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 June 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 July 15, 2000: 4,279,310



<PAGE>



                      TRANSNATIONAL FINANCIAL NETWORK, INC.

                                  JUNE 30, 2000

                                    UNAUDITED

                    TABLE OF CONTENTS                                PAGE NUMBER


PART 1  ITEM 1      FINANCIAL INFORMATION

                    Condensed Balance Sheets as of June 30, 2000
                    And December 31, 1999                                   2

                    Condensed Statements of Operations
                    For the Three and Six Months

                    Ended June 30, 2000 and 1999                            3

                    Condensed Statements of Cash Flows for the

                    Three Months Ended June 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


PART II ITEM 4      SUBMISSION OF MATTERS OF VOTE TO                       13
                    SECURITY HOLDERS


                    SIGNATURES


<PAGE>



                      TRANSNATIONAL FINANCIAL NETWORK, INC.

                            CONDENSED BALANCE SHEETS

<TABLE>
<CAPTION>
                                                                                 June 30,         December 31,
                                                                                    2000              1999
                                                                             ------------------ ---------------
                                                                                (Unaudited)
<S>                                                                          <C>                <C>
ASSETS

               Cash and cash equivalents                                     $      837,897     $       862,257
               Mortgage loans held for sale                                      19,593,912           2,009,092
               Accrued interest receivable                                           60,799              40,126
               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                                                           3,618,467           3,758,827
               Property and equipment, net                                          412,871             577,079
               Other assets                                                         815,001             988,930
                                                                             ------------------ ---------------

TOTAL ASSETS                                                                 $   25,738,947     $     9,062,801
                                                                             ================== ===============


LIABILITIES AND SHAREHOLDERS' EQUITY

LIABILITIES:

              Warehouse notes payable                                        $   19,116,796     $             0
              Accrued interest payable                                              111,084             164,278
              Real estate mortgage                                                        0             140,283
              Due to shareholders                                                         0              22,043
              Accounts payable and accrued liabilities                               16,567              80,392
                                                                             ------------------ ---------------

TOTAL LIABILITIES                                                                19,244,447             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                       10,558,709          10,558,709
              Accumulated deficit                                                (4,064,209)         (1,902,904)
                                                                             ------------------ ---------------

TOTAL SHAREHOLDERS' EQUITY                                                        6,494,500           8,655,805
                                                                             ------------------ ---------------


TOTAL LIABILITIES AND SHAREHOLDERS' EQUITY                                   $   25,738,947      $    9,062,801
                                                                             ================== ===============
</TABLE>



            See accompanying notes to condensed financial statements.



                                      - 2 -
<PAGE>


                      TRANSNATIONAL FINANCIAL NETWORK, INC.

                       CONDENSED STATEMENTS OF OPERATIONS

                                   (Unaudited)


<TABLE>
<CAPTION>
                                                                 For the Three                   For the Six
                                                                  Months Ended                  Months Ended
                                                                    June 30,                      June 30,
                                                          ----------------------------- ------------------------------

                                                              2000           1999            2000           1999
                                                              ----           ----            ----           ----
<S>                                                         <C>             <C>             <C>          <C>
    INCOME

                 Net gain on sale of mortgage loans         $  476,442      $ 861,655       $ 873,606    $ 2,335,105
                 Production income                           1,339,405        567,703       2,641,893      1,503,971
                 Interest Income                               421,785        476,971         876,817      1,500,371
                 Other                                         157,504          4,127         206,154         20,118

                                                          -------------- -------------- --------------- --------------
                                                             2,395,136      1,910,456       4,598,470      5,359,565
                                                          -------------- -------------- --------------- --------------


   EXPENSES

                 Interest expense                               437,812        346,560         929,066      1,344,406
                 Salaries and benefits                        1,912,574      1,370,348       3,988,729      2,792,917
                 General and administrative                     670,050        566,085       1,473,004        999,793
                 Occupancy                                      189,506         94,424         368,975        186,028
                                                          -------------- -------------- --------------- --------------
                                                              3,209,942      2,377,417       6,759,774      5,323,144
                                                          -------------- -------------- --------------- --------------


