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, 1999

[ ]      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)

                      Transnational Financial Corporation
              (Former name, former address and former fiscal year,
                         if changed since last report)

         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 the latest practicable date: 4,279,310


<PAGE>




                      TRANSNATIONAL FINANCIAL NETWORK, INC.

                                  JUNE 30, 1999

                                    UNAUDITED



                               TABLE OF CONTENTS                     PAGE NUMBER

PART 1  ITEM 1      FINANCIAL INFORMATION

                    Condensed Balance Sheet as of June 30, 1999
                    And December 31, 1998                                    2

                    Condensed Statement of Operations
                    For the Three and Six Months
                    Ended June 30, 1999 and 1998                             3

                    Statement of Cash Flows for the
                    Three Months Ended June 30, 1999 and 1998                4

                    Notes to Condensed Financial Statements                  5

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

PART II OTHER INFORMATION                                                   12


                                      - 1 -
<PAGE>



                      TRANSNATIONAL FINANCIAL NETWORK, INC.

                            CONDENSED BALANCE SHEETS

<TABLE>
<CAPTION>
                                                                                         June 30,        December 31,
                                                                                           1999             1998
                                                                                     ----------------- ----------------
                                                                                       (unaudited)
<S>                                                                                  <C>               <C>
ASSETS
             Cash and cash equivalents                                               $       500,309   $       990,115
             Mortgage loans held for sale, pledged (net of allowance for
               loan losses: June 30, 1999, $42,500; December 31, 1998, $0)                14,248,823        62,540,846
             Accrued interest receivable                                                      48,513            45,524
             Notes receivable                                                                135,819           135,819
             Real estate held for investment, net                                            192,989           195,308
             Property and equipment, net                                                     480,298           271,441
             Other assets                                                                    657,842           287,342
                                                                                     ----------------- ----------------

TOTAL ASSETS                                                                         $    16,264,593   $    64,466,395
                                                                                     ================= ================


LIABILITIES AND STOCKHOLDERS' EQUITY
            Warehouse notes payable                                                  $     6,432,923   $    53,587,740
            Accrued interest payable                                                         159,159           462,487
            Real estate mortgage                                                             142,041           143,975
            Accounts payable and accrued liabilities                                         328,963         1,026,378
            Distributions payable to "S" corporation stockholders                                  0            65,742
                                                                                     ----------------- ----------------

TOTAL LIABILITIES                                                                    $     7,063,086   $    55,286,322
                                                                                     ================= ================


STOCKHOLDERS' 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: 3,700,000 shares issued and outstanding,                        8,453,059         8,453,059
            Retained earnings                                                                748,448           727,014
                                                                                     ----------------- ----------------

TOTAL STOCKHOLDERS' EQUITY                                                           $     9,201,507    $    9,180,073
                                                                                     ================= ================


TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY                                           $    16,264,593     $  64,466,395
                                                                                     ================= ================
</TABLE>


            See accompanying notes to condensed financial statements.


                                      - 2 -
<PAGE>


                      TRANSNATIONAL FINANCIAL NETWORK, INC.

                       CONDENSED STATEMENTS OF OPERATIONS

                             JUNE 30, 1999 AND 1998
                                   (Unaudited)

<TABLE>
<CAPTION>
                                                                For the Three                   For the Six
                                                                Months Ended                   Months Ended
                                                                  June 30,                       June 30,
                                                        ------------------------------ ------------------------------
                                                             1999           1998            1999           1998
                                                             ----           ----            ----           ----
<S>                                                       <C>             <C>             <C>            <C>
    INCOME

                Net gain from sales of mortgage loans     $  1,013,571    $ 1,126,844     $ 2,730,998    $ 1,879,857
                Interest Income                                483,216        823,558       1,512,747      1,460,316
                Production Income                              415,814        820,770       1,108,110      1,343,238
                Other                                           (2,145)         3,946           7,710          9,472
                                                        --------------- -------------- --------------- --------------
                                                          $  1,910,456    $ 2,775,118     $ 5,359,565    $ 4,692,883
                                                        --------------- -------------- --------------- --------------


   EXPENSES
                Interest Expense                         $     349,073   $  1,135,876     $ 1,349,231    $ 1,921,382
                Salaries and Benefits                        1,378,108        775,234       2,809,183      1,288,707
                General and Administrative                     555,809        431,223         978,702        744,306
                Office Occupancy                                94,427         48,212         186,028         87,254
                                                        --------------- -------------- --------------- --------------
                                                          $  2,377,417    $ 2,390,545     $ 5,323,144    $ 4,041,649
                                                        --------------- -------------- --------------- --------------

