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, 2001

[ ]      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 August 13, 2001: 4,279,310



<PAGE>




                      TRANSNATIONAL FINANCIAL NETWORK, INC.

                                  JUNE 30, 2001

                                    UNAUDITED



                              TABLE OF CONTENTS                      PAGE NUMBER


PART 1     ITEM 1      Financial Information

                       Condensed Balance Sheets as of June 30, 2001
                       and December 31, 2000                                  2

                       Condensed Statements of Operations
                       For the Three and Six Months Ended
                       June 30, 2001 and 2000                                 3

                       Condensed Statements of Cash Flows for the
                       Six Months Ended June 30, 2001 and 2000                4

                       Notes to Condensed Financial Statements                5

           ITEM 2      Management's Discussion and Analysis of
                       Financial Condition and Results of Operations          7


PART 2     ITEM 1      Legal Proceedings                                     11

           ITEM 2      Changes in Securities and Use of Proceeds             11

           ITEM 4      Submission of Matters of Vote to Security Holders     12

                       SIGNATURES                                            13






                                      -1-
<PAGE>



Item 1.  Financial Information


                      TRANSNATIONAL FINANCIAL NETWORK, INC.

                            CONDENSED BALANCE SHEETS
<TABLE>
<CAPTION>

                                                               June 30,                       December 31,
                                                                   2001                               2000
                                                                   ----                               ----
                                                            (Unaudited)                          (Audited)

ASSETS
<S>                                                         <C>                                <C>
         Unrestricted cash and cash equivalents             $   659,735                        $   492,938
         Restricted cash and cash equivalents                   581,837                            400,000
         Mortgage loans held for sale                           576,469                         20,307,222
         Accrued interest receivable                             53,634                             41,733
         Due from Shareholders                                        -                             11,613
         Receivable from Loan Link, LLC                         300,000                            300,000
         Notes receivable                                       136,322                            136,322
         Goodwill                                             3,226,881                          3,428,321
         Property and equipment, net                            232,542                            296,913
         Other assets                                         1,354,489                          1,477,077
                                                              ---------                          ---------

TOTAL ASSETS                                                $ 7,121,908                        $26,892,139
                                                            ===========                        ============


LIABILITIES AND SHAREHOLDERS' EQUITY

LIABILITIES:
         Warehouse notes payable                            $         -                        $19,645,445
         Accrued interest payable                               106,098                            219,602
         Accounts payable and accrued liabilities               903,419                            556,209
         Subordinated debt                                    2,007,000                            712,000
                                                              ---------                         ----------

TOTAL LIABILITIES                                             3,016,517                         21,133,256
                                                              ---------                         ----------


SHAREHOLDERS' EQUITY:
    Preferred stock, no par value: 2,000,000 shares
      authorized, no shares issued and outstanding                   -                                  -
    Common stock, no par value: 20,000,000 shares
      authorized: 4,279,310 shares issued and outstanding,
      as of June 30, 2001 and December 31, 2000              10,612,155                         10,594,450
         Accumulated deficit                                 (6,506,764)                        (4,835,567)
                                                            -----------                        -----------

TOTAL SHAREHOLDERS' EQUITY                                    4,105,391                          5,758,883
                                                              ---------                          ---------


TOTAL LIABILITIES AND SHAREHOLDERS' EQUITY                  $ 7,121,908                        $26,892,139
                                                            ===========                        ===========
</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,

                                                          2001         2000                  2001              2000

INCOME

<S>                                                <C>           <C>                  <C>               <C>
         Net gain on sale of mortgage loans        $   700,146   $  476,442           $ 1,852,817       $   873,606
         Production income                           2,042,688    1,339,405             4,046,571         2,641,893
         Interest Income                               908,803      421,785             2,158,686           876,817
         Other                                          23,192      157,504               578,326           206,154
                                                    ----------   -----------            ----------      ------------

                                                     3,674,830    2,395,136             8,636,400         4,598,470


EXPENSES

         Interest expense                            1,201,452      437,812             2,867,434           929,066
         Salaries, benefits and commissions          2,569,023    1,912,574             5,335,250         3,988,729
         General and administrative                  1,021,248      670,050             1,765,838         1,473,004
         Occupancy                                     161,331      189,506               339,075           368,975
                                                     ---------   ----------            ----------         ---------
                                                     4,953,054    3,209,942            10,307,597         6,759,774
                                                     ---------    ---------            ----------         ---------


