Form 10-QSB

                       SECURITIES AND EXCHANGE COMMISSION
                             Washington, D.C. 20549

          |X|    Quarterly Report Pursuant to Section 13 or 15(d) of
                 the Securities Exchange Act of 1934.
                 For the quarterly period ended March 31, 1998

          |_|    Transition Report Pursuant to Section 13 or 15(d) of
                 the Securities Exchange Act of 1934.
                 For the transition period from _______ to _______

                        Commission File Number 000-19160

                      ATEL Cash Distribution Fund III, L.P.
             (Exact name of registrant as specified in its charter)

       California                                                  94-3100855
(State or other jurisdiction of                               (I. R. S. Employer
incorporation or organization)                               Identification No.)

           235 Pine Street, 6th Floor, San Francisco, California 94104
                    (Address of principal executive offices)

       Registrant's telephone number, including area code: (415) 989-8800



Indicate  by a check  mark  whether  the  registrant  (1) has filed all  reports
required to be filed by section 13 or 15(d) of the  Securities  Exchange  Act of
1934  during  the  preceding  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  |_|

                       DOCUMENTS INCORPORATED BY REFERENCE

                                      None
<PAGE>

                          Part I. FINANCIAL INFORMATION

Item 1.  Financial Statements.

<PAGE>

                      ATEL CASH DISTRIBUTION FUND III, L.P.

                                 BALANCE SHEETS

    MARCH 31, 1998
                                   (Unaudited)


                                     ASSETS


Cash and cash equivalents                                           $8,464,533

Accounts receivable                                                    554,182

Investments in leases                                               11,669,795
                                                               ----------------
Total assets                                                       $20,688,510
                                                               ================


                        LIABILITIES AND PARTNERS' CAPITAL


Non-recourse debt                                                   $2,042,399

Accrued interest                                                        18,832

Accounts payable:
     General Partners                                                   96,138
     Other                                                              81,726

Unearned operating lease income                                        151,782
                                                               ----------------
Total liabilities                                                    2,390,877

Partners' capital:
     General Partners                                                  176,178
     Limited partners                                               18,121,455
                                                               ----------------
Total partners' capital                                             18,297,633
                                                               ----------------
Total liabilities and partners' capital                            $20,688,510
                                                               ================

                             See accompanying notes.

<PAGE>

                      ATEL CASH DISTRIBUTION FUND III, L.P.

                                INCOME STATEMENTS

                            THREE MONTH PERIODS ENDED
                             MARCH 31, 1998 AND 1997
                                   (Unaudited)


<TABLE>
<CAPTION>
                                                                  1998            1997
                                                                  ----            ----
<S>                                                              <C>              <C>       
Revenues:
Lease revenues:
   Operating leases                                              $1,357,597       $2,034,284
   Direct financing leases                                           57,438           86,412
   Leveraged leases                                                   4,644           11,048
   Gain on sales of assets                                          203,742          232,839
Interest income                                                      92,295           24,641
Other                                                                 1,571              534
                                                             --------------- ----------------
                                                                  1,717,287        2,389,758
                                                             --------------- ----------------
Expenses:
Depreciation and amortization                                       815,475        1,329,795
Interest                                                             45,920          103,854
Equipment and partnership management fees to General Partners        83,578          148,742
Administrative cost reimbursements to General Partners               72,999           71,151
Provision for losses                                                 17,173           23,898
Professional fees                                                     2,596            3,431
Other                                                                22,853           38,577
                                                             --------------- ----------------
                                                                  1,060,594        1,719,448
                                                             --------------- ----------------
Net income                                                         $656,693         $670,310
                                                             =============== ================

Net income:
     General Partners                                                $6,567           $6,703
     Limited Partners                                               650,126          663,607
                                                             --------------- ----------------
                                                                   $656,693         $670,310
                                                             =============== ================

Net income per Limited Partnership unit                               $0.09            $0.09

Weighted average number of units outstanding                      7,376,284        7,376,284

</TABLE>
                    STATEMENT OF CHANGES IN PARTNERS' CAPITAL

                        THREE MONTHS ENDED MARCH 31, 1998

<TABLE>
<CAPTION>
                                           Limited Partners     General
                               Units           Amount           Partners          Total

<S>                             <C>            <C>                 <C>           <C>        
Balance December 31, 1997       7,376,284      $19,628,128         $169,611      $19,797,739
Net income                                         650,126            6,567          656,693
Distributions                                   (2,156,799)               -       (2,156,799)
                          ---------------- ----------------  --------------- ----------------
Balance March 31, 1998          7,376,284      $18,121,455         $176,178      $18,297,633
                          ================ ================  =============== ================
</TABLE>

                             See accompanying notes.

