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

                                   Form 10-QSB

                                   (Mark One)

[X] QUARTERLY REPORT UNDER SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF
    1934

                  For the fiscal period ended January 31, 2005

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

       For the transition period from __________________ to ______________

                         Commission file number: 1-14219

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

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

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

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


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



                      APPLICABLE ONLY TO CORPORATE ISSUERS

State the number of shares outstanding of each of the issuer's classes of common
equity, as of March 15, 2005: 6,791,360




<PAGE>





                      TRANSNATIONAL FINANCIAL NETWORK, INC.

                                January 31, 2005

                                    UNAUDITED




TABLE OF CONTENTS                                                   PAGE NUMBER


PART I.  FINANCIAL INFORMATION

Item 1.  Financial Statements

         Condensed Balance Sheets as of January  31, 2005 (Unaudited)
              and April 30, 2004 ...........................................3

         Condensed Statements of Operations for the  Three and
              Nine Months Ended January 31, 2005 and 2004...................4

         Condensed Statements of Cash Flows for the Nine Months
              Ended January 31, 2005 and 2004...............................5

         Notes to Condensed Financial Statements.......................6 - 11

Item 2.  Management's Discussion and Analysis of Financial Condition
                and Results of Operations.............................12 - 31

Item 3.  Controls and Procedures  .........................................32


PART II.  OTHER INFORMATION

Signatures.................................................................32

Item 6   Exhibits.....................................................33 - 34







                                       2
<PAGE>


PART 1. FINANCIAL INFORMATION

Item 1.  Financial Statements


                      TRANSNATIONAL FINANCIAL NETWORK, INC.

                            CONDENSED BALANCE SHEETS
                    as of January 31, 2005 and April 30, 2004
                               ------------------
<TABLE>
<CAPTION>

                                                                                          JANUARY 31,            APRIL 30,
                                                                                             2005                  2004
                                                                                             ----                  ----

         ASSETS                                                                           (unaudited)


<S>                                                                                      <C>                  <C>
  Cash and cash equivalents, unrestricted                                                $   3,402,424        $  1,585,034
  Restricted cash                                                                            1,100,000           2,000,000
  Investments held-to-maturity                                                                       -           1,015,234
  Short-term mortgage related accounts receivable                                              576,925             448,705
  Mortgage loans held for sale                                                               1,491,744             365,918
  Deferred tax assets                                                                          291,365             291,365
  Goodwill                                                                                   3,972,305           3,972,305
  Property and equipment, net                                                                  108,776             142,223
  Fair value of derivative financial instruments                                                38,400             175,000
  Other assets                                                                                 343,430             230,901
                                                                                         -------------        --------------

         Total assets                                                                    $  11,325,369        $ 10,226,685
                                                                                         =============        ============


             LIABILITIES AND SHAREHOLDERS' EQUITY

  Warehouse lines of credit                                                              $           -        $          -
  Accrued interest payable                                                                      45,428              35,735
Accounts payable and accrued liabilities                                                       577,209             615,035
  Income taxes payable                                                                             336              29,180
  Settlement payable                                                                                 -             639,047
  Capital lease obligations                                                                      3,253              21,522
  Subordinated debt                                                                          3,987,700           1,512,000
                                                                                         -------------        ------------

          Total liabilities                                                                  4,613,926           2,852,519
                                                                                         -------------        ------------

  Shareholders' equity:
  Preferred stock, no par value: 2,000,000 shares authorized; no shares
         issued or outstanding                                                                       -                   -
  Common stock, no par value: 20,000,000 shares authorized;  6,791,360
         and 6,828,160 shares issued and outstanding at January 31, 2005
         and April 30, 2004, respectively.                                                  13,422,276          13,459,474
  Accumulated deficit                                                                       (6,710,833)         (6,085,308)
                                                                                         --------------       -------------

         Total shareholders' equity                                                          6,711,443           7,374,166
                                                                                         -------------        ------------


         Total liabilities and shareholders' equity                                      $  11,325,369        $ 10,226,685
                                                                                         =============        ============
</TABLE>


                 The accompanying notes are an integral part of
                          these financial statements.

                                       3
<PAGE>



                      TRANSNATIONAL FINANCIAL NETWORK, INC.
                       CONDENSED STATEMENTS OF OPERATIONS

               for the nine months ended January 31, 2005 and 2004
                                   (Unaudited)
                               ------------------
<TABLE>
<CAPTION>


                                                   For the 3 Months Ended January 31        For the 9 Months Ended January 31
                                                   ---------------------------------        ---------------------------------
                                                        2005         2004  % Chng.               2005          2004   % Chng.
                                                        -----------------  -------               ----          ----  --------

Revenue:
<S>                                              <C>          <C>              <C>         <C>           <C>             <C>
    Net gain on sale of mortgages                $ 1,073,635  $ 1,438,552      -25%        $ 3,531,834   $ 5,520,706     -36%
    Production revenue                             1,067,179    1,495,658      -29%          3,499,901     7,640,816     -54%
    Other revenue                                     56,671       13,135        nm             83,150        35,041     137%
                                                 -----------  -----------                  -----------   -----------

    Total revenue                                  2,197,485    2,947,345      -25%          7,114,885    13,196,563     -46%

Direct expense:
    Commission and production incentives             660,366      893,246      -26%          2,145,137     4,735,863
-55%
    Production expense                               148,298      225,074      -34%            454,894     1,025,531     -56%
    Pair-off fees                                      1,500        4,149      -64%              4,500        (4,987)      nm
    Provision for early payoff penalties              15,000       30,000      -50%             33,500       100,000     -67%
                                                 -----------  -----------                    ---------   -----------

    Total direct expense                             825,164    1,152,469      -28%          2,638,031     5,856,407     -55%

Net interest income (expense)
    Interest income on loans in warehouse            227,535      243,702       -7%            743,929       959,174     -22%
    Interest expense on loans in warehouse          (169,318)    (183,683)      -8%           (497,997)     (878,347)    -43%
    Warehouse transaction fees                       (30,675)     (33,760)      -9%            (91,933)     (180,786)    -49%
                                                    --------     --------                    ---------    ----------
     Net warehouse interest income (expense)          27,542       26,259        5%            153,999       (99,959)      nm
    Interest income on deposits                        2,003        8,174      -75%             25,948        19,066      36%
    Interest expense - subordinated debt             (44,774)     (62,345)     -28%           (128,582)     (230,691)    -44%
                                                   ---------    --------                   -----------    ----------
    Net interest income (expense)                    (15,229)     (27,912)       nm             51,365      (311,584)      nm


Gross profit on mortgage activities                1,357,092    1,766,964      -23%          4,528,219     7,028,572     -36%

Indirect expense

    Salaries and benefits                            948,513    1,032,164       -8%          2,794,575     3,378,478     -17%
    General and administrative                       520,481      473,476       10%          1,630,819     1,612,840       1%
    Occupancy                                        174,759      171,799        2%            522,974       526,085      -1%
    Depreciation                                      17,052       22,271      -23%             53,152        75,341     -29%
                                                 -----------  -----------                  -----------   ------------

    Total indirect expense                         1,660,805    1,699,710       -2%          5,001,520     5,592,744     -11%
                                                 -----------  -----------                  -----------   ------------

    Operating income (loss)                         (303,713)      67,254        nm           (473,301)    1,435,828       nm

Non-operating income (expense):
    Other interest expense                              (227)     (27,115)     -99%            (15,624)     (104,558)    -85%
    Other income (expense), including
     SFAS 133 adjustment                             (11,700)      (1,900)       nm           (136,600)     (232,800)    -41%
                                                 -----------  ------------                 -----------   ------------

    Total non-operating income (expense)             (11,927)     (29,015)     -59%           (152,224)     (337,358)    -55%
                                                 -----------  ------------                 -----------   ------------

Income (loss) before taxes                          (315,640)      38,239        nm           (625,525)    1,098,470       nm

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

Net income (loss)                                $  (315,640) $    32,741        nm        $  (625,525)  $ 1,027,205       nm
                                                 ===========  ===========                  ===========   ============

Net income (loss) per share
    Basic                                        $    (0.05)  $     0.00                   $    (0.09)   $     0.15
    Diluted                                      $    (0.05)  $     0.00                   $    (0.09)   $     0.15
    Weighted averages shares outstanding
    Basic                                          6,791,360    6,728,289                    6,795,040     6,786,402
    Diluted                                        6,791,360    7,308,979                    6,795,040     7,036,605
</TABLE>



                 The accompanying notes are an integral part of
                          these financial statements.