LOSS BEFORE INCOME TAXES                            (1,278,224)    (814,806)           (1,671,197)       (2,161,304)


INCOME TAXES                                                 -            -                     -                 -
                                                   -----------   ----------            ----------        ----------

NET LOSS                                           $(1,278,224)  $ (814,806)          $(1,671,197)      $(2,161,304)
                                                   ===========   ==========           ===========       ===========


NET LOSS PER SHARE

         Basic and diluted                         $    (0.30)   $   (0.19)           $    (0.39)       $    (0.51)


WEIGHTED AVERAGE SHARES OUTSTANDING

         Basic and diluted                           4,279,310    4,279,310             4,279,310         4,279,310
</TABLE>



           See accompanying notes to condensed financial statements.


                                       -3-
<PAGE>


                      TRANSNATIONAL FINANCIAL NETWORK, INC.

                       CONDENSED STATEMENTS OF CASH FLOWS

                                   (Unaudited)
<TABLE>
<CAPTION>


                                                                                            For the Six
                                                                                       Months Ended June 30,
                                                                                        2001              2000

Cash flows from operating activities:
<S>                                                                                 <C>               <C>
         Net loss                                                                   $ (1,671,197)     $ (2,161,304)
         Adjustments to reconcile net loss to net cash provided
         By (used in) operating activities:
                  Gain on sale mortgage loans                                         (1,852,817)         (788,595)
                  Gain on sale investment in Loan Link, LLC                             (300,000)                -
                  Provision for early payoffs and loan losses                            127,713           (85,011)
                  Issuance of stock warrants for subordinated debt                        17,705                 -
                  Depreciation and amortization                                          297,376           314,599
                  Mortgage loans originated for sale                                (429,241,455)     (281,773,567)
                  Proceeds from sales of mortgage loans                              450,697,312       265,062,354
                  Net gain on sale of investment property                                      -           (65,297)

                  Changes in assets and liabilities:
                           Accrued interest receivable                                   (11,901)          (20,673)
                           Due from shareholder                                           11,613                 -
                           Notes receivable                                                    -            35,819
                           Other assets                                                  122,588           286,333
                           Accrued interest payable                                     (113,504)          (53,194)
                           Accounts payable and accrued liabilities                      347,210           (63,825)
                                                                                      ----------        ----------
         Net cash provided by operating activities                                    18,430,643       (19,312,363)

Cash flows from investing activities:
         Purchases of property and equipment                                             (31,565)          (12,391)
         Repayment of advances by Loan Link, LLC                                               -           200,000
         Proceeds from sale of equity interest in Loan Link, LLC                         300,000                 -
         Additional cost to acquire LRS                                                        -           (15,246)
                                                                                        --------           -------
         Net cash provided by (used in) investing activities                             268,435           172,363

Cash flows from financing activities:
         Borrowings on warehouse notes payable                                       438,350,657       316,490,191
         Payments on warehouse notes payable                                        (457,996,102)     (297,373,395)
         Payments on real estate mortgage                                                      -            (1,156)
         Borrowings on subordinated debt                                               1,295,000                 -
         Short-term borrowings                                                           759,491                 -
         Repayments of short-term borrowings                                            (759,491)                -
                                                                                      ----------       -----------

         Net cash provided by (used in) financing activities                         (18,350,445)       19,115,640
                                                                                      ----------        ----------
NET INCREASE (DECREASE) IN CASH AND CASH EQUIVALENTS                                     348,633           (24,360)

CASH AND CASH EQUIVALENTS, BEGINNING OF PERIOD                                           892,938           862,257
                                                                                     -----------        ----------
CASH AND CASH EQUIVALENTS, END OF PERIOD                                            $  1,241,571      $    837,897
                                                                                    ============      ============

Cash paid during the period for:

         Interest paid                                                              $  2,929,700      $    887,654

         Income taxes paid                                                          $      1,540      $          -
</TABLE>



                                      -4-
<PAGE>


                      TRANSNATIONAL FINANCIAL NETWORK, INC.