<PAGE>

                      ATEL CASH DISTRIBUTION FUND III, L.P.

                            STATEMENTS OF CASH FLOWS

                            THREE MONTH PERIODS ENDED
                             MARCH 31, 1998 AND 1997
                                   (Unaudited)


<TABLE>
<CAPTION>
                                                                                              1998            1997
                                                                                              ----            ----
Operating activities:
<S>                                                                                          <C>              <C>     
Net income                                                                                     $656,693         $670,310

Adjustments to reconcile net income to net cash provided by operations:
   Depreciation and amortization                                                                815,475        1,329,795
   Gain on sale of assets                                                                      (203,742)        (232,839)
   Leveraged lease income                                                                        (4,644)          (7,005)
   Provision for losses                                                                          17,173           23,898
   Changes in operating assets and liabilities:
     Accounts receivable                                                                       (329,147)         354,386
     Accounts payable, general partner                                                           23,599          (65,282)
     Accounts payable, other                                                                   (112,065)           8,950
     Accrued interest                                                                             6,990          (18,626)
     Unearned operating lease income                                                             (2,667)         262,179
                                                                                         --------------- ----------------
Net cash provided by operations                                                                 867,665        2,325,766
                                                                                         --------------- ----------------

Investing activities:
Proceeds from sales of lease assets                                                             566,161        1,049,374
Reductions of net investment in direct financing leases                                         299,772          315,959
                                                                                         --------------- ----------------
Net cash provided by investing activities                                                       865,933        1,365,333
                                                                                         --------------- ----------------

Financing activities:

Distributions to limited partners                                                            (2,156,799)      (2,085,382)
Repayments of non-recourse debt                                                                (454,993)      (1,265,927)
                                                                                         --------------- ----------------
Net cash used in financing activities                                                        (2,611,792)      (3,351,309)
                                                                                         --------------- ----------------

Net decrease in cash and cash equivalents                                                      (878,194)         339,790
Cash and cash equivalents at beginning of period                                              9,342,727        2,766,552
                                                                                         --------------- ----------------
Cash and cash equivalents at end of period                                                   $8,464,533       $3,106,342
                                                                                         =============== ================

Supplemental disclosures of cash flow information:
Cash paid during period for interest                                                            $38,930         $122,480
                                                                                         =============== ================
Supplemental schedule of non-cash transactions:
Operating lease assets reclassified to direct financing lease assets                           $672,013
Less accumulated depreciation                                                                  (611,198)
                                                                                         ---------------
                                                                                                $60,815
                                                                                         ===============
</TABLE>
                             See accompanying notes.

<PAGE>

                      ATEL CASH DISTRIBUTION FUND III, L.P.

                          NOTES TO FINANCIAL STATEMENTS

                                 MARCH 31, 1998
                                   (Unaudited)


1. Summary of significant accounting policies:

Interim financial statements:

The unaudited interim financial statements reflect all adjustments which are, in
the opinion of the general partners,  necessary to a fair statement of financial
position and results of operations for the interim periods  presented.  All such
adjustments are of a normal recurring nature.  These unaudited interim financial
statements  should be read in  conjunction  with the most recent  report on Form
10KSB.


2. Organization and partnership matters:

ATEL Cash  Distribution Fund III, L.P. (the  Partnership),  was formed under the
laws of the State of California in September  1989, for the purpose of acquiring
equipment to engage in equipment leasing and sales activities.  Contributions in
the  amount  of $600  were  received  as of  September  7,  1989,  $100 of which
represented  the  General  Partners'  continuing  interest,  and  $500 of  which
represented the Initial Limited Partners' capital investment.

Upon the sale of the  minimum  amount of Units of Limited  Partnership  interest
(Units) of $1,200,000 and receipt of the proceeds  thereof on March 1, 1990, the
Partnership commenced operations.