                                       4
<PAGE>


                      TRANSNATIONAL FINANCIAL NETWORK, INC.
                       CONDENSED STATEMENTS OF CASH FLOWS

               for the nine months ended January 31, 2005 and 2004
                                   (Unaudited)
                               ------------------
<TABLE>
<CAPTION>
                                                                                                          For the Nine
                                                                                                    Months Ended January 31,
                                                                                                  ----------------------------
                                                                                                      2005            2004
                                                                                                   (unaudited)     (unaudited)
Cash flows from operating activities:
<S>                                                                                             <C>              <C>
Net (loss) income                                                                               $    (625,525)   $   1,027,204
   Adjustments to reconcile net (loss) income to net cash
             flows from operating activities:
     Depreciation and amortization                                                                     53,152           75,341
     Net change in fair market value of financial derivatives                                         136,600          232,800
     Provision for early payoff penalties                                                              33,500            9,532
   Net effect of changes in assets and liabilities:
     Other assets                                                                                    (112,529)          13,693
     Accrued interest payable                                                                           9,693          (31,759)
     Accounts payable and accrued liabilities                                                         (66,670)        (313,829)

   Net effect of changes in mortgage loans activity:
     Mortgage related short-term accounts receivable                                                 (161,720)         500,418
     Mortgage loans originated for sale                                                           281,880,413     (483,624,708)
     Mortgage loans proceeds from sale                                                           (283,006,239)     484,558,269
                                                                                                --------------   -------------

         Net cash (used in) provided by operating activities                                       (1,859,325)       2,446,961
                                                                                                --------------   -------------

Cash flows from investing activities:
   Property and equipment purchases                                                                   (19,705)         (59,070)
   Decrease in restricted cash                                                                        900,000          650,000
   Proceeds from securities held-to-maturity                                                        1,015,234                -
                                                                                                -------------    -------------

         Net cash provided by investing activities                                                  1,895,529          590,930
                                                                                                -------------    -------------

Cash flows from financing activities:
     Warehouse notes payable-net borrowings                                                                 -         (789,445)
     Payments on settlement payable                                                                  (639,047)        (795,442)
   Proceeds from stock option exercises                                                                     -           46,384
   Common stock repurchases                                                                           (37,198)          (9,969)
   Payments on capital lease obligations                                                              (18,269)         (14,599)
   Borrowings on subordinated debt                                                                  2,875,700                -
   Repayments of subordinated debt                                                                   (400,000)        (935,000)
                                                                                                --------------   -------------

         Net cash provided by (used in) financing activities                                        1,781,186       (2,498,071)
                                                                                                -------------    -------------

Net increase in cash and cash equivalents, unrestricted                                             1,817,390          539,820
                                                                                                -------------    -------------

Cash and cash equivalents, unrestricted, beginning of period                                        1,585,034        1,847,996

Cash and cash equivalents, unrestricted, end of period                                          $   3,402,424    $   2,387,816
                                                                                                =============    =============

Cash paid during the period for:
     Interest                                                                                   $     716,261    $   1,354,199
     Income taxes                                                                                      28,844          115,000

Schedule of non-cash investing and financing activities:
   Increase in goodwill and settlement payable                                                              -           88,218
</TABLE>



                 The accompanying notes are an integral part of
                          these financial statements.
                                       5
<PAGE>


                      Transnational Financial Network, Inc.

                          Notes to Financial Statements

Note 1 - General

The accompanying financial statements of Transnational Financial Network, Inc.
(the "Company") as of and for the three and nine month periods ended January 31,
2005 and 2004 are unaudited and have been prepared 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 accounting principles generally accepted in the United States of
America 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 April 30, 2004. These unaudited 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 accounting principles generally accepted in the United States of
America requires management to make estimates and assumptions that affect
certain reported amounts and disclosures. Accordingly, actual results could
differ from those estimates. The results of operations of the Company for the
three and nine months ended January 31, 2005 and 2004 are not necessarily
indicative of the results to be expected for the full year. The Company operates
in one business segment - mortgage banking.

Note 2 - Summary of Significant Accounting Policies

Use of Estimates - The preparation of financial statements in conformity with
accounting principles generally accepted in the United States of America
requires management to make certain estimates and assumptions, including the
depreciable lives of assets, the fair value of goodwill and financial
derivatives, and the realizable portion of deferred tax assets, that affect the
reported amounts of assets and liabilities and disclosure of contingent
liabilities at the date of the financial statements and the reported amounts of
revenues and expenses during the reporting period. Actual results could differ
from those estimates.

Statement of Cash Flows - For purposes of the statement of cash flows, the
Company considers cash equivalents to be short-term, highly liquid investments
used in its cash management activities and generally having a remaining maturity
of three months or less from the date of purchase.

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

Stock-Based Compensation - The Company follows APB 25 in accounting for its
employee stock options. The disclosure provisions of SFAS 148 have been
incorporated into these financial statements and accompanying footnotes.

The following table illustrates the effect on net (loss) income that would have
resulted if the Company had applied the fair value recognition provisions of
Financial Accounting Standard No. 123, Accounting for Stock-Based Compensation,
as amended by SFAS 148, Accounting for Stock-Based Compensation - Transition and
Disclosure, to stock-based employee compensation:


                                       6
<PAGE>


                      Transnational Financial Network, Inc.

                    Notes to Financial Statements (Continued)


<TABLE>
<CAPTION>

                                                  Three Months Ended                       Nine Months Ended
                                           ----------------------------------      --------------------------------
                                                  January 31      January 31         January 31        January 31
                                                     2005            2004               2005              2004
                                                     ----            ----               ----              ----
Net (loss) income:
<S>                                              <C>            <C>                 <C>              <C>
As reported                                      $ (315,640)    $    32,741         $ (625,525)      $ 1,027,204
Add:  compensation expense previously
          recorded                               $        -     $         -         $        -       $         -
Deduct:  fair value amount net of tax            $  (31,736)    $   (56,504)        $ (146,701)      $  (153,279)
                                                 -----------    -----------         ----------       -----------
Pro forma                                        $ (347,376)    $   (23,763)        $ (772,226)      $   873,925

Basic (loss) income per common share:
As reported                                      $    (0.05)    $      0.03         $    (0.09)      $      0.15
Deduct:  fair value amount                       $     0.00     $      0.01         $    (0.02)      $     (0.02)
                                                 -----------    -----------         ----------       -----------
Pro forma                                        $    (0.05)    $      0.02         $    (0.11)      $      0.13

Diluted (loss) income per common share:
As reported                                      $    (0.05)    $      0.03         $    (0.09)      $      0.15
Deduct:  fair value amount                       $     0.00     $     (0.01)        $    (0.02)      $     (0.02)
                                                 -----------    -----------         ----------       -----------
Pro forma                                        $    (0.05)    $      0.02         $    (0.11)      $      0.12
</TABLE>


There were no options granted during the quarter ended January 31, 2005. There
were 100,000 options granted during the quarter ended January 31, 2004. The fair
value of the stock options granted during the quarter ended January 31, 2004 was
estimated as $0.93 per option. This fair value was determined as of the date of
the grant using an option-pricing model with the following assumptions: $0
annual dividend, volatility of 139.06%, risk-free interest rate of 3.15%, and an
average expected life of 5.0 years.

There were 154,000 and 234,000 option grants during the nine months ended
January 31, 2005 and 2004, respectively. The fair value of the stock options
granted during these nine-month periods was estimated as $0.47 and $0.88,
respectively. This fair value was determined as of the date of grant using an
option-pricing model with the following assumptions: $0 annual dividend,
volatility ranging from 107.53% to 217.26%, risk-free interest rate ranging from
2.20% to 2.95%, and an average expected life of 5.0 and 5.0 years, respectively.

Note 3 - Financing Facilities

As of January 31, 2005, the Company had a maximum mortgage loan financing
capacity of $60 million through two master sale agreements, or warehouse lines
of credit. Under these arrangements, the lending financial institutions purchase
a 100% loan participation interest in each loan upon the Company obtaining a
firm forward sale delivery commitment from investors and upon the financial
institutions' approval of the loan based on their underwriting criteria. The
Company recognizes income from loans transferred under these lines as a gain on
sale immediately upon the purchase and funding of the loans by the financial
institutions.

In connection with these agreements, the Company may be required to repurchase
certain loans that, subsequent to acquisition by the financial institutions,
fail to meet certain representations and warranties set forth in the agreements
at the date of the sale. During the nine-month period ended January 31, 2005 the
Company was required to repurchase two loans in the total amount of $895,546.
Such loans were refinanced by the borrower and the Company recovered its entire
principal, as well as the direct and carrying costs associated with these loans.
During the nine-month period ended January 31, 2004 the Company was required to
repurchase one loan in the amount of $29,762 which, subsequent to January 31,
2005, was resold. The Company recovered its entire principal, as well as the
direct and carrying costs associated with this loan.

                                       7
<PAGE>


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

The first master sale agreement provides a credit facility of $30 million as of
January 31, 2005. Under this arrangement, an additional bulge capacity of $10
million is available if needed, bringing the total capacity under this
arrangement to $40 million. The Company has not used this interim bulge capacity
to date. Interest on the $30 million portion of the line is at the Prime Rate or
3.99%, whichever is higher. Prime was 5.25% at January 31, 2005. Interest on the
remaining $10 million of the line is 0.05% higher than that charged on the $30
million portion. The rate paid by the Company on this line as of January 31,
2005 was 5.25%. The Company is required to maintain a non-interest bearing cash
collateral deposit with this lender of $1,000,000, which has been included as
restricted cash in the balance sheets.

The second master sale agreement provides a credit facility of $20 million as of
January 31, 2005. Interest on the facility is at 1 month LIBOR plus a margin
ranging from 1.875% to 2.50%. The rate paid by the Company on this line as of
January 31, 2005 was 4.90%. The Company is required to maintain an interest
bearing cash collateral deposit with this lender of $100,000, which has been
included as restricted cash in the balance sheets.

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

These financing facilities have various financial and operational covenants with
which the Company must comply. As of January 31, 2005, the Company was not in
compliance with the requirements for current profitability contained in these
facilities, of which status both lenders are aware. Both lenders continue to
fund the Company's loans under these facilities and have informally indicated a
willingness to increase their lending limits if the Company requests to do so.

The CEO and the President of the Company have both personally guaranteed the
above financing facilities.