                     NOTES TO CONDENSED FINANCIAL STATEMENTS

                                  JUNE 30, 2001
                                   (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,
                  2000. 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.

NOTE 2            The results of operations of the Company for the three and
                  six-month periods ended June 30, 2001 and 2000 are not
                  necessarily indicative of the results to be expected for the
                  full year.

NOTE 3            Net Loss Per Share -

                  Basic net loss per share is computed by dividing net loss by
                  the weighted average common shares outstanding during the
                  period. Diluted net loss per share is computed based on the
                  weighted average number of common shares outstanding adjusted
                  for potentially dilutive securities. For the three and six
                  months ended June 30, 2001 and 2000, the effect of including
                  potentially dilutive securities in the calculation of diluted
                  net loss per share would be antidilutive. As a result, the
                  effect of potentially dilutive securities of 869,000 has not
                  been included in the calculations.

NOTE   4          Warehouse Loans -

                  The transfer of assets under the warehouse facilities has been
                  accounted for as gain on sale of mortgage loans since they
                  satisfy the condition to be accounted for as a sale under
                  Statement of Financial Accounting Standards No. 140 Accounting
                  for Transfers and Servicing of Financial Assets and
                  Extinguishments of Liabilities.

NOTE 5            Subordinated Debt and Notes Payable -

                  During the first six months of 2001, the Company received
                  additional subordinated debt in the amount of $1,295,000. The
                  subordinated debt bears interest at 15% and has five-year
                  detachable warrants to purchase 35,000 shares of common stock
                  at $.75 per share. The maturity dates of this subordinated
                  debt range from August 14, 2002 to June 11, 2004.

                                      -5-
<PAGE>


                  Also during the first quarter of 2001, the Company raised
                  short-term borrowings of $759,491 from various members of
                  management and shareholders. The interest rate on these
                  short-term borrowings was 12%. As of June 30, 2001, all of
                  these amounts had been repaid.

NOTE 6            Subsequent Events -

                  On July 11, 2001, the Company signed an investment banking
                  agreement to assist in raising up to $3,000,000 of equity
                  securities in a private placement through an investment bank,
                  $300,000 of which has been received as of August 13. One of
                  the principals of the investment bank is a member of the board
                  of directors of the Company. The agreement requires
                  shareholder approval before any monies can be released to the
                  Company.

NOTE 7            New Accounting Standards -

                  In June 2001, the Financial Accounting Standards Board (the
                  "FASB") adopted SFAS No. 141 Business Combinations and SFAS
                  No. 142 Goodwill and Intangible Assets. SFAS No. 141 addresses
                  the methods used to account for business combinations and
                  requires the use of the purchase method of accounting for all
                  combinations after June 30, 2001. SFAS No. 142 addresses the
                  methods used to amortize intangible assets and to assess
                  impairment of those assets, including goodwill resulting from
                  business combinations accounted for under the purchase method.
                  SFAS No. 142 is effective for fiscal years beginning after
                  December 15, 2001. Included in our assets at June 30, 2001, is
                  goodwill related to an acquisition in 1999 with a net carrying
                  value of $3,226,881. Upon adoption of SFAS No. 142, we will no
                  longer amortize this goodwill, decreasing our amortization
                  expense by approximately $400,000 per year. We are required to
                  assess this goodwill for impairment in the year of adoption.
                  We will not be able to determine the full effect of these new
                  pronouncements on our financial position or our results of
                  operations until we are able to complete our analysis of the
                  impairment provisions of the new standards.



                                      -6-
<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. Since 1985, when the Company was incorporated, it has been engaged in
the retail origination of mortgage loans, and currently maintains retail offices
in San Francisco and Campbell, California. In 1995, the Company began a
wholesale division to close and fund loans originated by mortgage brokers as
well as those originated through the Company's retail division. The Company
maintains wholesale offices in San Francisco, Campbell, and Tustin, California
as well as Phoenix, Arizona. The Company operates in one business segment -
mortgage banking.

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 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 was 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 roll over
mortgages loans, that is, mortgage loans that have interest rates that
frequently change and, consequently, lower interest rates than that charged on
longer term fixed interest rate mortgage loans.