INCOME (LOSS) BEFORE INCOME TAXES                          (   814,806)    (  466,961)      (2,161,304)        36,421

INCOME TAX (BENEFIT) EXPENSE                                          0      (196,433)               0         14,987

                                                          -------------- -------------- --------------- --------------
NET (LOSS) INCOME                                          $(  814,806)    $ (270,528)   $ (2,161,304)       $ 21,434
                                                          ============== =============== ============== ==============



NET (LOSS) INCOME  PER SHARE

                 Basic and diluted                          $  (  0.19)    $  (  0.07)     $   ( 0.51)        $  0.01


WEIGHTED AVERAGE SHARES OUTSTANDING
                  Basic and diluted                           4,279,310      3,700,000       4,279,310      3,700,000
</TABLE>














                                     - 3 -
<PAGE>


                      TRANSNATIONAL FINANCIAL NETWORK, INC.

                       CONDENSED STATEMENTS OF CASH FLOWS

                                   (Unaudited)


<TABLE>
<CAPTION>
                                                                                              For the Six
                                                                                              Months Ended
                                                                                                June 30,
                                                                                         2000              1999
                                                                                   ----------------- -----------------
<S>                                                                                <C>                <C>
Cash flows from operating activities:

           Net (loss) income                                                       $(2,161,304)       $     21,434
           Adjustments to reconcile net income to net cash provided By (used in)
           operating activities:
                   Gain on sale mortgage loans                                        (788,595)         (2,755,973)
                   Provision for early payoffs                                         (85,011)            (42,500)
                   Depreciation and amortization                                       314,599              54,943
                   Mortgage loans originated for sale                             (281,773,567)       (455,000,613)
                   Proceeds from sales of mortgage loans                           265,062,354         506,091,109
                   Net gain on sale of investment property                             (65,297)                  0
                   Changes  in assets  and liabilities:
                        Accrued interest receivable                                    (20,673)             (2,989)
                        Notes receivable                                                35,819                   0
                        Other assets                                                  (286,333)           (370,499)
                        Accrued interest payable                                       (53,194)           (303,328)
                        Accounts payable and accrued liabilities                       (63,825)           (697,416)
                                                                                   ----------------- -----------------

             Net cash provided by (used in) operating activities                   (19,312,363)         46,994,168
                                                                                   ----------------- -----------------

Cash flows from investing activities:

             Purchases of property and equipment                                       (12,391)          (261,481)
             Repayment of advances by Loan Link, LLC                                   200,000                  0
             Additional cost to acquire LRS                                            (15,246)                 0
                                                                                   ----------------- -----------------
             Net cash provided by (used in) investing activities                       172,363           (261,481)
                                                                                   ----------------- -----------------

Cash flows from financing activities:

             Borrowings on warehouse notes payable                                 316,490,191        444,939,897
             Payments on warehouse notes payable                                  (297,373,395)      (492,094,714)
             Payments on distribution payable to "S" corporation stockholders                0            (65,742)
             Payments on real estate mortgage                                           (1,156)            (1,934)
                                                                                   ----------------- -----------------

             Net cash provided by (used in) financing activities                    19,115,640        (47,222,493)

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

DECREASE IN CASH AND CASH EQUIVALENTS                                                  (24,360)          (489,806)
                                                                                   ----------------- -----------------

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

CASH AND CASH EQUIVALENTS, END OF PERIOD                                           $   837,897       $    500,309
                                                                                   ================= =================

CASH PAID DURING THE PERIOD FOR
             Interest paid                                                         $   887,654       $  1,652,559
                                                                                   ================= =================

             Income taxes paid                                                     $         0       $    515,016
                                                                                   ================= =================
</TABLE>


            See accompanying notes to condensed financial statements




                                     - 4 -
<PAGE>

                      TRANSNATIONAL FINANCIAL NETWORK, INC.

                     NOTES TO CONDENSED FINANCIAL STATEMENTS

                                  JUNE 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 June 30, 1999
                     financial statements have been reclassified to conform to
                     the June 30, 2000 presentation.

NOTE 2               The results of operations of the Company for the six-month
                     periods ended June 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 six months ended June 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
                     those outstanding options has not been included in the
                     calculations.