Note 4 - Goodwill

Goodwill is attributable to the purchase of the Company's Campbell branch
(formerly LRS, Inc.) in 1999.

Note 5 - Subordinated Debt

As of January 31, 2005, the Company had a total of $3,987,700 of subordinated
debentures outstanding. In January, 2005, we received $2,687,700 of convertible
subordinated debt that is due on January 12, 2015, bears interest at 8.50% and
is convertible into common shares at $1.00 per share. The remaining $1,300,000
of subordinated debt bears interest at 10%, and has maturities ranging from
October 31, 2006 to October 1, 2007.

Subsequent to the end of the quarter, the Company repaid $250,000 of the 10%
subordinated debt that had been issued to its former Chief Financial Officer.

During the nine months ended January 31, 2005, the Company repaid $400,000 of
subordinated debt that carried interest at 15% and issued $188,000 of
subordinated debt at 10%.

Subordinated debt interest expense of $128,582 and $230,691was incurred in the
nine month periods ended January 31, 2005 and 2004, respectively.

                                       8

<PAGE>

Note 6 - Settlement Payable

This obligation arose from the December 2002 settlement of litigation related to
the purchase price of the Campbell branch (formerly LRS, Inc.). The balance of
the obligation includes unpaid principal and accrued interest. Pursuant to the
Settlement Agreement, the Company has finished making monthly payments of
$100,000. In October 2004, the Company determined the final amount payable under
the earn-out provisions of the original purchase agreement. Accordingly, the
Company determined to pay an additional $20,000 in final settlement of all
obligations related to this purchase. In November 2004, the Company paid the
final payment in full settlement of this obligation.

Note 7 - Stock Option Programs and Warrants to Purchase Common Stock

As of January 31, 2005, the Company had options outstanding under the programs
described herein.

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

Options issued and outstanding from the 1998 Plan will continue to be honored,
but no additional options may be issued under the 1998 Plan. As January 31,
2005, there were a total of 18,000 share options outstanding under the 1998
Plan, all with an exercise price of $7.50 per option, which vested over 4 years,
and which expire in August 2008.

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

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

Under the 2000 Plan, a total of 750,000 shares were initially reserved. The
options typically vest over four to five years. As of January 31, 2005, there
were 832,166 options outstanding under the 2000 Plan. The share reserve
increases by 4% of total common shares outstanding each year, beginning on
January 1, 2001. The maximum annual increase in the share reserve is limited to
400,000 shares.

Accordingly, the following table is a roll forward of the share reserve limit
through January 31, 2005:

                                       9
<PAGE>




                                                   Number of Options
             Initially Reserved                          750,000
             January 1, 2001                             171,172
             January 1, 2002                             205,503
             January 1, 2003                             270,407
             January 1, 2004                             272,640
             January 1, 2005                             271,654
                                                       ---------
             Reserve amount at January 31, 2005        1,941,376
                                                       =========

The table below summarizes aggregate activity for all options programs for the
nine-month period ended January 31, 2005:

                                                All Programs
                                            -------------------
                                                                  Weighted
                                                                  Average
                                                  Stock           Exercise
                                                  Options         Price
                                                  ---------       -------
           Outstanding at April 30, 2004:         1,426,072       $2.23
           Grants & Adjustments                     154,000        0.99
           Forfeitures                              (89,906)       0.87
                                                  ---------       -----
           Outstanding at January 31, 2005        1,490,166        2.18
                                                  =========       =====


As of January 31, 2005, there were 53,000 warrants to purchase shares of the
Company's common stock outstanding. The exercise prices of the warrants ranged
from $0.55 to $7.50.

Note 8 - Basic and Diluted Net Income (loss)  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 securities. For the
three and nine-month period ended January 31, 2005, the effect of including
potentially dilutive securities in the calculation of diluted net loss per share
was antidilutive. There were potentially dilutive securities of 4,230,866 and
906,780 as January 31, 2005 and 2004 respectively.

Note 9 - Fair Value of Financial Instruments

A summary of the total contract value of the Company's exposure to off-balance
sheet credit risk as of January 31, 2005 and April 30, 2004, including financial
instruments whose contract amount represents credit risk only is as follows:

                                         January 31, 2005        April 30, 2004
                                         ----------------        --------------

Commitments to extend credit             $     18,559,816        $   39,667,350
Mandatory forward delivery commitments          2,786,475                     -



                                       10
<PAGE>


Commitments to extend credit are contractual agreements entered into with
customers to fund mortgage loans, which remain valid as long as there is no
violation of any condition established in the contract. These commitments
generally have fixed expiration dates or other termination clauses. Since many
of the commitments are expected to expire without being drawn upon, the total
commitment amounts do not necessarily represent future cash requirements. The
balance sheet value of these contracts, calculated in accordance with SFAS 133,
was $18,100 and $175,000 at January 31, 2005 and April 30, 2004, respectively.

The Company is exposed to credit risk on its mandatory forward delivery
commitments when the Company's position in these instruments becomes positive
(i.e. "in-the-money") and the Company is a net creditor to the counter party to
the agreement. If the Company cannot deliver the agreed-upon loans into the
commitment by the expiration date, the Company is subject to a financial penalty
("pair-off fee"). The balance sheet value of these contracts, calculated in
accordance with SFAS 133, was $20,300 and $0 at January 31, 2005 and April 30,
2004, respectively.

Note 10 - Subsequent Event

During February, 2005, the Company repaid $250,000 of 10% subordinated debt
owned by its former Chief Financial Officer. This debt had maturities ranging
from February 28, 2007 to October 28, 2007.



                                       11
<PAGE>

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

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

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

QUARTER AND NINE MONTHS ENDED JANUARY 31, 2005 COMPARED TO QUARTER AND NINE
MONTHS ENDED JANUARY 31, 2004

The following table shows the Company's wholesale and retail production trends
by fiscal quarter for the last nine fiscal quarters:

                                     Table 1
                               Origination Volumes
                                  ($ millions)
<TABLE>
<CAPTION>

Fiscal Quarter Ended     1-31-05   10-31-04    7-31-04   4-30-04    1-31-04  10-31-03  7-31-03   4-30-03    1-31-03
                         -------   --------    -------   -------    -------  --------  -------   -------    -------

<S>                      <C>        <C>        <C>       <C>        <C>      <C>       <C>       <C>        <C>
Wholesale                $   91     $   94     $   98    $   128    $  103   $   135   $   247   $   194    $  197
Retail                       72         64         83        144        88       183       216       247       242
                             --         --         --    -------    ------   -------   -------   -------    ------

Total                    $  163     $  158     $  181    $   272    $  191   $   318   $   463   $   441    $  439
                         ======     ======     ======    =======    ======   =======   =======   =======    ======
</TABLE>

Revenue Analysis

Our 25% decline in year over year revenues exceeded the 10.8% decline in
wholesale origination volumes and the 18.2% decline in retail origination
volumes. The current historically low interest rates occurred after a
substantial decline during which we saw a large volume of refinancings. With the
relative stability of interest rates over the last 15 months, the refinancings
stabilized and our origination volumes declined accordingly. Our retail
origination volumes were also affected by the loss of several retail loan
officers that work as independent contractors.

There were materially fewer revenues booked in the quarter just ended from
forward commitment fees and volume bonuses than in the comparable period a year
earlier. Net revenues from these sources in the quarter just ended were $42,682
compared to the $335,161 in the prior year period. Had these additional fees not
been received in either quarter, revenues would have declined at approximately
the same rate as our total loan production.

                                       12

<PAGE>

Most significant to the Company's longer-term outlook, our aggregation of loans
into pools for bulk sale has begun to have an impact on our Gain on Sale
revenues. As a result, our Gain on Sale, excluding forward commitment fees and
volume bonuses, was 114 basis points in the quarter just ended, an increase from
108 basis points in the year earlier period. Accordingly, our Gain on Sale
(excluding forward commitment fees and volume bonuses) from wholesale operations
only declined 6.5% year-over-year in the quarter just ended, approximately half
the decline in our wholesale loans funded.

During the quarter, we aggregated less than 10% of the dollar value of loans we
originated into pools for sale. Thus far, the pricing we are receiving on our
pools is resulting in a net gain on sale at least 50 basis points higher than if
we were to have sold the loans individually.

With the recent addition of $2.5 million of 10 year subordinated debt to our
capital base, we expect to pursue further the use of pooling loans for bulk
sale. If this continues to work as it has been recently, there will be two
positive effects on our Company that could potentially have compounded positive
effects on our operations. Our reported Gain on Sale will continue to improve,
thus boosting revenues without material additional direct expenses.
Additionally, it will give us additional maneuvering room in recruiting Account
Executives and pricing to the network of retail mortgage brokers we service,
both of which could contribute to increased unit production volumes.

Additionally, Total Revenues for the nine-months ended January 31, 2005
decreased 46% from the year earlier period, materially more than for the quarter
just ended. The dominant reason for this is that the historic peak in mortgage
funding activity occurred in the first quarter of the prior fiscal year, thus
creating a high basis for comparison in the first and second quarters of last
fiscal year. Mortgage rates during the current fiscal year have been at a
generally higher level and have not varied as greatly as in previous periods.
Thus, funding activity appears to have stabilized at a lower level.

