                                                                   --------------        -------------
                                                                                   --------------        -------------
Cash flows from operating activities:
<S>                                                                                <C>                   <C>
           Net loss income                                                         $  (2,687,629)        $ (1,102,667)
           Adjustments to reconcile net loss to net cash provided
             by(used in)operating activities:
                   Gain on sale mortgage loans                                        (1,294,033)          (3,817,179)
                   Provision for early payoffs                                           141,269               39,975
                   Depreciation and amortization                                         477,498              171,938
                   Issuance of stock warrants for services                                35,741                    0
                   Mortgage loans originated for sale                               (435,605,766)        (599,163,141)
                   Proceeds from sales of mortgage loans                             411,543,556          654,277,048
                   Net gain on sale of investment property                               (65,298)                   0
                   Changes in assets and liabilities:
                        Accrued interest receivable                                      (29,270)              (6,246)
                        Notes receivable                                                  35,819                    0
                        Other assets                                                     117,867             (400,236)
                        Accrued interest payable                                          92,561             (365,398)
                        Accounts payable and accrued liabilities                         433,054             (718,932)
                                                                                    ------------          -----------
                   Net cash provided by(used in)operating activities                 (26,804,632)          48,915,162
                                                                                    ------------          -----------

Cash flows from investing activities:
             Purchases of property and equipment                                         (12,391)            (333,824)
             Repayment of advances by Loan Link, LLC                                     200,000                    0
             Purchase/additional cost to acquire LRS                                     (30,438)          (1,806,930)
                                                                                    ------------          -----------

             Net cash provided by (used in) investing activities                         157,171           (2,140,754)
                                                                                    ------------          -----------

Cash flows from financing activities:
             Borrowings on warehouse notes payable                                   316,490,191          786,591,762
             Payments on warehouse notes payable                                    (289,625,438)        (833,125,936)
             Payments on distribution payable to "S" corporation stockholders                  0              (65,742)
             Payments on real estate mortgage                                             (1,156)              (2,566)
             Borrowings on subordinated debt                                             560,000                    0
                                                                                    ------------          -----------

             Net cash provided by (used in) financing activities                      27,423,597          (46,602,482)
                                                                                    ------------          -----------

NET INCREASE  IN CASH AND CASH EQUIVALENTS                                               776,137              171,926
                                                                                    ------------          -----------

CASH AND CASH EQUIVALENTS, BEGINNING OF PERIOD                                           862,257              990,115
                                                                                    ------------          -----------

CASH AND CASH EQUIVALENTS, END OF PERIOD                                           $   1,638,394         $  1,162,041
                                                                                    ============          ===========

Cash paid during the period for:

                      Interest paid                                                    1,386,465            1,917,484
                                                                                    ============          ===========
                      Income taxes paid (refund)                                        (597,278)             515,016
                                                                                    ============          ===========
</TABLE>
See accompanying notes to condensed financial statements.
<PAGE>





                      TRANSNATIONAL FINANCIAL NETWORK, INC.

                     NOTES TO CONDENSED FINANCIAL STATEMENTS

                               SEPTEMBER 30, 2000
                                   (Unaudited)



NOTE 1      The accompanying  financial statements of Transnational  Financial
            Network,  Inc. (the  "Company") are unaudited and have been prepared
            without  audit  pursuant  to  the  rules  and   regulations  of  the
            Securities  and  Exchange   Commission.   Certain   information  and
            financial  disclosures  normally  included in  financial  statements
            prepared in accordance with generally accepted accounting principles
            have  been   condensed  or  omitted   pursuant  to  such  rules  and
            regulations.   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
            December  31,  1999.  These   statements   include  all  adjustments
            consisting  only of normal  recurring  accruals,  which are,  in the
            opinion of management  considered  necessary for a fair presentation
            of financial position and results of operations.

            The preparation of financial statements in conformity with generally
            accepted accounting principles requires management to make estimates
            and   assumptions   that  affect   certain   reported   amounts  and
            disclosures.  Accordingly,  actual  results  could differ from those
            estimates.