Throughout 1999 mortgage interest rates increased. 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.
Rates dropped steadily over the remainder of the year, and as of December 31,
2000 the 30-year fixed rate average had dropped to approximately 7.13%. Rates
remained at these favorable levels during the first half of 2001, ranging
between 6.95% and 7.16%.

                                      -7-
<PAGE>

As a consequence, the Company saw its volume of mortgage originations pick-up
(as rates dropped) during the 4th quarter of 2000 and into the first quarter of
2001. During the second quarter the Company's mortgage originations were
constrained due to reductions in available warehouse facilities.

The following table sets forth the wholesale and retail production for the
periods indicated:
<TABLE>
<CAPTION>

                     1st Qtr-00        2nd Qtr-00       3rd Qtr-00        4th Qtr-00       1st Qtr-01        2nd Qtr-01

<S>               <C>               <C>              <C>               <C>              <C>               <C>
Wholesale         $ 144,043,724     $ 130,878,546    $ 154,913,511     $ 181,744,512    $ 241,779,524     $ 187,461,931
Retail               77,405,856        82,928,025       67,973,925        87,598,298      108,326,735       136,115,007
Total             $ 221,449,580     $ 213,806,571    $ 222,887,436     $ 269,342,810    $ 350,106,259     $ 323,576,938
</TABLE>

Overall, the Company's mortgage loan volume increased by $238.4 million or 55%
for the first six months of 2001 when compared to the first six months of 2000.
Wholesale mortgage loan production through June 30 of this year was $154.3
million or 56% greater than in the same period in 2000. Retail loan production
was $84.1 million or 52% more compared to the first six months of 2000.

SIX MONTHS ENDED JUNE 30, 2001 COMPARED TO SIX MONTHS ENDED JUNE 30, 2000

The Company incurred a net loss of $1,671,197 for the six months ended June 30,
2001 compared to a net loss of $2,161,304 during the comparable period last
year. Overall, the smaller net loss in the first half of 2001 compared to the
same period last year was the result of (1) a 55% increase in loan volume, (2)
an 18% drop in operating costs as a percentage of loan volume, and (3) a
$372,172 increase in other income. These factors offset a $656,499 increase in
net interest expense over the prior year.

Net gain on sale of mortgage loans increased $979,211 or 112%. The bulk of the
increase in net gain on sale arose from higher wholesale loan production. Total
wholesale loans closed were $429.2 million, or 56% greater than in the same
period last year.

Production income increased by $1,404,678 or 53%. Production income increased
because of an increase in retail and wholesale loan production. Retail loan
production was $84.1 million or 52% greater than in the first half of 2000.

Other income was higher by $372,172 or 181% for the first half of 2001 compared
to the totals for the same period last year. Other income increased because of
recovery of a previously written off loan, and the sale of 50% of the Company's
ownership interest in Loan Link, LLC.

During the first half of 2001, the Company incurred a net interest expense of
$708,748 compared to a net interest expense in the first half of 2000 of
$52,249. The unfavorable result in 2001 reflects (1) greater levels of loans
warehoused by the company in the first half of 2001 - this is a result of
increasing business volumes and longer dwell times for those loans, and (2) the
negative gap between the initial interest rates on mortgage loans funded and the
interest rate on the Company's warehouse lines has increased as the Company
began using new, higher priced, warehouse lenders beginning in the fourth
quarter of 2000.

Excluding interest expense, total expenses were $7,440,163 or 28% higher during
the first half of 2001 compared to the same period in 2000. This compares
favorably to a 55% increase in loan volumes over the same period. Commissions
increased by $933,515 or 55% and salaries and benefits increased by $413,005 or
18%, as a result of higher loan volumes. General and administrative expenses
increased by $292,834 or 20%, mainly as a result of increased loan volume and

                                      -8-
<PAGE>

write-off of uncollectible receivable. Occupancy costs decreased by $29,900 or
8%, mainly as a result of the previously discussed cost reduction efforts.

THREE MONTHS ENDED JUNE 30, 2001 COMPARED TO THREE MONTHS ENDED JUNE 30, 2000

The Company incurred a net loss of $1,278,224 for the three months ended June
30, 2001 compared to a net loss of $814,806 during the comparable period last
year. Overall, the greater net loss in the second quarter of 2001 compared to
the same period last year was the result of an increase of $276,621 in net
interest expense, and a $979,472 increase in operating expenses, offset by
increased gain on sale and production income resulting from a 51% increase in
loan volume.