The year-over-year change in the Company's total revenues for the nine-month
periods ended January 31, 2005 and 2004 were subject to the following additional
influence:

Although wholesale production decreased by 42%, the Company's Gain on Sale
revenues decreased by only 36% during the nine-month period ended January 31,
2005 as compared to the prior comparable period. There were two factors pulling
in opposite directions with respect to our year-over-year Gain on Sale revenues.
On the negative side, we received a total of $314,162 in forward commitment fees
and volume bonuses in this year's nine month period, a decline of 65% from the
$890,887 received in the year earlier. Part of this is due to timing differences
and part is due to a reduced proportion of our total volume being delivered to
the secondary market buyers from whom we have received such payments
historically.

On the positive side, our Gain on Sale, excluding forward commitment fees and
volume bonuses in this year's nine months was 114 basis points, up from 96 basis
points in the year earlier period. This increase in our marginal Gain on Sale
primarily reflects the changes that we made to our product mix during the last
year as well as the fact that we have begun to sell some of our mortgage loans
in small pools for a higher yield.

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

                                     Table 2
                             Wholesale Gain on Sale
                                 (Basis Points)

Fiscal Quarter Ending       1-31-05   10-31-04   7-31-04    4-30-04   1-31-04   10-31-03   7-31-03    4-30-03    1-31-03
                            -------   --------   -------    -------   -------   --------   -------    -------    -------

<S>                           <C>        <C>       <C>        <C>         <C>      <C>       <C>        <C>        <C>
Gain On Sale                  119        145       113        93          140      133       93         128        101
</TABLE>

                                       13
<PAGE>

The Company's Gain on Sale margin peaked during the quarter ended October 31,
2004. On balance, and excluding forward payout fees, the Company prices its
products to achieve a 100 basis point, or more, margin. With the overall
decrease in mortgage loan production in the industry, we have found that our
mortgage loan investors have increased their demand for our production.
Additionally, we have been able to use our available cash balances to fund small
pools of loans to sell for a higher yield, thereby increasing the base level of
Gain on Sale from this production. As we increase our use of pools for the sale
of the mortgages we originate, we expect that our basic Gain on Sale margin will
increase and that the proportion of our Gain on Sale revenues coming from
forward commitment fees and volume bonuses will decrease.

In the current environment, the Company expects to continue to earn such forward
delivery fees from time to time. In the quarter just ended, the Company paid an
upfront commitment fee of $125,000 to enter into a six-month $100 million
forward delivery commitment contract with one of its mortgage loan investors.
Under this arrangement, the Company will earn a fee of 25 basis points on loans
sold under this commitment, in addition to its normal gain on sale. If the
Company fulfills all elements of the arrangement, including delivering $100
million of loans within the six-month period of the contract, the Company will
earn an additional 12.5 basis points.

The final amount of forward payout fee earned by the Company under this contract
is subject to the following pull-through rate (the percentage of loans that are
locked and that fund within the lock period) determination:

o        60.00% - 64.00% pull through receives 50% of forward payout fee
o        65.00% - 69.99% pull through receives 75% of forward payout fee
o        70.00% - above pull through receives 100% of forward payout fee

As of most recently ended quarter, the pull-through rate on the loans delivered
to this investor comfortably exceeded 70%.

Other Income during the quarter and nine months recently ended benefited from a
one-time recovery of about $58,000 in previously expensed legal and other
collection fees on a judgment received with respect to a loan that had gone into
default. The judgement and collection also included the broker on the loan
repurchasing it from the Company at face value.

Gross Profit Analysis

Gross profits for the quarter just ended were lower by 23% when compared to that
earned in the year ago period, not materially different from the decline in
overall revenues. Excluding the effects of forward commitment fees and volume
bonuses in the year over year calculations, our basic Gain on Sale margin in the
quarter rose to 114 basis points from 108 basis points a year earlier.

Additionally, our gross margin was helped by improvements in our interest
income/expense lines. Our net positive interest income from our warehouse
operations were 5% higher in this year's quarter. During the last year of the
interest rate cycle, our interest income from loans held in the warehouse has
increased more rapidly than our associated interest expense for such loans.
Subject to what the Federal Reserve does to short-term interest rates, this
seems unlikely to continue.

We experienced a 28% reduction in our Subordinated Debt interest expense in the
quarter just ended. This is largely the result of having refinanced our prior
Subordinated Debt during the last 12 months at a 10% coupon, down from the 15%
coupon we were paying previously.

Our Subordinated Debt interest expense will rise by about $52,000 in the coming
fourth quarter as a result of the placement of a net additional $2.5 million
8.5% convertible subordinated debt toward the end of this last quarter. Had this
debt been in place for the entire quarter, our gross margin in the third fiscal
quarter of this year would have been approximately 60%.

                                       14

<PAGE>

Gross profits for the nine months ended January 31, 2005 decreased 35% from the
like period a year ago. Again, this is largely due to the countervailing
influences (discussed above) in the nine-month period just ended compared to the
comparable period of a year ago.

As shown in the table below, the Company has experienced generally increasing
gross margins over the last two years, although there has been
quarter-to-quarter variability. The peak gross margin shown in the second
quarter (ended October 31st) of the current fiscal year is primarily
attributable to the higher base gain on sale, the forward delivery and volume
bonus fees received, and the positive warehouse interest margin.

<TABLE>
<CAPTION>

                                     Table 3
                           Gross Profit Margin Trends*

         Fiscal Quarter Ending       1-31-05  10-31-04    7-31-04   4-30-04    1-31-04   10-31-03    7-31-03   4-30-03
         ---------------------       -------  --------    -------   -------    -------   --------    -------   -------
<S>                                  <C>        <C>        <C>       <C>        <C>        <C>       <C>       <C>
         Gross Profit Margin         61.8%      66.9%      61.5%     55.0%      59.8%      52.0%     51.0%     52.5%
</TABLE>


         * - These margins are different, and lower by 1-2 percentage points,
         than previously reported because we are now reporting Subordinated Debt
         Interest expense above the Gross Profit line going forward.

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

First, the Company's wholesale originations have higher gross profitability than
retail mortgage originations. Hence, relatively small changes in our total
wholesale originations, as percentage of our total originations, will have a
larger impact on our corporate-wide gross margin.

Second, as previously discussed, the Company benefited from changes it made to
its product mix, as well as from increased market demand for its product types
and it use of pools to enable the bulk sale of its mortgage loans. As a result,
the Company's basic Gain on Sale margin has steadily increased, thus magnifying
the effects of the mix factor change.

Third, in the most recent quarter and nine-month period, we have experienced a
positive net interest margin on our warehouse. This increase is attributable to
the types of facilities that the Company has been able to negotiate and obtain
during the last nine months, which resulted in a decrease in the interest costs
charged on the facilities.

Indirect Expense Analysis

While aggregate indirect expenses declined 2% to $1.7 million in the quarter
ended January 31, 2005 when compared to the like period a year earlier, they
increased to 74.5% from 57.5% of revenues. This increase, as a percentage of
revenues, is due to revenues declining faster than expenses.

Our total absolute spending on indirect expenses for the quarter just ended was
approximately $23,000 higher than it was in the immediately preceding second
fiscal quarter.

While we have been able to continue trimming our G&A expenses ($31,000 lower
than in the immediately preceding quarter), our Salary and Benefit expense
increase of $53,000 more than offset the G&A reductions. Of this $53,000 Salary
and Benefit increase from the prior quarter, $32,000 was due to the one-time
receipt of a refund of Workers Compensation Insurance in the second fiscal
quarter (thus temporarily depressing Salary and Benefit expense). The remainder
of the increase is primarily from increased benefits costs over which we have
minimal control.

Indirect expenses for the nine-months ended January 31, 2005 declined 11% when
compared to the like period a year earlier.

                                       15

<PAGE>

                                     Table 4
                         Indirect Expense and Components
                                    ($ 000s)
<TABLE>
<CAPTION>

Fiscal Quarter Ending   1-31-05   10-31-04     7-31-04    4-30-04    1-31-04    10-31-03   7-31-03     4-30-03   1-31-03
---------------------   -------   --------     -------    -------    -------    --------   -------     --------  -------
<S>                     <C>        <C>         <C>        <C>        <C>        <C>        <C>         <C>       <C>
Total Indirect Exp.     $1,660     $1,637      $1,702     $1,724     $1,699     $1,799     $2,093      $2,035    $2,232
    Percent of Rev.     74.5%      66.9%       68.3%      51.1%      57.5%      40.6%      35.9%       33.6%     38.6%

Selected Components:
    Salaries and Ben.   $948       $895        $950       $979       $1,024     $1,096     $1,249      $1,114    $1,211
    Percent of Rev.     42.6%      36.6%       38.1%      29.1%      34.7%      24.7%      21.4%       19.0%     20.4%

    Gen. and Admin.     $520       $550        $559       $553       $480       $503       $635        $712      $818
    Percent of Rev.     23.4%      22.5%       22.5%      16.4%      16.3%      11.4%      10.9%       11.3%     14.5%
</TABLE>

We do not expect to be able to continue reducing our aggregate Indirect Expenses
from the recent levels.

Non-Operating Expense Analysis

The Company's non-operating expenses consist of two types.

First, the Company has incurred other interest expense. This is interest expense
not associated with the Company's mortgage lending activities (warehouse loans)
or the financing of its capital base. It results solely from a single past
obligation: An obligation related to an acquisition the Company made in 1999,
accounted for the entire amount of Non-operating quarterly interest expense.
This obligation (principal and accrued interest) was paid in full during the
last quarter. Accordingly, we do not expect to incur other interest expense in
the foreseeable future.