            Reclassifications  -  Certain  amounts  in the  September  30,  1999
            financial  statements  have  been  reclassified  to  conform  to the
            September 30, 2000 presentation.


NOTE2       The results of  operations  of the Company for the  nine-month
            periods  ended  September  30,  2000 and  1999  are not  necessarily
            indicative of the results to be expected for the full year.


NOTE 3      Net (Loss) Income  Per Share

            Basic net (loss) income per share is computed by dividing net (loss)
            income by the weighted average common shares  outstanding during the
            period. Diluted net (loss) income per share is computed based on the
            weighted  average number of common shares  outstanding  adjusted for
            potentially dilutive securites.  For the nine months ended September
            30,  2000 and 1999,  the effect of  including  potentially  dilutive
            securities in the calculation of diluted net (loss) income per share
            would be  antidilutive.  As a  result,  the  effect  of  potentially
            dilutive  securities  of  769,500  has  not  been  included  in  the
            calculations.


<PAGE>







NOTE 4      In February  2000, the Company's  Board of Directors  approved the
            2000 Stock Incentive Plan ("2000 Plan") effective March 1, 2000. All
            options  presently  issued  and  outstanding  under  the 1998  Stock
            Compensation  Plan ("1998  Plan") will continue to be honored but no
            more options may be issued under the 1998 Plan.

            Under the 2000  Plan,  the  maximum  number  of  shares  that can be
            granted in any one year to any single  individual either directly or
            via option grants will be 150,000.  Among other features of the plan
            is an initial  outside  directors'  option grant of 15,000 shares to
            each  director at the date the plan was adopted or upon the director
            first becoming such.  Each outside  director also receives an option
            for 5,000 shares upon election at the annual meeting of stockholders
            provided  the  director  has served at least six months.  The option
            price is the  market  price of the stock on the date of  grant.  The
            2000 Plan also contains an incentive stock option plan, which allows
            options  to be  granted to  eligible  employees.  The 2000 Plan also
            permits  directors and certain  employees to receive options in lieu
            of  compensation  as well as  directly  granting  stock  to  certain
            employees as a bonus.  As of September  30,  2000,  options  granted
            under the 2000 Plan consist of automatic grants to outside directors
            and options for 100,000 shares given to a senior  executive  officer
            hired in August 2000. The 2000 Plan was ratified by the shareholders
            at the annual shareholders meeting held on May 11, 2000.


NOTE 5      Subordinated Debt -

            In August ($500,000) and September  ($60,000),  the Company borrowed
            $560,000 in  subordinated  debt.  Interest is payable monthly at 15%
            with the debt maturing in 2002.


NOTE 6      Income Taxes -

            During the third  quarter of 2000 the  Company  received  income tax
            refunds in excess of amounts previously recorded as receivables.



<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.

   Forward-Looking Information

   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 in this Form
   10-QSB  and  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.  ("Transnational  Financial Network,
   Inc." 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.  During the second  quarter of 1999,  the  Company
   opened additional loan production offices in Houston, Texas, Phoenix, Arizona
   and Reno, Nevada. The Nevada and Texas offices were subsequently closed.

   The Company's loan production and results of operations are strongly affected
   by mortgage interest rates.  Increasing  mortgage rates raises the qualifying
   income  required of a homebuyer and reduces  housing  affordability.  It also
   causes mortgage  refinancing activity to decline because fewer homeowners can
   successfully  obtain a mortgage at a lower  interest rate than their original
   mortgage.  Thus,  when  mortgage  interest  rates  started  to rise in  1999,
   industry-wide  refinancing,  which was $740  billion in 1998  dropped  and is
   expected to total only $180 billion in 2000, a decline of over 75%.