                                     - 5 -
<PAGE>


NOTE 4               Acquisition

                     On July 30, 1999, the Company acquired all of the issued
                     and outstanding stocks of LRS, Inc., a Silicon Valley based
                     mortgage banking company. Under the terms of the agreement,
                     the Company paid $1.5 million in cash and issued 579,310
                     shares of Common Stock at a closing share price of $3.625
                     per share as of July 30, 1999. In addition, the Company
                     must pay certain earn-out amounts based on pretax income,
                     as defined, to the former stockholders of LRS, Inc. up to a
                     total of $3.2 million over a four-year period beginning
                     August 1, 1999 and ending July 31, 2003. In connection with
                     the acquisition, goodwill was recorded and is being
                     amortized using the straight-line method over 10 years. As
                     of June 30, 2000, goodwill including ongoing accrual for
                     earn out of former shareholders of LRS, Inc. was
                     $3,984,639.

                     The following Unaudited Pro Forma Combined Summary of
                     Operations presents a pro forma combined summary of
                     operations of the Company and LRS, Inc. for the six-month
                     period ended June 30, 1999 and it is presented as if the
                     acquisition had been effective on January 1, 1999. This pro
                     forma combined historical summary of operations was
                     adjusted for the amortization of purchase accounting
                     adjustments.

                     The Unaudited Pro Forma Combined Summary of Operations data
                     is intended for information purposes only and is not
                     necessarily indicative of the future results of operations
                     of the Company that would have actually occurred had the
                     merger been in effect for the periods presented.

             Unaudited Pro Forma Combined Summary of Operations (the
                             Company and LRS, Inc.)
                  For the six-month period ending June 30, 1999



                     GROSS REVENUE                     $11,225,887

                     NET (LOSS) INCOME                 $   317,329

                     NET (LOSS) INCOME PER SHARE

                     Basic                             $      0.07
                     Diluted                           $      0.07

                     WEIGHTED AVERAGE SHARES OUTSTANDING

                     Basic                               4,279,310
                     Diluted                             4,279,310


                                     - 6 -
<PAGE>


NOTE   5          During the first quarter of 2000, Transnational Financial
                  Network, Inc. entered into an agreement with 4ADREAM LOAN LINK
                  LLC to convert its $300,000 cash investment to a receivable to
                  be repaid in three years. The Company will continue to
                  maintain a 19.9% ownership interest. The $200,000 receivable
                  at December 31, 1999 was repaid in February 2000.

NOTE 6            On June 30, 2000, the Company sold its investment property in
                  Sta. Rosa, California at a net gain of $65,297. The receivable
                  for the sale is included in Other Assets.

NOTE   7          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 July 25, 2000,
                  there have been no options granted under the 2000 Plan other
                  than automatic grants to outside directors. The 2000 Plan was
                  ratified by the shareholders at the annual shareholders
                  meeting held on May 11, 2000.

NOTE  8           The agreement with RFC requires that the Company maintain a
                  tangible net worth of at least $3,000,000. At June 30, 2000,
                  the Company's tangible net worth was approximately $2,900,000.
                  The Company anticipates adding $1,000,000 in subordinated debt
                  which will allow the Company to comply with the tangible net
                  worth requirement of the RFC agreement.









                                     - 7 -
<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. ("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 in the San Francisco Bay area and Southern
               California. 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 results of operations are strongly affected by
               mortgage interest rates. Increasing interest rates result in
               diminished demand for mortgage loans especially those for
               refinancing. Throughout 1999 Federal Home Loan Mortgage
               Corporation's 30-year fixed rates for home mortgages increased
               and have continued to rise this year. In January 1999, these
               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 dropped sharply to 8.14% by the end of the
               month. This development came late in June and did affect loan
               production for June and for the quarter.