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

In the quarter just ended, there was a negative adjustment to this SFAS 133
asset of approximately $11,700. This expense contrasts to a charge of
approximately $1,900 the Company experienced in the third fiscal quarter a year
ago. As of the recently ended nine months, the "Fair value of financial
derivatives" represented an asset value of $38,400, $136,600 less than as of the
end of our last fiscal year.

LIQUIDITY AND CAPITAL RESOURCES

Our operations are funded through internally generated funds, externally raised
sources of capital (debt and equity), plus warehouse lines of credit (as set
forth below) providing the funding necessary to fund mortgage loans pending the
mortgage loans' resale to investors.

Our unrestricted and restricted cash plus investments held-to-maturity position
as of January 31, 2005, decreased by $97,844 from what it was at the end of our
last fiscal year, April 30, 2004. Management and the Company's board of
directors believe this is a more appropriate figure to examine than unrestricted
cash alone. The restricted cash is cash held on deposit with its warehouse
lenders and represent a management decision and strategy. We can negotiate for
lower deposit requirements, but at the expense of other variables associated
with the lending facility, including, but not limited to, nominal interest rate,
per transaction fees, loan haircuts, etc. Hence, the total of unrestricted and
restricted cash plus short-term (cash-like) investments it what we measure in
evaluating our overall liquidity.

                                       16

<PAGE>

The principal changes to our aggregate cash and investments positions during the
nine months are shown in the table below. The FASB-compliant sources and uses of
funds statement is included with the other financial statements at the beginning
of this filing. The short-form table below is how management and the Company's
board of directors monitor the Company's changes in cash and investments
position.


                                     Table 5
                        Simplified Sources/(Uses) of Cash
                       Nine Months Ended January 31, 2005

<TABLE>
<CAPTION>
                                                                                                    Sources (Uses)
                  Operating Cash Flows
                  Income Statement Related Cash Flows
<S>                                                                                             <C>
                  Net Income                                                                    $        (625,525)
                         Add back non-cash charges
                             Depreciation & Amortization                                                   53,152
                             Fair value of financial derivatives changes                                  136,600
                             Provision for early payoff penalties                                          33,500
                                                                                                          -------
                         Operational Cash Flows from the Income Statement                       $        (402,273)

                  Balance Sheet Related Cash Flows
                      Mortgages held for sale                                                   $      (1,125,826)
                      Short-term mortgage receivables                                                    (161,720)
                      Other Assets                                                                       (112,528)
                      Accounts payable and other accrued liabilities                                      (56,978)
                                                                                                       ----------
                         Operational Cash Flow from the Balance Sheet                           $      (1,457,052)

                  Total Cash Flow Used in Operations                                            $      (1,859,325)

                  Financing Activity Cash Flows
                      Issuance of subordinated debt                                             $       2,875,700
                      Repayments of subordinated debt                                                    (400,000)
                      Stock purchases                                                                     (37,198)
                      Settlement paid                                                                    (639,047)
                      Capital lease obligations change                                          $         (18,269)
                                                                                                -----------------

                  Total Cash Flow from Financings Activities                                    $       1,781,186

                  Investing Activity Cash Flows
                      Purchase of property and equipment                                        $         (19,705)

                  Total Cash Flow from Investing Activities                                     $         (19,705)

                  Net Change to Aggregate Cash and Investments                                  $         (97,844)
</TABLE>

In summary form, this table says the following concerning the Company's
aggregate cash resources in the first nine months of the current fiscal year:

     o   The Company lost about $402,000 of cash from its its income
         statement-related operations during this period;

     o   The Company increased it Mortgages Held for Sale and Short-term
         Mortgage Receivables by a total of $1.29 million during the nine
         months. This is the result of the previously discussed corporate

                                       17

<PAGE>

         strategy of aggregating individual mortgage loans into pools and then
         selling the pools in order to increase our Gain on Sale. Part of the
         pools is funded by the warehouse facilities, and part is funded using
         our own cash as a means of earning a greater return than on money
         market funds or equivalent short-term investments.

     o   In order to fund its corporate strategy of increasing its individual
         loan aggregation, the Company increased its net Subordinated Debt by
         $2.475 million. Importantly, we lengthened the term and lowered the
         cost of our total subordinated debt by (1) paying down $400,000 of 15%
         debt with short maturities, (2) raising $2.69 million of 10 year, 8.5%
         coupon convertible debt, and (3) raising $187,000 of 10% 2-3 year debt.


     o   The payment of the Settlement Payable (and the associated interest
         thereon) at $100,000 per month was completed during the last quarter.
         This used about $655,000 of cash, including the interest, and
         extinguished the $639,000 obligation.

     o   We include all the change in Other Assets in our measure of operational
         liquidity generation/use because virtually the entire account is
         comprised of prepaid expenses that run off in less than a year.

         Somewhat more than half the change ($62,500) in our Other Assets in the
         period reflected the remaining value as of January 31, 2005 of the
         forward commitment payout fee we incurred at the beginning of the
         quarter. This asset will be written off in our fourth fiscal quarter.
         However, we expect to earn substantially more than this fee from the
         receipt of forward commitment fees paid back to us based on loan
         delivery during the fourth quarter.

Summary of Financing Facilities

The capital resources utilized by the Company to fund its mortgage lending
activities are primarily provided by warehouse lenders that fund the mortgage
loans through Master Sales Agreements ("warehouse facilities"). The size of the
Company's warehouse facilities is based on the Company's net worth and cash
resources. As of January 31, 2005, the Company had a total of two financing
facilities for a maximum financing capacity of up to $60.0 million.

The funding facilities have various financial and operational covenants with
which the Company must comply, including the requirement that the Company
maintain cash deposits with certain lenders as compensating balances.
Collectively, these facilities currently require compensating balances of $1.1
million.

More detailed data on these facilities is presented in Note Number 3 to the
Financial Statements presented in Item 1.

Our overall funding strategy is to use committed facilities, summarized as of
January 31, 2005:


                                       18
<PAGE>
                                     Table 6
                          Loan Facilities and Balances

<TABLE>
<CAPTION>

                             Committed      Outstanding        Required              Interest Rate
Type of Facility               Facility        Balance       Cash Deposit    January 31, 2005  Maturity
----------------             -------------  ------------     ------------    ----------------  --------

<S>                            <C>            <C>            <C>                <C>            <C>
Master sales agreement (1)     $40,000,000    $ 8,982,125    $1,000,000         5.25%(2)       Annual or 30 days notice
Master sales agreement (1)      20,000,000      5,776,257       100,000         4.90%(3)       Annual or 30 days notice
                               -----------      ---------       -------
Totals                         $60,000,000    $14,758,382    $1,100,000
                               ===========    ===========    ==========
</TABLE>
(1)      The Company accounts for the loans underlying these facilities as sold
         as of January 31, 2005.
(2)      The contractual interest rate on this facility was 3.99% or Prime,
         whichever is greater.
(3)      The contractual interest rate on this facility is one month LIBOR plus
         a margin ranging from 1.875% to 2.50%.


Future Non-Operational Cash Requirements

The Company has certain non-operational requirements for cash in the future. The
material requirements are those for repayment of the subordinated debt issued in
recent years to bolster our capital position. The schedule of maturities for
these is as follows:
                                     Table 7
                   Non-Operational Cash Repayment Requirements

             March 31, 2006                       $   50,000
             February 28, 2007                    $  200,000
             March 31, 2007                       $  800,000
             May 31, 2007                         $  200,000
             October 28, 2007                     $   50,000
             January 12, 2015                     $2,687,700


Subsequent to the end of this past fiscal quarter, we repaid $250,000 of the
subordinated debt, extinguishing the maturities of February 28, 2007 and October
28, 2007.

Off Balance Sheet Risks

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

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

                                       19
<PAGE>

                                     Table 8
                     Notional Value of Financial Instruments
<TABLE>
<CAPTION>

                                                  January 31,                        April 30,
                                                    2005                               2004
                                            -------------------------------------------------------

<S>                                         <C>                               <C>
Commitments to extend credit                $     18,559,816                  $      39,667,350
Mandatory forward delivery commitments             2,786,475                                 -
</TABLE>



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


                                       20
<PAGE>


                                  MD&A APPENDIX

               Updated General and Operational Company Information

General

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

Since 1985, when the Company was incorporated, it has been engaged in the
origination of retail mortgage loans, and currently maintains wholly owned
retail offices in San Francisco and Campbell, California. In addition, the
Company maintains net branches in association with local mortgage brokerage
companies. As of January 31, 2005, the Company maintained one net branch in
Scottsdale, Arizona. We expect to continue our policy of adding and subtracting
net branches from our branch network on an opportunistic basis.

In 1995, the Company began a wholesale division to close and fund loans
originated by independent third party mortgage brokers as well as those
originated through the Company's retail division. The Company maintains
wholesale offices in San Francisco and Tustin, California, as well as
Scottsdale, 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, with origination volumes increasing in periods of
declining interest rates, and declining during periods of increasing interest
rates. Increasing mortgage rates raises the qualifying income required of a
homebuyer and reduces housing affordability. Interest rate increases also cause
mortgage refinance activity to decline because fewer homeowners can successfully
obtain a mortgage at a lower interest rate than their original mortgage. Higher
interest rates increase the cost of home ownership resulting in diminished
demand for mortgage loans, whether the purpose of the mortgage loan is for the
purchase of a home, refinancing of a home to obtain a lower rate or longer term,
home improvement, debt consolidation, or obtaining cash. When rates are high,
the mortgage loan financing that does occur usually takes the form of variable
rate mortgage loans, that is, mortgage loans that have interest rates that
frequently change and, consequently, have lower initial interest rates than
those charged on longer term fixed interest rate mortgage loans.