   In January 1999,  30-year mortgage interest rates were 6.74%,  reaching 7.55%
   at the end of the  second  quarter  and 7.91% at  year-end.  During the first
   quarter of 2000 the 30-year  mortgage  rate went up to 8.24%,  then peaked at
   8.54% in the  middle of June and moved down to 8.14% by the end of the month.
   Since then,  the rate has  stabilized at around 8% until  recently on October
   25, 2000 when the 30-year fixed rate average dropped to 7.36%.

<PAGE>



   The  Company's  mortgage  loan  production  started to decline from the third
   quarter  of  1999  and  continued   through  the  second   quarter  of  2000.
   Subsequently, loan production increased slightly in tandem with the favorable
   decline in interest  rates in the third  quarter of this year.  The following
   table  sets  forth  the  wholesale  and  retail  production  for the  periods
   indicated:


                              Mortgage Loan Volume
                      For the First Three Quarters of 1999

<TABLE>
<CAPTION>



                              1st Qtr-99.          2nd Qtr.-99            3rd Qtr.-99           Total

<S>                          <C>                  <C>                     <C>                  <C>
               Wholesale     $269,810,903         $185,189,710            $165,426,612         $620,427,225

               Retail          27,053,889           21,097,932              75,457,636          123,609,457
                              -----------          -----------             -----------          -----------

               TOTAL         $296,864,792         $206,287,642            $240,884,248         $744,036,682
</TABLE>


                              Mortgage Loan Volume
                      For the First Three Quarters of 2000
                                    <TABLE>
<CAPTION>


                              1st Qtr-00.          2nd Qtr.-00            3rd Qtr.-00           Total

<S>                          <C>                  <C>                   <C>                  <C>
               Wholesale     $144,043,724         $130,878,546          $154,913,511         $429,835,781

               Retail          77,405,856           82,928,025            67,973,925          228,307,806
                              -----------          -------------         -----------          -----------

               TOTAL         $221,449,580         $213,806,571          $222,887,436         $658,143,587
</TABLE>




   Overall, the Company's mortgage loan volume decreased by $85,893,095 or 11.5%
   for the first nine  months of 2000 when  compared to the first nine months of
   1999.  Wholesale  mortgage loan production through September 30 this year was
   $190,591,444  or 30.7% less than in the same period in 1999. Of this decline,
   94.5%  occurred  in the first six  months of 2000 when  interest  rates  were
   highest  compared  to  the  rates  in  the  comparable  period.  Retail  loan
   production, on the other hand, was $104,698,349 or 84.7% more compared to the
   first three quarters of 1999. All of this increase in retail loan  production
   was recorded in the first six months of 2000 compared to the same period last
   year because of the large retail  operations of LRS, Inc.  which was acquired
   on July 30, 1999.

<PAGE>




NINE MONTHS ENDED SEPTEMBER 30, 2000 COMPARED TO NINE MONTHS ENDED SEPTEMBER 30,
1999


   For the nine-month  period ended  September 30, 2000, the Company  incurred a
   net loss of $2,651,888  compared to a net loss of $1,102,667  during the same
   period in 1999. Gross revenue declined by $1,349,797 or 16.1% attributable to
   reduced wholesale loan originations  while expenses for the first nine months
   of 2000  increased  by  $418,614  or by 4.4% over the same  period last year.
   Expenses of the Arizona  office  established  mid-1999 and those of LRS, Inc.
   which was acquired at the end of July 1999 account for higher expenses during
   the first  three  quarters  of 2000  compared  to the same  period last year.
   Reductions of corporate  expenses were not sufficient to offset the increased
   cost of these offices.

   Net gain on sale of mortgage  loans  decreased by  $1,819,812 or 55.9% during
   the first nine months of 2000 compared to the same period last year. This was
   the combined  effect of lower  wholesale  production and the narrower  profit
   margin on loans  sold  during  the  first  nine  months of 2000.  59% of this
   decrease in gain on sale of loans occurred in the first  quarter,  21% in the
   second  quarter,  and 20% in the third  quarter of 2000  compared to the same
   period last year..  Wholesale production was $ 126 million less for the first
   three months of 2000,  was $54 million less during the second quarter and was
   $10.5 million less during the third quarter compared to the same periods last
   year. The decrease in production was industry wide and was the dominant cause
   of lower  gains on sale.  Beginning  in  April  of  2000,  the  Company  also
   discontinued  the wholesale  sub-prime  loan  operations of the acquired LRS,
   Inc.,  which  accounts  for part of the  decrease  in  production  this  year
   compared to the same period last year.