                                     - 8 -
<PAGE>


               The volume of mortgage loans declined beginning in the third
               quarter of 1999 and continued through the second quarter of 2000.
               The following table sets forth the wholesale and retail
               production for the periods indicated:

                              Mortgage Loan Volume
                    For 1999 Through the Second Quarter 2000



<TABLE>
<CAPTION>
                               1st Qtr.-99   2nd Qtr.-99    3rd Qtr.-99     4th Qtr.-99    1st Qtr.-00   2nd Qtr.-00
<S>                          <C>            <C>            <C>             <C>            <C>           <C>
               Wholesale     $269,810,903   $185,189,710   $165,426,612    $159,819,500   $144,043,724  $130,878,546

               Retail          27,053,889     21,097,932     75,457,636      69,371,902     77,405,856    82,928,025
                            -------------  -------------     ----------   -------------  ------------- -------------

               TOTAL         $296,864,792   $206,287,642   $240,884,248    $229,191,402   $221,449,580  $213,806,571
</TABLE>


               Overall, the Company's mortgage loan volume decreased by
               $67,896,283 or 13.5% for the first six months of 2000 when
               compared to the first six months of 1999 with wholesale mortgage
               loan production declining by $180,078,343 or 39.6% while retail
               mortgage loan production jumped by $112,182,060 or 233.0%.
               Similar to industry experience, the Company's loan production
               slowed down as a result of increasing mortgage interest rates.
               The office in Arizona, which was opened mid-year 1999 contributed
               to overall wholesale production but could not fully compensate
               for the reduction in loan production at other offices. Retail
               loan production, on the other hand, was much higher this year
               because of the large retail operations of LRS, Inc. which was
               acquired on July 30, 1999.

SIX MONTHS ENDED JUNE 30, 2000 COMPARED TO SIX MONTHS ENDED JUNE 30, 1999


               For the six-month period ended June 30, 2000, the Company
               incurred a net loss of $2,161,304 compared to net income after
               tax of $21,434 during the same period in 1999. Gross revenue
               declined by $761,095 or 14.2% attributable to reduced wholesale
               loan originations. Expenses increased by $1,436,630 or 27.0% .. A
               significant portion of this increase was due to the acquisition
               of LRS, Inc. on July 30, 1999 and the opening of the new branch
               in Arizona.in mid-1999.

               Beginning in April of this year, the Company also discontinued
               the wholesale sub-prime loan operations of the acquired LRS, Inc.
               However, transactions initiated before the closure still affect
               the Company's results of operations up to the present time.



                                     - 9 -
<PAGE>


               Net gain on sale of mortgage loans decreased by $1,461,499 or
               62.6% during the first six 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 because
               of greater competition. Over 70% of this decrease in gain on sale
               of loans occurred in the first three months of year 2000 compared
               to the same period last year. Wholesale production was $ 126
               million less for the first three months of 2000 compared with the
               first quarter of 1999 and was only $54 million less during the
               second quarter of 2000 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 $1,137,922 or
               75.7% for the six months ended June 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 draw downs 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 first quarter of this year,
               interest expenses for the warehouse line in the second quarter
               exceeded interest income received by the Company from loans
               funded but not yet sold. This resulted in net interest expense of
               $52,249 for the first six months of 2000 in contrast to a net
               interest income of $155,965 during the first half of 1999.

               The Company lowered interest costs by changing to another
               warehouse lender at the beginning of this year. However, the
               Company funded more and more adjustable rate mortgages (ARMs) in
               the first six months of 2000 which start at rates lower than what
               the Company pays for its warehouse line. Certain economists
               further predict that ARMs will represent about twice the amount
               of closed mortgages in 2000 as they did in 1999. Accordingly, the
               Company anticipates having to contend with a negative interest
               spread for the rest of the year.

               Salaries and benefits, general and administrative, and occupancy
               expenses were all higher during the first six months of 2000
               compared to the same period in 1999 due to expenses of the new
               offices which opened mid-year 1999; and most significant due to
               the addition of general overhead for the acquired LRS, Inc.
               starting August 1999.

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


               The Company incurred a loss of $814,806 for the three months
               ended June 30, 2000 compared to a net loss after income tax
               benefit of $270,528 during the comparable period last year.

               Net gain on sale of mortgage loans decreased $385,213 or 44.7%,
               production income increased by $771,702 or 135.9% and other
               income was higher by $153,378 or 3.716.5% for the second quarter
               of 2000 compared to the totals for the same period last year.