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

                                       21
<PAGE>


The following table summarizes mortgage loan production volume by division
(dollars in thousands):

                                     Table 9
                        Divisional Loan Production Volume
                                    ($ 000s)
<TABLE>
<CAPTION>

                                                Three month period ended                      Nine month period ended
                                                ------------------------                      -----------------------
                                               January 31,      January 31,               January 31,       January 31,
  Wholesale Division                                  2005             2004                      2005              2004
                                                      -----------------------------------------------------------------
<S>                                           <C>               <C>                       <C>               <C>
                  Volume                      $     90,572      $   102,413               $   281,880       $   483,980
                  Percent of Volume                     56%              54%                       56%               50%
                  Number of Loans                      407              428                     1,336             1,919
                  Average Loan Size           $        223      $       239               $       211       $       252

  Retail Division
                  Volume                      $     72,262      $    88,334               $   219,417       $   483,335
                  Percent of Volume                     44%              46%                       44%               50%
                  Number of Loans                      201              288                       618             1,422
                  Average Loan Size           $        359      $       307               $       355       $       340

  Total Loan Production
                  Volume                      $    162,834      $   190,747               $   501,297       $   967,315
                  Number of Loans                      608              716                     1,954             3,375
                  Average Loan Size           $        268      $       266               $       257       $       287
</TABLE>

The Wholesale Origination Division

Our wholesale lending division operates from our executive offices in San
Francisco with offices in Tustin, California and Scottsdale, Arizona.

During the nine month period ended January 31, 2005 we originated mortgage loan
volume through a network of approximately 650 independent mortgage brokers and
other financial intermediaries who are all screened and approved by us. No
single source of independent brokers accounted for more than 3% of our total
wholesale mortgage originations. Mortgage brokers are qualified to participate
in our wholesale program after the completion of an application process that
includes our checking and verifying references, resumes, licenses and financial
statements. New broker relationships are established through business
development staff. Approved mortgage brokers are monitored by our wholesale
account representatives and the broker's financial statements are updated and
re-verified on an annual basis.

Our underwriters, all of whom have many years of experience, process and
underwrite mortgage loans. Only those mortgage loan applications that meet our
underwriting criteria are funded.

Wholesale lending allows us to benefit from cost efficiencies derived from not
having to take a mortgage loan application, a labor intensive function, thereby
reducing mortgage loan processing time, as well as being able to centralize
support functions and reduce fixed operating costs. Wholesale lending offers us
economies of scale while building substantial loan volume.

One measure of efficiency widely used in the mortgage banking business is the
"pull through rate", or a percentage that measures the dollar volume of loans
that are funded versus the dollar volume of loans that we contract for with
mortgage borrowers using interest rate lock commitments. The more loans that we
close and fund, the higher our pull through rate. If we end up not funding and
closing a loan for which we have provided an interest rate lock commitment, then
our pull through rate will be negatively affected. The following table presents
our pull through rates for each of the nine previous quarterly periods:

                                       22
<PAGE>
                                    Table 10
                               Pull Through Rates
<TABLE>
<CAPTION>

        Fiscal Quarter Ended    Jan 05  Oct 04  Jul 04  Apr 04  Jan 04  Oct 03  Jul 03  Apr 03  Jan 03
                                ------  ------  ------  ------  ------  ------  ------  ------  ------
<S>                             <C>     <C>     <C>     <C>     <C>     <C>     <C>     <C>     <C>
        Rate                    76.8%   64.7%   66.2%   71.0%   74.5%   69.2%   76.5%   74.2%   76.0%
</TABLE>

We generate revenues through gains on the sale of mortgage loans and related
servicing rights to investors, interest generated on mortgage loans held or
warehoused from the time the mortgage loan is originated until the mortgage loan
is sold and, in the case of retail operations, origination fees.

Our wholesale mortgage banking business is directly dependent upon the size of
our capital base. The Company's financing facilities are generally limited to a
maximum leverage ratio of 15 to 1, so for every dollar in additional capital
earned or raised by the company, our financing facilities could be increased by
$15, thereby supporting increased business volumes. We currently have two
financing facilities in place for a total borrowing capacity of up to $60
million. In the aggregate, the Company believes that its existing financing
facilities are adequate to support current business levels. However, failure to
obtain additional financing facilities could limit our ability to exceed current
business levels, and failure to maintain existing facilities would have a
material adverse effect on our operations and financial performance.

Wholesale loan production during the nine-month period ended January 31, 2005
was $282 million as compared to $484 million for the comparable period ended
January 31, 2004. This decrease of approximately 48% is attributable to two
related factors: First, the increase in interest rates since the summer months
of 2003, when mortgage rates were at record lows has dampened overall mortgage
demand in California, our largest market. Second, the level of refinancings is
acutely sensitive to interest rates and refinancing activity has declined
substantially, particularly in California, our largest market.

During the fiscal year ended April 30, 2003, the Company made changes to its
product mix and began to focus on providing Alt-A type of mortgage loans. These
loans generally have characteristics such as lower documentation standards,
higher loan to value ratios, higher debt-to-income levels, and may be secured by
non-owner occupied properties. For investors in Alt-A mortgages, these products
typically offer a higher yield with a reduced prepayment tendency as compared to
prime or "A" mortgages. Because of these characteristics, mortgage investors
have increased their demand for these types of products. As a result of this
change in our product mix, we were able to increase the gain that we earn on the
sale of mortgage loans from 96 basis points during the nine months ended January
31, 2004 to 143 basis points in the recently ended nine month period.

Loan Production Administration

All mortgage loan applications must be underwritten and approved in accordance
with our underwriting standards and criteria. Underwriting standards used for
conforming loans are those promulgated by FNMA and FHLMC. Non-conforming (Jumbo)
loans are underwritten subject to credit and appraisal standards established by
specific private investors. We analyze the borrower's credit standing, financial
resources and repayment ability as well as the risk of the underlying
collateral. All mortgage loans must have a property appraisal provided by an
independent third party, fee-based appraiser. Nationally recognized credit
reporting agencies provide complete reports of the borrower's credit history
including bankruptcies and delinquencies.

A borrower may qualify for a mortgage loan through five mortgage loan
documentation programs:

1. Full documentation - the borrower's assets, income and employment are all
verified by written or verbal confirmation
2. Limited documentation - more emphasis is placed on the ability to pay and the
property value
3. Alternative documentation - income and assets are confirmed by reviewing the
borrower's supporting documentation
4. No ratio loan documentation - no income ratios are calculated

                                       23

<PAGE>

5. No income/no asset verification - no income/no asset program, the value of
the loan collateral is as critical as the borrower's credit history

Each program places a heavy emphasis on credit scores and differing loan to
value ratios.

The Company's underwriting department consists of five underwriters who maintain
the consistent quality of mortgage loans expected by secondary market investors.
The Company generally takes from 48 to 72 hours to underwrite a mortgage loan
from the initial receipt of the application from the broker. Quality
underwriting affects both our exposure to loss from fraud and our ability to
sell the mortgages we originate quickly for favorable prices. For this reason,
we are retaining our underwriting staff, even though we are not currently making
full use of it. We believe we could process 2-3 times the number of loans we are
currently doing with our current staff.

Upon completion of the underwriting process and funding of the loan by one of
our financing facilities, the mortgage loan is closed by a title agency chosen
by the borrower. We perform a pre-funding audit on all mortgage loans, which
includes a verification of certain mortgage loan documentation to determine the
integrity of the data and a review for compliance with underwriting guidelines.
Post-funding audits are performed by an independent third party to monitor and
evaluate our origination policies and procedures. A sample of ten percent of all
mortgage loans closed are subjected to a full quality control review including
re-underwriting the mortgage loan. Our management receives a monthly report on
any deficiencies found in the randomly sampled mortgage loans and believes that
its use of the IRS Verification of Income program increases significantly the
quality of its originations.

Wholesale Mortgage Loan Sales

We originate and purchase all of our mortgage loans with the intent to sell the
mortgage loans, without retaining any interest in them, or in the related
servicing rights, into the secondary market. We sell the mortgage loans without
recourse primarily to institutional investors, national banks and mortgage
lenders. As of January 31, 2005, we had relationships to sell to approximately
20 mortgage investors.

As part of the sale, we provide representations and warranties that are
customary to the industry and which cover compliance with program standards,
laws and regulations as well as the accuracy of the information. In the event of
a breach of these representations and warranties, we may be required to
repurchase these mortgage loans and/or may be liable for certain damages.
Normally, any repurchased mortgage loan can be corrected and resold back to the
original investor, although a loss may be incurred on the sale due to subsequent
changes in market conditions since the original closing date of the loan.
Historically, loan repurchases and related losses have not been material or
significant.