INCOME (LOSS) BEFORE PROVISION (BENEFIT)
FOR INCOME TAXES                                         $(    466,961)   $   384,573   $      36,421   $    651,234

PROVISION (BENEFIT) FOR INCOME TAXES                      (    196,433)        75,610          14,987         79,610

                                                        --------------- -------------- --------------- --------------
NET INCOME (LOSS)                                        $(    270,528)   $   308,963   $      21,434    $   571,624
                                                        =============== ============== =============== ==============

EARNINGS (LOSS) PER SHARE
                Basic                                    $(        .07)   $       .12   $         .01    $       .22
                Diluted                                  $(        .07)   $       .12   $         .01    $       .22

WEIGHTED AVERAGE SHARES OUTSTANDING
                Basic                                        3,700,000      2,592,308       3,700,000      2,546,409
                Diluted                                      3,700,000      2,592,308       3,700,000      2,546,409

PRO FORMA
                Historical income before taxes on income                  $   384,573                     $  651,234
                Pro forma provision for income taxes                          153,829                        260,494

                                                        --------------- -------------- --------------- --------------
PRO FORMA NET INCOME                                                      $   230,744                     $  390,740
                                                        =============== ============== =============== ==============

PRO FORMA EARNINGS PER SHARE
                Basic                                                     $       .09                     $      .15
                Diluted                                                   $       .09                     $      .15

PRO FORMA WEIGHTED AVERAGE SHARES OUTSTANDING
                Basic                                                       2,592,308                      2,546,409
                Diluted                                                     2,592,308                      2,546,409
</TABLE>


            See accompanying notes to condensed financial statements

                                     - 3 -
<PAGE>


                      TRANSNATIONAL FINANCIAL NETWORK, INC.

                       CONDENSED STATEMENTS OF CASH FLOWS

                          ENDED JUNE 30, 1999 AND 1998
                                   (Unaudited)
<TABLE>
<CAPTION>
                                                                                               For the Six
                                                                                              Months Ended
                                                                                                June 30,
                                                                                          1999            1998
                                                                                     --------------- ----------------
<S>                                                                                  <C>             <C>
Cash flows from operating activities:
            Net income                                                               $       21,434  $      571,624
            Adjustments to reconcile net income to net cash provided
            by operating activities:
                  Gain on sale mortgage loans                                            (2,755,973)     (1,879,857)
                  Provision for loan losses                                                 (42,500)              0
                  Depreciation and amortization                                              54,943          16,391
                  Mortgage loans originated for sale                                   (455,000,613)   (384,195,839)
                  Proceeds from sales of mortgage loans                                 505,966,813     404,838,565
                  Net effect of changes in:
                       Net deferred loan fees                                               124,296         685,641
                       Accrued interest receivable                                           (2,989)         41,496
                       Other assets                                                        (370,499)         (5,833)
                       Accounts payable and accrued liabilities                            (697,416)        269,278
                       Accrued interest payable                                            (303,328)       ( 88,118)
                                                                                     --------------- ----------------

            Net cash provided by operating activities                                    46,994,168      20,253,348
                                                                                     --------------- ----------------

Cash flows from investing activities:
            Proceeds from sales and maturities of certificates of deposit                         0           1,774
            Purchase of property and  equipment                                            (261,481)        (34,973)
                                                                                     --------------- ----------------
            Net cash used by investing activities                                          (261,481)        (33,199)
                                                                                     --------------- ----------------

Net cash flows from financing activities:
            Borrowings on warehouse notes payable                                       444,939,897     407,983,307
            Payments on warehouse notes payable                                        (492,094,714)   (427,734,026)
            Net proceeds from issuance of common stock                                            0       7,618,336
            Payments on distribution payable to "S" corporation stockholders                (65,742)       (493,180)
            Borrowings on note payable, subordinated                                              0        1,000,000
            Receipt of note receivable, stockholders                                              0          250,000
            Payments on real estate mortgage                                                 (1,934)          (1,345)
            Payment of note payable, subordinated                                                 0       (1,000,000)
                                                                                     --------------- ----------------

            Net cash used by financing activities                                    $ (47,222,493)  $  (12,376,908)
                                                                                     --------------- ----------------