                                     - 10 -
<PAGE>


               Net gain on sale declined because of lower pricing dictated by
               competition and wholesale loan production. Total wholesale loans
               produced were $54,353,934 or 29.3% less than in the same period
               last year. Production income was pushed up by retail origination
               fees contributed by the acquired LRS, Inc. Retail production
               during the second quarter of 2000 was $82,928,025, $61,830,093 or
               293.1% higher than in the same period in 1999 before the LRS,
               Inc. acquisition. Other income also rose because of rent for
               desks paid by retail loan agents of the former LRS, Inc. and due
               to the gain on the sale of investment in real estate in June
               2000.

               In the second quarter of 2000, the Company incurred a net
               interest expense of $16,028 compared to net interest income in
               the second quarter of 1999 of $130,411. The unfavorable result in
               2000 reflects the negative gap between the rates on mortgage
               loans funded and the interest rate on the warehouse line.

               The same expense trends previously discussed in the analysis of
               the six-month period ended June 30, 2000 are reflected in the
               results of operations for the three-month period ending June 30,
               2000 as compared to 1999. Excluding interest expense, total
               expenses were 36.5% higher during the second quarter of 2000
               compared to the same period in 1999 with office occupancy
               increasing by 100.3%, salaries, commissions and benefits
               increasing by 39.6% and general and administrative expense
               increasing 18.4%. The Company paid a higher combined rent when it
               consolidated its retail and wholesale offices in San Francisco
               and its Accounting Department in the same building in July 1999.
               Occupancy costs as well as general and administrative expenses
               went up with the new office in Arizona. In addition, operating
               expenses of the acquired LRS, Inc. and the monthly amortization
               of goodwill paid for the acquisition added significant amounts to
               general overhead.

               The Company has taken steps to reduce general overhead and has
               succeeded in substantially reducing controllable expenses since
               the beginning of the year to the end of the second quarter. 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 Company will continue to implement an action plan to
               rationalize operations and return to profitability.




                                     - 11 -
<PAGE>


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% (8.165% at June 30, 2000).
               The RFC line of credit expires on August 31, 2000 and is
               currently being processed for renewal.

               The Company maintains a $20 Million Quick Sale Master Loan
               Participation and Custodian Agreement with Gateway Bank. The line
               terminates only upon written notice from either party. Interest
               on the line is at Prime Rate less 1% (8.5% at June 30, 2000). The
               Company also has a whole loan Purchase and Sales Agreement
               (Gestation Repurchase Line) with Greenwich Capital for $30
               Million, which terminates only upon written notice from either
               party. Interest on gestation loans is at LIBOR + 1% (7.665% at
               June 30, 2000).

               The Company believes that funds provided through these
               facilities, combined with cash flows from daily transactions, are
               sufficient to support its operations in accordance with the Year
               2000 budget.

               The acquisition of LRS, Inc. on July 30, 1999 increased capital
               stock to $10,558,709, or by $2,105,650 and improved the Company's
               leveraged borrowing capacity.




                                     - 12 -
<PAGE>




                           PART II - OTHER INFORMATION


ITEM 4. SUBMISSION OF MATTERS OF VOTE TO SECURITY HOLDERS


               On May 11, 2000, the registrant held its annual meeting of
               shareholders. At that meeting, directors were elected and the
               Company's 2000 Stock Incentive Plan was ratified. The results of
               the voting was as follows:

               a.  Directors:

                          Name                          FOR             AGAINST

                     Joseph Kristul                  3,078,025            7,450
                     Maria Kristul                   3,078,025            7,450
                     William Russell                 3,078,025            7,450
                     Robert A. Shuey                 3,078,025            7,450
                     Robert A. Forrester             3,078,025            7,450
                     Alex Rotzang                    3,078,025            7,450
                     J. Peter Gaskins                3,078,025            7,450




               b. Adoption of the 2000 Stock Incentive Plan:



                                  FOR             AGAINST               ABSTAIN
                               2,986,175           94,700               4,600



                                     - 13 -
<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 Corporation

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






                                     - 14 -