The Partnership's business consists of leasing various types of equipment. As of
March 31, 1998, the terms of the Partnership's  leases were for two to eight and
one half years.


3. Investment in leases:

The Partnership's investment in leases consists of the following:

<TABLE>
<CAPTION>
                                                                         Depreciation
                                                                         Expense or         Reclas-
                                      December 31,                          Lease        sifications and    March 31,
                                          1997           Additions      Amortization      Dispositions        1998
                                          ----           ---------      ------------     --------------       ----
<S>                                      <C>                 <C>           <C>                <C>            <C>        
Net investment in operating
   leases                                $11,267,650                         ($815,475)       ($463,572)      $9,988,603
Net investment in direct
   financing leases                        2,379,596                          (299,772)         101,153        2,180,977
Net investment in leveraged
   leases                                    126,371                             4,644                -          131,015
Reserve for losses and
   impairments                              (613,627)        ($17,173)               -                -         (630,800)
                                     ---------------- ---------------- ----------------  --------------- ----------------
                                         $13,159,990         ($17,173)     ($1,110,603)       ($362,419)     $11,669,795
                                     ================ ================ ================  =============== ================
</TABLE>



<PAGE>

                      ATEL CASH DISTRIBUTION FUND III, L.P.

                          NOTES TO FINANCIAL STATEMENTS

                                 MARCH 31, 1998
                                   (Unaudited)


3. Investment in leases (continued):

The following  schedule provides an analysis of the Partnership's  investment in
property on operating leases by major  classifications  as of December 31, 1997,
acquisitions and dispositions  during the quarter ended March 31, 1998 and as of
March 31, 1998.

<TABLE>
<CAPTION>
                                December 31,                    1st Quarter        March 31,
                                  1997         Acquisitions     Dispositions         1998

<S>                              <C>                <C>              <C>            <C>       
Mining                           $12,690,592                                        $12,690,592
Utilities                          3,946,886                                          3,946,886
Manufacturing                      4,881,231                       ($1,099,749)       3,781,482
Printing                           3,044,659                                 -        3,044,659
Transportation                     3,760,326                        (1,313,606)       2,446,720
Food processing                    2,438,524                                 -        2,438,524
Medical                            2,155,489                                 -        2,155,489
Materials handling                   964,980                           (35,759)         929,221
Communications                       290,175                                 -          290,175
Other                                 65,695                                 -           65,695
                             ---------------- ----------------  --------------- ----------------
                                  34,238,557                        (2,449,114)      31,789,443
Less accumulated depreciation    (22,970,907)       ($815,475)       1,985,542      (21,800,840)
                             ---------------- ----------------  --------------- ----------------
                                 $11,267,650        ($815,475)       ($463,572)      $9,988,603
                             ================ ================  =============== ================
</TABLE>

Equipment on operating leases was acquired in 1990, 1991, 1992, 1993 and 1995.

At March 31, 1998, the aggregate amounts of future minimum lease payments are as
follows:

       Year ending                       Direct
      December 31,     Operating        Financing          Total
              1998       $2,633,678         $950,612       $3,584,290
              1999          487,141          546,645        1,033,786
              2000          120,240          144,416          264,656
              2001           20,000           23,836           43,836
              2002                -           17,877           17,877
                    ---------------- ----------------  ---------------
                         $3,261,059       $1,683,386       $4,944,445
                    ================ ================  ===============





<PAGE>

                      ATEL CASH DISTRIBUTION FUND III, L.P.

                          NOTES TO FINANCIAL STATEMENTS

                                 MARCH 31, 1998
                                   (Unaudited)


4.  Non-recourse debt:

Notes payable to financial  institutions are due in varying  monthly,  quarterly
and semi-annual installments of principal and interest. The notes are secured by
assignments  of lease  payments and pledges of the assets  which were  purchased
with the proceeds of the particular notes. Interest rates on the notes vary from
6.81% to 11.2%.

Future minimum principal payments of non-recourse debt are as follows:

             Year ending
            December 31,     Principal        Interest           Total

                    1998       $1,628,692          $93,759       $1,722,451
                    1999          356,416           22,120          378,536
                    2000           57,291            2,374           59,665
                          ---------------- ----------------  ---------------
                               $2,042,399         $118,253       $2,160,652
                          ================ ================  ===============


5.  Related party transactions:

The terms of the Limited Partnership  Agreement provide that the General Partner
and/or   Affiliates   are  entitled  to  receive   certain  fees  for  equipment
acquisition, management and resale and for management of the Partnership.