NET (DECREASE) INCREASE IN CASH AND CASH EQUIVALENTS                                      (489,806)       7,843,241
                                                                                     --------------- ----------------

CASH AND CASH EQUIVALENTS, BEGINNING OF PERIOD                                             990,115          482,558
                                                                                     --------------- ----------------

CASH AND CASH EQUIVALENTS, END OF PERIOD                                             $     500,309   $    8,325,799
                                                                                     =============== ================

CASH PAID DURING THE PERIOD FOR
            Interest paid                                                            $   1,652,559   $    2,009,499
                                                                                     =============== ================

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


            See accompanying notes to condensed financial statements


                                     - 4 -
<PAGE>

                      TRANSNATIONAL FINANCIAL NETWORK, INC.

                     NOTES TO CONDENSED FINANCIAL STATEMENTS

                                  JUNE 30, 1999

                                   (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, 1998. 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 six month
                    periods ended June 30, 1999 and 1998 are not necessarily
                    indicative of the results to be expected for the full year.

NOTE 3              On June 24, 1998, the Company completed an initial public
                    offering of its common stock, which became listed on the
                    American Stock Exchange under the symbol TFN. 1,200,000
                    shares were sold for net proceeds of $7,419,719.

NOTE 4              On April 30, 1998, the Company changed its corporate charter
                    from an "S" Corporation to that of a "C" Corporation for
                    taxation purposes.

                    During the first four months of 1998, the Company
                    distributed Subchapter "S" earnings in the form of cash
                    dividends to its existing stockholders of $493,180. On April
                    30, 1998, the termination date of the subchapter "S"
                    election, the Company's stockholders' equity contained
                    dividends of $286,028 to which existing shareholders, as of
                    April 30, were entitled. These dividends were paid during
                    the remainder of 1998, except for $65,742 which was paid in
                    1999.






                                     - 5 -
<PAGE>

NOTE 5              Pro Forma Information

                    Income Taxes - Effective April 30, 1998, the Company
                    terminated its S corporation status and became a C
                    corporation for tax purposes. The Company is now subject to
                    federal and state income taxes and recognizes deferred taxes
                    in accordance with Statement of Financial Accounting
                    Standards (SFAS) No. 109, Accounting for Income Taxes. SFAS
                    No. 109 requires companies subject to income taxes to adjust
                    their deferred tax assets and liabilities based on temporary
                    differences between financial statement and tax basis of
                    assets and liabilities using enacted tax rates in effect in
                    the years in which the differences are expected to reverse.
                    For information purposes, the condensed statements of
                    operations include an unaudited pro forma income tax
                    provision on income before income taxes for financial
                    reporting purposes using federal and state rates that would
                    have resulted if the Company had filed corporation tax
                    returns during the period in which the Company was an S
                    corporation.

                    Earnings (Loss) Per Share - Pro forma earnings (loss) per
                    share is computed by dividing pro forma net income (loss) by
                    the pro forma number of shares of common stock outstanding
                    during the respective period.


NOTE 6              Net Income (Loss) Per Share

                    Basic net (loss) income per share is computed by dividing
                    net income (loss) by the weighted average common shares
                    outstanding during the period. Diluted net income (loss) per
                    share is computed based on the weighted average number of
                    common shares outstanding adjusted for the common stock
                    equivalents, which include stock options. The following
                    table presents a reconciliation of basic and diluted net
                    income (loss) per share for the six months ended June 30,
                    1999 and 1998. For the six months ended June 30, 1999 and
                    1998, the effect of including outstanding options in the
                    calculation of diluted earnings (loss) per share would be
                    antidilutive. As a result, the effect of those outstanding
                    options has not been included in the calculations.

<TABLE>
<CAPTION>
                                                                       For the Three              For the Six
                                                                        Months Ended              Months Ended
                                                                          June 30                   June 30
                                                         1999         1998          1999         1998
                                                                  (pro forma)                (pro forma)
                                                     ------------ ------------ ------------- -----------
<S>                                                   <C>         <C>           <C>          <C>
Calculation of Basic Net Income (Loss) Per Share:
 Numerator - net income (loss)                        $ (270,528) $    230,744  $     21,434 $   390,740
 Denominator -
  Weighted average common shares outstanding           3,700,000     2,592,308     3,700,000   2,546,409
                                                     -----------   -----------   -----------   ---------


Basic net income (loss) per share                     $    (0.07) $       0.09  $       0.01 $      0.15
                                                         =======         =====         =====       =====