   Production  income  is  derived  from  wholesale  loan fees and  retail  loan
   origination fees. Production income went up by $933,658 or 31.4% for the nine
   months ended September 30, 2000 compared to the same period last year because
   of increased retail loan production as previously described.

   Interest income is derived from  borrowers'  payments on mortgage loans prior
   to the loan being  sold by the  Company.  Interest  expense  is  incurred  on
   drawdowns  made by the Company on its warehouse line of credit at the time of
   funding  the  mortgage  loans  until the loans are sold.  As in the first and
   second quarters of this year, interest expenses for the warehouse line in the
   third quarter  exceeded  interest  income  received by the Company from loans
   funded but not yet sold.  This  resulted in net interest  expense of $126,754
   for the first nine  months of 2000 in contrast  to a net  interest  income of
   $248,219 during the same period in 1999.

   The Company lowered interest costs by changing to another warehouse lender at
   the beginning of this year.  Nonetheless,  the amount the Company received on
   mortgage  loans after they were funded was less than the interest the Company
   paid on its  warehouse  line of credit  during the first nine  months of 2000
   compared to a positive net interest  income during the same period last year.
   The Company funded an increased  number of adjustable  rate mortgages  (ARMs)
   some of which have initial  rates as low as 2.95%,  substantially  lower than
   what the Company pays for its warehouse line. The Company  anticipates having
   a negative interest spread for the rest of the year.

<PAGE>


   Salaries and benefits,  general and  administrative,  and occupancy  expenses
   were all higher  during the first nine  months of 2000  compared  to the same
   period in 1999.  Expenses have actually been  significantly  pared down since
   the beginning of the year.  This is not readily  apparent,  however,  because
   expense  totals  for 2000  include  expenses  of  Arizona  branch  and of the
   acquired LRS,  Inc. from the beginning of the year while 1999 expense  totals
   reflect expenses for these offices only starting mid-June 1999 in the case of
   Arizona branch and August 1, 1999 in the case of the acquired LRS, Inc.


   THREE  MONTHS  ENDED  SEPTEMBER  30,  2000  COMPARED  TO THREE  MONTHS  ENDED
   SEPTEMBER 30, 1999

   The Company  incurred a net loss after income taxes of $526,324 for the three
   months ended  September 30, 2000 compared to a net loss after income taxes of
   $1,124,104  during the  comparable  period last year. The smaller net loss in
   the third  quarter  of 2000  compared  to the same  period  last year was the
   result of  reductions  in expenses  and a refund of income taxes which offset
   the decrease in revenue.

   Net gain on sale of mortgage loans  decreased  $358,313 or 39.0%,  production
   income  decreased by $204,264 or 13.9% and other income was higher by $22,671
   or 106.4% for the third  quarter of 2000  compared to the totals for the same
   period  last year.  Other  income rose  because of  interest  accruals on the
   $300,000 notes  receivable  from 4ADream Loan Link LLC, a holding company for
   an internet mortgage loan brokerage.

   The bulk of the decrease in net gain on sale arose from lower  wholesale loan
   production.  Total wholesale loans closed were  $10,513,101 or 6.4% less than
   in the same  period  last  year.  Production  income  went down  because of a
   decrease in retail  origination  fees posted by the acquired LRS, Inc. during
   the third quarter this year compared to fee income it contributed immediately
   after  acquisition  in 1999.  Retail loan  production  was $7,483,711 or 9.9%
   lower than in the third quarter of 1999,  principally because of a decline in
   LRS's retail production.