We hold the originated or purchased mortgage loan for sale from the time that
the mortgage loan application is funded by us until the time the mortgage loan
is sold to an investor. During that time, the note rate on the mortgage loan
might be higher or lower than the market rate at which we can sell the mortgage
loan to an investor. Therefore, a market gain or loss results on the sale of the
mortgage loan. To protect against interest rate changes on mortgage loans that
are in the warehouse (mortgage loans that have been funded, but not sold) and
committed pipeline loans (loans which are not yet funded, but on which an
interest rate has been committed to the borrower) we undertake certain
activities to protect our mortgage position. We follow the practice of entering
into forward delivery commitments for the sale of whole mortgage loans to
mitigate our exposure to interest rate risk on substantially all funded and
committed mortgage loans. These forward delivery commitments are either on a
"best efforts" or "mandatory" basis. The best efforts commitments generally
result in a lower gain on sale, but simply require that we make an effort to
deliver a loan or group of loans at a specified interest rate and balance, with
no cost or penalty if we fail to make delivery of such loans. A mandatory
commitment generally results in a higher gain on sale; however, it requires that
we deliver loans as promised. Failure to do so results in the payment of a
penalty ("pair-off" fee) which can be significant in the event of large changes
in the interest rate environment. The Company has not designated its practice of
entering into forward delivery commitments as a hedging activity within the
definition of Statement of Financial Accounting Standard ("SFAS") No. 133,
Accounting for Derivative Instrument and Hedging Activities.

                                       24

<PAGE>

Historically, we have normally sold each loan as it is funded. Doing so has
limited our exposure to changes in the market value of the loan due to interest
rate changes since the period of time from which we fund a loan to when we
receive the proceeds from a secondary market buyer has been in the are of only
two weeks. At the same time, we get a lower gain on sale from the secondary
market for mortgages when we sell the loans one-by-one.

During the quarter ended January 31, 2005 we initiated a program to accumulate
certain types of loans and then sell them in bulk. The types of loans we have
done bulk or mini-bulk sales on to date have been Home Equity Lines of Credit
(HELOCs) and adjustable rate mortgages (ARMs), both of which are less
susceptible to value changes from changes in interest rates than are fixed rate
mortgages.

The purpose of doing this is to increase our gain on sale, while still limiting
our exposure to changes in loan values from interest rate changes. Subject to
our available capital, we expect to continue to expand our activities in this
area.

                       Funding of Wholesale Mortgage Loans

We need substantial cash resources to facilitate the funding and closing of the
originated and purchased loans. These funds are provided on a short-term basis
by financial institutions that specialize in purchasing loans or providing lines
of credit (collectively known as "master sale agreements"). We submit the
mortgage loan to the financial institutions for funding, along with the investor
commitment, if any, to purchase the loan.

As of January 31, 2005, the Company had a maximum mortgage loan financing
capacity of $60 million through two master sale agreements. Under these
arrangements, the lending financial institutions purchase a 100% loan
participation interest in each loan upon the Company obtaining a firm forward
sale delivery commitment from investors and upon the financial institutions'
approval of the loan based on their underwriting criteria. The Company
recognizes income from loans transferred under these lines as a gain on sale
immediately upon the purchase and funding of the loans by the financial
institutions.

In addition, both of these facilities have offered to expand our borrowing
capability to permit the Company to accumulate loans for bulk resale. We have
not yet needed to make use of this additionally available borrowing capacity.

In connection with these agreements, the Company may be required to repurchase
certain loans that, subsequent to acquisition by the financial institutions,
fail to meet certain representations and warranties set forth in the agreements
at the date of the sale. During the nine-month period ended January 31, 2005 the
Company was required to repurchase two loans in the total amount of $895,546.
Such loans were refinanced by the borrower and the Company recovered its entire
principal, as well as the direct and carrying costs associated with these loans.
During the nine-month period ended January 31, 2004 the Company was required to
repurchase one loan in the amount of $29,762 which, subsequent to January 31,
2005, was resold. The Company recovered its entire principal, as well as the
direct and carrying costs associated with this loan.

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

The following table shows the average number of days that the Company's
wholesale mortgage loans are with a financial institution, or "in the
warehouse", for each quarter for the last nine fiscal quarters:


                                    Table 11
                       Average Number of Days in Warehouse
<TABLE>
<CAPTION>
Fiscal Quarter Ended         Jan 05  Oct 04  Jul 04  Apr 04  Jan 04  Oct 03  Jul 03  Apr 03  Jan 03  Oct 02
                             ------  ------  ------  ------  ------  ------  ------  ------  ------  -----
<S>                          <C>     <C>     <C>     <C>     <C>     <C>     <C>     <C>     <C>     <C>
Average Number of Days       15      15      15      13      14      14      11      14      21      19
</TABLE>
                                       25

<PAGE>

To the extent we continue to expand our mortgage pooling activities and utilize
larger pools, we may see the average number of days our loans are financed start
to increase.

Wholesale Loan Products

We originate a variety of mortgage loan products. Conforming mortgage loans are
those that qualify for inclusion in guarantee programs sponsored by the Federal
National Mortgage Association (or FNMA) and the Federal Home Loan Mortgage
Corporation (or FHLMC). In addition, the Department of Housing and Urban
Development (or HUD) offers Government Insured loan programs through the Federal
Housing Administration (or FHA) and Veterans Administration (or VA).
Non-conforming mortgage loans are those that do not conform to FNMA, FHLMC, FHA
& VA requirements. The principal deviation from such standards relates to the
size of the mortgage loan although some do not conform because of lower
documentation standards where there is a higher loan-to-value ratio. Those loans
that exceed the FNMA/FHLMC guidelines (presently mortgage loans larger than
$359,650) are called Jumbo loans. Jumbo loans comprised approximately 48% and
42% of the wholesale mortgage loans we originated for the nine-month periods
ended January 31, 2005 and 2004, respectively.

In periods of declining interest rates, our predominant products are fixed rate
mortgages with terms of either 15 or 30 years. When interest rates are rising,
adjustable rate mortgages make up a larger percentage of our originations. We
originate some home equity financing through second mortgages and lines of
credit using the home as collateral, but these products constitute a small
portion of our business.

Since inception, our marketing niche has been borrowers that have high credit
ratings and require large mortgage loans with low loan to value ratios. For the
nine-month periods ended January, 2005 and 2004, the average wholesale loan size
based on principal balance was approximately $211,000 and $252,000,
respectively.

We primarily originate prime first lien residential mortgage loans. The Company
also originates a lesser amount of second mortgage loans and home equity lines
of credit.

The following table details the mortgage loan types originated by the wholesale
division, as measured by principal balance, during the six-month periods ended
January 31, 2005 and 2004:

                                    Table 12
                        Wholesale Mortgage Loans by Type
                     (Nine Month Periods Ending January 31)
<TABLE>
<CAPTION>


                  Loan Type                                                                    2005              2004
                  ---------                                                                    ----              ----
                  <S>                                                                         <C>               <C>
                  1 month adjustable-rate (various total terms)                                 2.6%              0.2%
                  6 month adjustable-rate (various total terms)                                 7.2%              3.0%
                  2 year fixed-rate, adjustable-rate hybrid (various total terms)               9.1%              0.7%
                  3 year fixed-rate, adjustable-rate hybrid (various total terms)              18.3%              2.5%
                  5 year fixed-rate, adjustable-rate hybrid (various total terms)              32.9%             32.9%
                  7 year fixed-rate, adjustable-rate hybrid (various total terms)               1.8%              4.1%
                  10 year fixed-rate, adjustable-rate hybrid (various total terms)              0.0%              0.1%
                  10 year term fixed-rate                                                       0.0%              0.0%
                  15 year term fixed-rate                                                       3.8%              8.7%
                  20 year term fixed-rate                                                       0.1%              0.0%
                  30 year term fixed-rate                                                      19.6%             43.0%
                  Federal Housing Authority (various total terms and rates)                     0.5%              3.4%
                  Other                                                                         4.1%              1.4%
                                                                                               ----              ----
                  Total                                                                       100.0%            100.0%
</TABLE>

The loans that fall into the "Other" category are comprised of second mortgage
loans and home equity lines of credit. "Other" loans can be either fixed or
adjustable rate loans and have a variety of terms to maturity.

                                       26

<PAGE>

Wholesale Geographic Concentration

The Company originates loans in states where it is approved to do so. As of
January 31, 2005, the Company was either licensed or qualified to do business in
17 states. On that same date, the Company had 76 employees located in two
retail-lending offices in two states and three wholesale origination offices.
During the nine-month periods ended January 31, 2005 and 2004, the Company's
wholesale division's loan origination volume, as measured by principal balance,
came from the following states:

                                    Table 13
                    Wholesale Lending Geographic Origination
                     (Nine Month Periods Ending January 31)

                                            2005             2004
                 -------------------------------------------------
                 California                 71.7%            85.9%
                 Arizona                    24.9%            12.4%
                 Others                      3.4%             1.7%
                                            ----             ----
                 Total                     100.0%           100.0%

Wholesale Loan to Value Ratios

A loan's loan-to-value ratio, or LTV, is an important way for many loan
originators and loan investors to discern risk within a loan. An LTV is
calculated by using the loan principal balance as the numerator and the lower of
the home's sales price or appraised value as the denominator. A loan is said to
have an 80% LTV if, for example, the home was purchased for $100,000 and the
loan amount is $80,000. This assumes the appraised value of the home is at least
$100,000.

During the nine-month periods ended January 31, 2005 and 2004, the wholesale
division's first lien mortgage loan origination volume, as measured by principal
balance, contained loans within the following LTV ranges:

                                    Table 14
                      Wholesale Loan to Value Distribution
                     (Nine Month Periods Ending January 31)

                      LTV                 2005              2004
                      ---                 ----              ----
                      50 or less           16.9%            22.8%
                      50.01 - 60            9.3%            15.7%
                      60.01 - 70           23.3%            20.4%
                      70.01 - 80           49.3%            32.9%
                      80.01 - 85            0.2%             0.9%
                      85.01 - 90            0.5%             2.5%
                      90.01 - 95            0.2%             1.7%
                      95.01 or more         0.3%             3.1%
                      Total               100.0%           100.0%

Wholesale Loan Credit Scores

Borrower credit scores are also a very important tool in determining the quality
of loans produced by a lender. In underwriting a potential mortgage loan, we
will obtain credit scores from the borrower's credit report. A credit report
contains information on credit history, including existing and previously repaid
debt, and payment history on each obligation. There are three primary credit
repositories that keep historical data and provide credit reports on potential
borrowers. Each has a scoring model, the most common of which is referred to as
a FICO score. The FICO score is a 3-digit number that can range from 300 to 850
and is based on payment histories, amounts owed, length of credit history, new
credit and types of credit use.