Calculation of Diluted Net Income (Loss) Per Share:
Numerator - net income (loss)                         $ (270,528) $    230,744  $     21,434  $  390,740

Denominator -
Weighted average common shares outstanding             3,700,000     2,592,308     3,700,000   2,546,409
                                                     -----------   -----------   ----------- -----------

Dilutive effect of outstanding options                         -             -             -           -
Diluted net income (loss) per share                   $    (0.07) $       0.09  $       0.01  $     0.15
                                                         =======         =====         =====       =====
</TABLE>



                                     - 6 -
<PAGE>

NOTE 7              Recently Issued Accounting Pronouncements

                    In June 1998, the Financial Accounting Standards Board
                    issued SFAS No. 133, Accounting for Derivative Instruments
                    and Hedging Activities. The statement establishes accounting
                    and reporting standards for derivative instruments and
                    hedging activities. The statement is effective for fiscal
                    quarters of fiscal years beginning after June 15, 1999. The
                    Company is in the process of determining the impact of SFAS
                    No. 133 on the Company's financial statements.

NOTE 8              Subsequent Event

                    On July 29, 1999, the Company acquired all of the issued and
                    outstanding stock of LRS, Inc., a Silicon Valley based
                    mortgage banking Company. Under the terms of the agreement,
                    the Company paid $3.6 million consisting of $1.5 million in
                    cash and 579,310 shares of Common Stock valued at $2.1
                    million. In addition, the Company may pay the former
                    stockholders of LRS, Inc. an aggregate of $3.2 million based
                    on the subsequent profitability of LRS, Inc. In 1998 LRS,
                    Inc. produced more than $1.0 billion in conforming mortgage
                    loans.



                                     - 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 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, such statements could be affected by
               general economic and market conditions and growth rates.

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 and Phoenix,
               Arizona.

               The Company's results of operations is strongly affected by
               interest rates. Throughout 1998 interest rates on 30 year
               treasuries declined and have increased thus far throughout 1999.
               In January, 1998, interest rates on 30 year treasuries were
               approximately 5.85% and at the end of 1998 were approximately
               5.1% after reaching a low of about 4.7% in October 1998. From
               approximately 5.1% in January 1999, interest rates on 30 year
               treasuries increased to approximately 6.0% at the end of June
               1999, reaching almost 6.2% earlier that month.

               Yields on mortgage loans closely parallel yields on treasury
               securities, and increasing interest rates increase the cost of
               home ownership resulting in diminished demand for mortgage loans.
               The Company saw its volume of mortgage loans generally increase
               throughout 1998, reaching a peak in February 1999, with mortgage
               loan production averaging $98,954,931 in the first quarter of
               1999. The Company's volume of mortgage loans dropped thereafter,
               averaging $68,762,547 per month in the second quarter of 1999.


                                     - 8 -
<PAGE>

               Since May 1995, the Company's growth has been focused and driven
               by the wholesale loan division. The following table sets forth
               the Company's mortgage loan production for the first two quarters
               of 1999 and 1998:

<TABLE>
<CAPTION>
                                                  Mortgage Loan Volume
                                                          for
                                                     Six Months of
                                                1999                                         1998
                            First Quarter  Second Quarter       TOTAL     First Quarter   Second Quarter      TOTAL
<S>                          <C>            <C>            <C>             <C>            <C>          <C>
               Wholesale     $269,810,903   $185,189,710   $455,000,613    $166,206,275   $217,989,563 $384,195,838
               Retail          27,053,889     21,097,932     48,151,821      28,328,830     28,711,820   57,040,650
                             -------------  -------------  -------------   -------------  --------------------------

               TOTAL         $296,864,792   $206,287,642   $503,152,434    $194,535,105   $246,701,383 $441,236,488
</TABLE>


               Overall, the Company's mortgage loan volume grew by 14.0% for the
               first six months of 1999 when compared to the first six months of
               1998 with wholesale mortgage loan production increasing by 18.4%
               and retail mortgage loan production decreasing by 15.6%. However,
               total mortgage loan production declined in the second quarter of
               1999 when compared to the second quarter of 1998 by 16.4%, with
               both wholesale and retail mortgage loan production declining in
               the 1999 three month period, wholesale mortgage loan production
               by 15.0% and retail mortgage loan production by 26.5%.