Net gain on sale of mortgage loans increased $223,704 or 47%. The bulk of the
increase in net gain on sale arose from higher wholesale loan production. Total
wholesale loans closed were $187.5 million, or 43% greater than in the same
period last year.

Production income increased by $703,283 or 53%. Production income increased
because of an increase in retail and wholesale loan production. Retail loan
production was $136.1 million or 64% greater than in the second quarter of 2000.

Other income was lower by $134,312 or 85% for the second quarter of 2001
compared to the totals for the same period last year. Other income declined
because of one-time gains that were present in the second quarter of 2000.

During the second quarter of 2001, the Company incurred a net interest expense
of $292,649 compared to a net interest expense in the second quarter of 2000 of
$16,027. The unfavorable result in 2001 reflects (1) greater levels of loans
warehoused by the company in the second quarter of 2001 - this is a result of
increasing business volumes and longer dwell times for those loans, and (2) the
negative gap between the initial interest rates on mortgage loans funded and the
interest rate on the Company's warehouse lines has increased as the Company
began using new, higher priced, warehouse lenders beginning in the fourth
quarter of 2000.

The Company has taken steps to better manage expenses since the beginning of
2001. These steps have included reducing the number of support staff, placing
account executives on straight commission so that compensation will vary with
loan production, renegotiating vendor contracts, prioritizing technology
projects. The effect of these cost cutting measures has reduced operating
expenses (not including interest expense) to 1.16% of loan volume during the
second quarter of 2001 compared to 1.30% during the same period in 2000.

Excluding interest expense, total expenses were $3,751,602 or 35% higher during
the second quarter of 2001 compared to the same period in 2000. This compares
favorably to a 51% increase in loan volumes over the same period. Commissions
increased by $445,971 or 51% and salaries and benefits increased by $210,479 or
20%, as a result of higher loan volumes. General and administrative expenses
increased by $351,198 or 52%, mainly as a result of increased loan volume and
write-off of uncollectible receivable. Occupancy costs decreased by $28,175 or
15%, mainly as a result of the previously discussed cost reduction efforts.

LIQUIDITY AND CAPITAL RESOURCES

The Company's capital resources are substantially provided by warehouse lenders
that fund (through a sale as defined under SFAS 140) the mortgage loans pending
the mortgage loan's final sale to investors. The size of the Company's warehouse
facilities is based on the Company's net worth and cash resources. The Company's
operating losses have eroded this net worth and cash position. As of June 30,
2001 the Company had three financing facilities for a maximum of $65 million.
These warehouse facilities have various financial and operational covenants with

                                      -9-
<PAGE>

which the Company must comply. As of June 30, 2001 the Company was in default
under certain financial covenants of these lines that require the maintenance of
minimum levels of net worth and the attainment of positive earnings.

In June of 2001, the Company was informed by one of its warehouse lenders that
as a result of the lender's loss of its own financing, the, the lender would
cease purchases under the $20 million line effective when the current agreement
expired on July 22, 2001.

As a result of reductions in available warehouse facilities, the Company has
been forced to reduce its levels of loan production. Wholesale production in
June, 2001 totaled $53.4 million, a 41% decline over February's peak volume of
$91.7 million. Failure to obtain warehouse lines or additional financing
facilities will limit the Company's ability to grow, and failure to maintain the
existing facilities will have a material adverse effect on the Company's
operations and financial performance.

During the second quarter of 2001, the Company raised additional subordinated
debt in the amount of $680,000. Despite this cash infusion, the Company's cash
position during the second quarter of 2001 remained strained as a result of: (1)
a significant increase in mortgage loan originations, (2) an increase in the
period of time between a mortgage loan's closing and its final sale to
investors, and (3) operating losses.

In order to fund its business activities over the remainder of 2001, the Company
has undertaken the following operating and financing activities:

1.       Strengthened broker pricing policies and procedures to reduce price
         concessions and increase loan margins.
2.       Restructured funding and shipping procedures in order to reduce
         warehouse time. As a result, the period of time between a mortgage
         loan's closing and its final sale to investors has decreased from a
         high of approximately 30 days to current levels of 18-20 days with a
         target of 15 days.
3.       Began implementing new loan origination software to improve
         productivity
4.       Signed an agreement with an investment banking firm to assist in
         raising up to $3,000,000 of equity securities; and
5.       Is actively seeking new warehouse lines.