Higher scores are considered better scores. That is, the higher the score, the
more favorably lenders look upon the borrower as a credit risk. Each primary
credit repository produces their own score based on the data they have on a

                                       27

<PAGE>

potential borrower. We compare the scores from the three repositories and
generally will use the middle of the three in rating the risk profile of a
proposed mortgage loan. We generally consider loans to borrowers with FICO
scores below the 600 - 650 range to have higher repayment risk than loans to
borrowers with higher FICO scores, although FICO scores alone do not always
accurately reflect repayment risk or a lack thereof.

During the nine-month periods ended January 31, 2005 and 2004, the percentage of
loans, as measured by principal balance, that the wholesale division originated
in each specific middle FICO score range follows:

                                    Table 15
                        Wholesale FICO Score Distribution
                     (Nine Month Periods Ending January 31)

                     FICO Score           2005             2004
                     ----------           ----             ----
                     800 +                 2.4%             1.9%
                     775 - 799            10.2%            14.3%
                     750 - 774            14.2%            19.2%
                     725 - 749            16.3%            17.5%
                     700 - 724            19.4%            14.0%
                     675 - 699            17.2%            15.2%
                     650 - 674            12.9%             9.4%
                     625 - 649             5.5%             2.6%
                     600 - 624             0.7%             0.6%
                     575 - 599             0.1%             0.2%
                     550 - 574             0.0%             0.1%
                     Below 550             0.1%             0.0%
                     No score available    1.0%             5.0%
                     Total               100.0%           100.0%

Wholesale Loan Property Types

During the nine-month periods ended January 31, 2005 and 2004, 100% of our
wholesale loan origination volume, as measured by principal balance, was
collateralized by residential property.

The following table shows, for the nine-month periods ended January 31, 2005 and
2004, the percentage of loans originated by property type:

                                    Table 16
                    Wholesale Mortgage Loans by Property Type
                     (Nine Month Periods Ending January 31)

                                              2005              2004
                                              ----              ----
                    Single family             57.6%             66.4%
                    Planned Unit Dev.         27.2%             17.5%
                    Condominium                8.2%              5.5%
                    2 - 4 family               6.9%             10.5%
                    Other                      0.1%              0.1%
                                             -----------------------
                    Total                    100.0%            100.0%

During the nine-month periods ended January 31, 2005 and 2004, the wholesale
division's first lien mortgage loan origination volume, as measured by principal
balance, was comprised of loans with original principal balances in the
following ranges:

                                       28
<PAGE>
                                    Table 17
                Wholesale Mortgages by Original Principal Balance
                     (Nine Month Periods Ending January 31)


                                        2005              2004
                                        ----              ----
                $100,000 or less         8.3%              4.0%
                $100,001-200,000        20.4%             19.5%
                $200,001-300,000        15.4%             25.1%
                $300,001-400,000        17.2%             19.1%
                $400,001-500,000        11.2%             10.1%
                $500,001-600,000         6.8%              7.7%
                $600,001-700,000         6.6%              5.1%
                $700,001-800,000         3.7%              1.3%
                $800,001-900,000         0.6%              1.1%
                $900,001-1,000,000       4.5%              2.8%
                $1,000,001-1,500,000     1.3%              2.8%
                over $1,500,001          4.0%              1.4%
                                        ----              ----
                                       100.0%            100.0%

First lien mortgage loan originations represented 91% and 98% of our wholesale
loan originations, as measured by principal balance, for the nine-month periods
ended January 31, 2005 and 2004, respectively.

The Retail Origination Division

Our retail division was established in 1985 and as of January 31, 2005
contracted with 18 commissioned loan officers, who are based in our Campbell and
San Francisco, California offices. While our retail division advertises
frequently in Bay Area newspapers, most of our retail division's business is
generated through customer referrals. Approximately 18% and 17% of the aggregate
dollar value of mortgage loans originated by the retail division were funded by
our wholesale division during the nine-month periods ended January 31, 2005 and
2004.

The retail division completes and processes the mortgage loan applications and
prepares and organizes necessary mortgage loan documents. The retail division
preliminarily underwrites these mortgage loans to conform to either agency
guidelines or private investor guidelines. Mortgage loans that are funded by our
wholesale division are re-underwritten by the wholesale division. During the
nine-month periods ended January 31, 2005 and 2004, the average loan size
originated by the retail division was approximately $355,000 and $340,000,
respectively.

Our retail division generates revenues from the origination and closing fees
that it collects from the mortgage borrower. These are used to pay commissioned
mortgage loan officers, cover the cost of processing the mortgage loan and
contribute to the fixed operating costs of the retail offices. The retail
division contributes to the financial benefit of the Company as a source of
loans for the wholesale division and as a source of loan fees to improve total
profits.

Retail loan production for the nine-month period ended January 31, 2005 was
approximately $219 million as compared to $483 million for the nine-month period
ended January 31, 2004. The main reason for this decline was that our retail
operations are concentrated in the San Francisco Bay area. Our experience has
been that this geographic region experienced a greater than average surge in
refinancings when interest rates were at their trough. Conversely, as interest
rates have increased, it, too, has experienced a greater than average decline
from it peak.

An additional factor contributing to the decrease was a reduction in the number
of loan officers who were contracted with the Company during this period. This
reduction was primarily the result of the intense competition in the mortgage
industry to recruit experienced mortgage brokers.

                                       29
<PAGE>

Retail Loan Products

Jumbo loans comprised approximately 72% and 65% of the retail mortgage loans we
originated for the nine-month periods ended January 31, 2005 and 2004,
respectively.

In periods of declining interest rates, our predominant products are fixed rate
mortgages with terms of either 15 or 30 years. When interest rates are rising,
adjustable rate mortgages make up a larger percentage of our originations. We
originate some home equity financing through second mortgages and lines of
credit using the home as collateral, but these products constitute a small
portion of our business.

Since inception, our marketing niche has been borrowers that have high credit
ratings and require large mortgage loans with low loan to value ratios.

The following table details the mortgage loan types originated by our retail
division, as measured by principal balance, during the nine-month periods ended
January 31, 2005 and 2004:

                                    Table 18
                         Retail Loan Origination by Type
                     (Nine Month Periods Ending January 31)

                                                         2005           2004
                                                         -----          -----
            Fixed and variable Jumbo mortgage             72.0%          65.1%
            Conventional adjustable-rate mortgage         11.9%           9.1%
            Conventional fixed-rate mortgage               7.5%          21.0%
            Second mortgages and home-equity lines         8.6%           4.8%
            Total                                        100.0%         100.0%

Retail Geographic Concentration

The Company originates retail loans primarily in California. During the
nine-month periods ended January 31, 2005 and 2004, the Company's retail loan
origination volume, as measured by principal balance, came from the following
states:

                                    Table 19
                       Retail Loan Geographic Distribution
                     (Nine Month Periods Ending January 31)

                                        2005              2004
                                        ----              ----
                       California       98.0%             99.0%
                       Others            2.0%              1.0%
                       Total           100.0%            100.0%

Retail Loan Property Types

During the nine-month periods ended January 31, 2005 and 2004, the Company's
first lien retail mortgage loan origination volume, as measured by principal
balance, was comprised of loans with original principal balances in the
following ranges:

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                                    Table 20
                 Retail Mortgages by Original Principal Balance
                     (Nine Month Periods Ending January 31)

                                               2005               2004
                                               -----             -----
                 $100,000 or less                3.4%              2.9%
                 $100,001-200,000                7.7%              6.6%
                 $200,001-300,000                6.9%             16.4%
                 $300,001-400,000               14.1%             18.6%
                 $400,001-500,000               20.6%             18.4%
                 $500,001-600,000               13.1%             14.0%
                 $600,001-700,000               10.2%              9.0%
                 $700,001-800,000                5.5%              4.4%
                 $800,001-900,000                6.0%              2.9%
                 $900,001-1,000,000              6.7%              3.4%
                 $1,000,001-1,500,000            4.9%              2.4%
                 over $1,500,001                 0.9%              1.0%
                                               -----             -----
                                               100.0%            100.0%


First lien retail mortgage loan originations represented 91% and 95% of our
total loan originations, as measured by principal balance, for the nine-month
periods ended January 31, 2005 and 2004, respectively.

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ITEM 3.  CONTROLS AND PROCEDURES

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


PART 2. OTHER INFORMATION

Item 6.  EXHIBITS.

(a)      EXHIBITS

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


                                   SIGNATURES

         In accordance with the requirements of the Exchange Act, the registrant
caused this report to be signed on its behalf by the undersigned, thereunto duly
authorized.


                                 Transnational Financial Network, Inc.

Date:      March 15, 2005        /s/ Joseph Kristul
      ---------------------      ---------------------------------------------
                                 Joseph Kristul,   Chief Executive Officer,
                                                   Chief Financial Officer










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