               The Company has taken steps to increase wholesale mortgage loan
               production with the opening of new offices in Houston, Texas and
               Phoenix, Arizona, both of which will contribute production
               beginning in the third quarter of 1999.

SIX MONTHS ENDED JUNE 30, 1999 COMPARED TO SIX MONTHS ENDED JUNE 30, 1998

               For the six month period ended June 30, 1999, the Company had net
               income of $21,434 compared to pro forma net income of $390,740
               for the same period in 1998. While the growth in revenues in 1999
               generally match the increase in mortgage loan production, the
               results for the six month period hide the declines in revenues
               that occurred in the second quarter of 1999. (See "Three Months
               Ended June 30, 1999 Compared to Three Months Ended June 30,
               1998.") The overall increase in revenues for the six months ended
               June 30, 1998, when compared to the same period in 1998, are more
               than offset by increased expenses the Company incurred in the
               1999 period.

               Net gain on the sale of mortgage loans in the 1999 period
               increased 45.3%. While mortgage loan production grew by 14.0%,
               the increase in net gain on sale can be partially attributable to
               more effective sales to investors and management of risk between
               the funding of a mortgage loan by the Company and its eventual
               sale.


                                     - 9 -
<PAGE>

               Production income declined by 17.5% in the 1999 period when
               compared to the 1998 period. Production income is primarily
               derived from loan fees from both wholesale and retail production.

               Interest income is derived from payments received on mortgage
               loans during the period prior to the mortgage loan being sold by
               the Company. Interest expense is incurred under the Company's
               warehouse line of credit when the Company is required to borrow
               to fund mortgage loans. During the 1998 period, the cost of
               borrowing exceeded the interest received by the Company on the
               mortgage loans funded by the Company resulting in a net interest
               expense of $461,066. In the 1999 period, the Company's borrowing
               costs were much lower resulting in net interest income of
               $163,516. The borrowing costs were lower because the Company
               entered into a new warehouse line of credit in August 1998 that
               had a lower interest rate than the previous warehouse line of
               credit.

               The increase in office occupancy costs of 113.2% is due to the
               Company moving its San Francisco office to new office space in
               September, 1998, to handle the increase in loan volume and during
               the month of May, 1999 opening new loan production offices in
               Houston and Phoenix.

               Although revenues were up 14.2%, expenses increased 31.8%.
               Excluding interest expense, expenses increased 87.4% with
               occupancy expenses increasing 113.2%, general and administrative
               expenses increasing 31.5% and salaries and benefits increasing
               118.0%. These increased expenses reflect the Company's building
               of corporate infrastructure to support a larger business,
               although some of the increase in salaries and benefits reflects
               compensation to the Company's Chief Executive Officer and
               President who were compensated in the first part of 1998 through
               dividends when the Company was an S corporation. Some of the
               increase in salaries and benefits also reflects the Company's
               hiring of senior management. Expenses incurred in the second
               quarter of 1999 such as increased advertising expense, expenses
               relating to opening the Phoenix and Houston offices and expenses
               relating to software development for mortgage loan production to
               occur on the internet further increased general and
               administrative expenses in the first half of 1999 when compared
               to the first half of 1998.

               The Company is planning for mortgage loan volume to increase from
               the present levels. These increases, if not the result of
               interest rate declines, are anticipated to come through the
               opening of additional offices and through acquisitions.

THREE MONTHS ENDED JUNE 30, 1999 COMPARED TO THREE MONTHS ENDED JUNE 30, 1998

               The Company incurred a loss of $270,528 for the three months
               ended June 30, 1999 compared to pro forma net income of $230,744
               for the three months ended June 30, 1998. Revenues declined 31.0%
               in the 1999 period when compared to the 1998 period with mortgage
               loan production declining 16.4%. The net gain on sale of mortgage
               loans declined in the later period by 10.1%, and production
               income declined 49.3%.

               Net interest income and expense was more favorable in the second
               quarter of 1999 than the second quarter of 1998. In the second
               quarter of 1998, the Company incurred net interest expense of
               $312,318 compared to net interest income in the second quarter of
               1999 of $134,143. The favorable result in 1999 reflects not only
               the lower cost of borrowing discussed above but a smaller portion
               of the mortgage loans funded by the Company coming from the
               warehouse line of credit as opposed to the Company's own funds.