If the Company receives the additional equity funds it is seeking, this would
both provide additional cash and allow the Company to renegotiate the interest
rates it pays on current warehouse facilities, as well as obtain additional
warehouse facilities. This would result in a reduction in the Company's negative
net interest margin that has been a significant contributor to operating losses.
No guarantees can be made that the preceding activities will result in a return
to profitability and/or an improvement in the Company's cash position.


                                      -10-
<PAGE>



PART II


Item 1.  Legal Proceedings

On February 23, 2001, William Russell and Teresa Saldivar, former principals of
LRS, Inc., filed a complaint in the Superior Court of Santa Clara County,
California alleging that, among other claims, the registrant violated its
agreement wherein in the registrant purchased LRS, Inc. This complaint alleges
that in connection with the acquisition, the registrant failed to pay William
Russell and Teresa Saldivar a percentage of profits from certain loans of LRS,
Inc. held at the time of the acquisition as required by the contracts relating
to the acquisition.

Because of the poor performance of William Russell and Teresa Saldivar and
because several of the registrant's brokers reported that William Russell and
Teresa Saldivar approached the brokers and discussed discontinuing the brokers's
relationship with the registrant, on March 8, 2001, the registrant terminated
its employment of William Russell and Teresa Saldivar. On April 4, 2001, William
Russell and Teresa Saldivar filed a second complaint in the Superior Court of
Santa Clara County against the registrant based upon breach of contract,
wrongful termination in violation of public policy, breach of covenant of good
faith and fair dealing, and declaratory relief. The registrant filed a
cross-complaint in this action asserting that William Russell and Teresa
Saldivar violated their employment agreement, breached their duty of loyalty,
intentionally interfered with economic relationships and negligently interfered
with economic relationships.

The registrant plans to pursue aggressively its cause of action against William
Russell and Teresa Saldivar and vigorously defend their litigation, believing
that the claims will not have a material adverse effect on the registrant. The
registrant disputes the claims relating to the amounts owed because of the
acquisition of LRS, Inc. and believes that the other claims of William Russell
and Teresa Saldivar are without merit. William Russell and Teresa Saldivar own
an aggregate of approximately 550,000 shares of the registrant's common stock.


Item 2.  Changes in Securities and Use of Proceeds.

During the second quarter of 2001 the Company sold $680,000 in principal amount
of subordinated debt to three individuals and a trust. This debt carries an
interest rate of 15% and a five-year detachable warrant to purchase 35,000
shares of common stock at $.75 per share. The maturity dates of this
subordinated debt range from December 2002 to June 2004. These sales of
securities were exempt from registration under the Securities Act pursuant to
Section 4(2) thereunder as transactions not involving a public offering.


                                      -11-
<PAGE>



Item 4.  Submission Of Matters Of Vote To Security Holders

On June 28, 2001, the registrant held its annual meeting of shareholders. At
that meeting, directors were elected and an amendment to the Company's Articles
of Incorporation was ratified to increase the number of authorized shares of
Common Stock. The results of the voting was as follows:

a.       Directors:

Name                                     FOR           AGAINST

Joseph Kristul                     3,376,350            44,950
Maria Kristul                      3,376,350            44,950
Robert A. Shuey                    3,376,350            44,950
Robert A. Forrester                3,376,350            44,950
Alex Rotzang                       3,376,350            44,950
J. Peter Gaskins                   3,376,350            44,950


b.       To amend the Company's Articles of Incorporation to increase the number
         of authorized shares of Common Stock to 20,000,000:

        FOR                      AGAINST                   ABSTAIN
     3,354,940                   66,550                      100

c.       Ratification of Grant Thornton LLP as independent auditors:

        FOR                      AGAINST                   ABSTAIN
     3,381,640                   36,850                     3,100



                                      -12-
<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.



August 14, 2001                   /s/ Joseph Kristul
                                  ------------------
                                  Joseph Kristul, Chief Executive Officer
                                  And Principal Financial Officer








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