   During the third quarter of 2000, the Company incurred a net interest expense
   of $74,505  compared to a net interest income in the third quarter of 1999 of
   $92,254. The unfavorable result in 2000 reflects the negative gap between the
   initial  interest rates on mortgage loans funded and the interest rate on the
   warehouse line.

   The  Company  has  taken  steps to  reduce  controllable  expenses  since the
   beginning  of the year.  Among  others,  the  Company  reduced  the number of
   support  staff,  placed  account  executives  on straight  commission so that
   compensation will vary with loan production, renegotiated vendor contracts to
   bring down monthly costs,  prioritized and limited technology projects to the
   most  important,  and  managed  down  delivery  and fax  expenses by limiting
   distribution  of rate  sheets to only  active  brokers.  The  effect of these
   aggressive cost cutting  measures which was not apparent in the comparison of
   expenses between the nine-month period ending September 30, 2000 and the same
   period in 1999 is visible in the analysis of expenses for the third  quarter.
   Unlike in previous quarter  comparisons,  general overhead for Arizona branch
   and the former LRS,  Inc.'s  expenses  are included in both the 1999 and 2000
   third quarter numbers.

<PAGE>



   Excluding  interest  expense,  total expenses were  $1,100,243 or 30.2% lower
   during  the  third  quarter  of 2000  compared  to the same  period  in 1999.
   Commissions  decreased  by  $177,423  or 18.2%  because of lower  production.
   Salaries   and  benefits   decreased  by  $843,153  or  32.8%,   general  and
   administrative expenses by $229,945 or 28%, and occupancy costs by $21,145 or
   11.4% mainly as a result of aggressive cost reduction efforts.

   Production started to increase during the latter part of the third quarter at
   the same time that the Company made better spreads on loans sold. The Company
   will continue to implement an action plan to return to profitability.

   The  pre-tax  loss for the first,  second,  and third  quarters  of 2000 were
   $473,942, $814,806, and $745,514,  respectively. While the third quarter loss
   narrowed in comparison to the second  quarter 2000 loss,  the benefit of cost
   reduction was not as much in the third quarter as in the prior two quarters.



LIQUIDITY AND CAPITAL RESOURCES

   The Company's main funding source is a $40 million  revolving  warehouse line
   of credit provided by Residential  Funding Corporation (RFC) to fund mortgage
   loan  originations.  Interest on warehoused loans are at LIBOR + 1.5% (8.12 %
   at  September  30, 2000) and LIBOR + 2% starting  October 23,  2000.  The RFC
   credit  agreement  matured  on August  31,  2000 and the  warehouse  line was
   extended  to January 15,  2001 at a reduced  amount of $35 million  effective
   November 1, 2000. and a higher  interest rate of LIBOR + 2% starting  October
   2000. The new terms also provide that no further  advances can be made on the
   line after November 30, 2000.

   As of November 10, 2000, the Company has received credit approval from Lehman
   Brothers  Bank  for a $20  million  warehouse  line  beginning  on or  before
   November 30, 2000.  Lehman  Brothers Bank requires a minimum of $3 million of
   adjusted  tangible net worth. In addition,  Gateway Bank has approval for the
   Company's  immediate use of $10 Million on a QuickSale line  (warehouse)  and
   Gateway  Bank  stated  that they are  increasing  the line to $20  million by
   year-end.

   The  Company  is in  negotiations  with  four  other  national  entities  for
   warehouse  and  gestation  lines in an  aggregate  of over $57  million . The
   Company  requires  a minimum  of $30  Million  to fund  acceptable  levels of
   revenues.  The Company  believes that by  mid-December  it will have in place
   adequate  funding  sources to support its increasing  production.  Failure to
   achieve the $30 million  credit lines will have a material  adverse effect on
   the Company's operations and financial performance.



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                                   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 Corporation



November 14, 2000                       /s/ Joseph Kristul
                                        ---------------------------------------
                                        Joseph Kristul, Chief Executive Officer
                                        And Principal Financial Officer


















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