                                     - 10 -
<PAGE>


               The expense trends discussed above are reflected in results for
               the second quarter of 1999. Excluding interest expense, expenses
               increased 61.7% with office occupancy increasing 95.9%, general
               and administrative expense increasing 28.9% and salaries and
               benefits increasing 77.8%. Most of the increase in general and
               administrative expenses relate to expenses of being publicly
               held, expenses of increased advertising for the Company's retail
               operations and expenses attributable to establishing the Phoenix
               and Houston offices as well as expenses associated with the
               Company's development of electronic commerce technology.

LIQUIDITY AND CAPITAL RESOURCES

               On June 24, 1998 the Company successfully completed an Initial
               Public Offering adding net proceeds of $7,419,719 to its
               stockholders' equity to provide the capital infusion necessary to
               facilitate additional growth of the wholesale division as well as
               to lower the Company's overall cost of borrowing.

               As a result of the public offering, during the third quarter of
               1998, the Company began the use of new warehouse lines of credit
               with the execution of a facility syndicated with several banks
               providing up to $105 million and agented by Guaranty Federal Bank
               of Dallas. In addition, the Company has been able to secure a
               Whole Loan Purchase and Sales Agreement ("Gestation Repo Line")
               with Greenwich Capital for $30 million and as additional Whole
               Loan Purchases and Sales Agreement ("Gestation Repo Line") with
               Gateway Bank for $50 million. These new credit facilities have
               begun to reduce the Company's interest expense beginning in the
               third month of the third quarter of 1998 due to its borrowings
               now being based on LIBOR plus 1.50% for the warehouse line and
               LIBOR plus 1% on the Gestation Repo lines, both of which have
               reduced interest expense compared to the Company's warehouse line
               in the first half of 1998 which charged LIBOR plus 2.75%.

YEAR 2000

               The Company recognizes the need to ensure its operations will not
               be adversely impacted by Year 2000 software failures. The
               Company's internal computer operations are run on IBM compatible
               person computers running recently released standard software
               certified as complying with Y2K standards or recently purchased
               software, similarly certified. The Company does not use
               minicomputers or mainframes using software developed several
               years ago. The focus of the Company's software purchases has been
               on the implementation of systems necessary to support the
               Company's growth, making certain that additional software
               purchases or developed internally comply with Year 2000 issues.
               Accordingly, the Company believes that there is little risk that
               its computers or software will fail after December 31 of this
               year and the Company has not adopted contingency plans based on
               its assessment of those risks. Since the Year 2000 issue has been
               addressed in the context of expansion of the Company's business,
               the Company has not identified separately costs associated with
               compliance with of Y2K issues.

               In addition to the Company's internal computer systems, the
               Company depends upon the effective operations of the financial
               institutions with which the Company deals as well as of the
               United States financial system as administered by the United
               States Federal Reserve Board. The Company has representations
               from the institutions with which it deals that the Year 2000 does
               not pose a risk to those institution's operations.

                                     - 11 -
<PAGE>


                           PART II - OTHER INFORMATION

ITEM 4. SUBMISSION OF MATTERS OF VOTE TO SECURITY HOLDERS

     On May 12, 1999, the registrant held its annual meeting of shareholders. At
     that meeting, directors were re-elected, the name of the corporation was
     changed, the number of shares authorized under the registrant's incentive
     stock plan were increased from 300,000 to 500,000 and the appointment of
     Deloitte & Touche LLP as the registrant's independent auditors was
     ratified. The results of the voting was as follows:

     Directors:

                Name               FOR             AGAINST
         Joseph Kristul         3,275,425          198,360
         Maria Kristul          3,275,425          198,360
         Eugene Kristul         3,275,425          198,360
         Hilary Whitley         3,275,425          198,360
         Robert A. Shuey        3,275,425          198,360
         Robert A. Forrester    3,275,425          198,360

     Increase in the number of shares authorized under the 1998 Incentive Stock
     Option Plan:

                                   FOR             AGAINST              ABSTAIN
                                2,476,431          256,100               4,800

     Change the name of the Corporation to Transnational Financial Network,
     Inc.:

                                   FOR             AGAINST              ABSTAIN
                                3,476,485            4,200               2,100

     Ratification of Deloitte & Touche LLP as independent auditors:

                                   FOR             AGAINST              ABSTAIN
                                3,472,425            1,260                 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 Corporation



August 16, 1999                     /s/ Joseph Kristul
                                    --------------------------------------------
                                    Joseph Kristul, Chief Executive Officer
                                    And Principal Financial Officer




                                     - 13 -