The Limited Partnership Agreement allows for the reimbursement of costs incurred
by ATEL in providing administrative services to the Partnership.  Administrative
services provided include  partnership  accounting,  investor  relations,  legal
counsel  and lease  and  equipment  documentation.  ATEL is not  reimbursed  for
services where it is entitled to receive a separate fee as compensation for such
services,  such as acquisition and disposition of equipment.  Reimbursable costs
incurred  by ATEL are  allocated  to the  Partnership  based  upon  actual  time
incurred by employees working on partnership  business and an allocation of rent
and other costs based on utilization studies.

The General Partner and/or Affiliates earned the following fees, commissions and
reimbursements, pursuant to the Limited Partnership Agreement as follows:

<TABLE>
<CAPTION>
                                                                                     1998            1997
                                                                                     ----            ----
<S>                                                                                   <C>              <C>     
Incentive  management  fees  (computed  as  5% of  distributions  of  cash  from
operations,  as defined in the  Limited  Partnership  Agreement)  and  equipment
management  fees  (computed as 5% of gross revenues from  operating  leases,  as
defined in the Limited Partnership Agreement plus 2% of gross revenues
from full payout leases, as defined in the Limited Partnership Agreement).             $83,578         $148,742

Administrative costs reimbursed to General Partner                                      72,999           71,151
                                                                                --------------- ----------------
                                                                                      $156,577         $219,893
                                                                                =============== ================
</TABLE>


<PAGE>

                      ATEL CASH DISTRIBUTION FUND III, L.P.

                          NOTES TO FINANCIAL STATEMENTS

                                 MARCH 31, 1998
                                   (Unaudited)


6.  Line of credit:

The  Partnership  participates  with the  General  Partner  and  certain  of its
Affiliates in a $90,000,000 revolving credit agreement with a group of financial
institutions  which  expires on October  28,  1998.  The  agreement  includes an
acquisition  facility to be used by the  Partnership  and  Affiliates to provide
bridge financing for assets on leases.  Draws on the acquisition facility by any
individual  borrower  are  secured  only by that  borrower's  assets,  including
equipment and related leases.

The Partnership had no borrowings under the agreement during 1998.

The credit agreement  includes certain  financial  covenants  applicable to each
borrower.  The  Partnership was in compliance with its covenants as of March 31,
1998.






<PAGE>

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

Capital Resources and Liquidity

During the first quarter of 1998 and 1997, the  Partnership's  primary source of
cash was rents from operating leases. The liquidity of the Partnership will vary
in the future, increasing to the extent cash flows from leases and proceeds from
the sales of lease assets exceed  expenses,  and  decreasing as lease assets are
acquired,  as  distributions  are made to the Limited Partners and to the extent
expenses  exceed cash flows from leases and the proceeds from the sales of lease
assets.

As another source of liquidity, the Partnership has contractual obligations with
a diversified group of lessees for fixed lease terms at fixed rental amounts. As
the  initial  lease  terms  expire the  Partnership  will  re-lease  or sell the
equipment.  The future  liquidity  beyond the  contractual  minimum rentals will
depend on the General  Partner's  success in re-leasing or selling the equipment
as it comes off lease.

The  Partnership  participates  with the  General  Partner  and  certain  of its
affiliates  in  a  $90,000,000   revolving  line  of  credit  with  a  financial
institution. The line of credit expires on October 28, 1998.

The  Partnership's  objective  is to reinvest a portion of lease  payments  from
assets  owned in new leasing  transactions.  Such  reinvestment  will occur only
after the payment of all obligations, including debt service (both principal and
interest),  the payment of management  fees to the General Partner and providing
for cash distributions to the Limited Partners.

The Partnership currently has available adequate reserves to meet contingencies,
but in the event those  reserves were found to be  inadequate,  the  Partnership
would  likely be in a position to borrow  against its current  portfolio to meet
such  requirements.  The  General  Partners  envision no such  requirements  for
operating purposes.

As of March 31, 1998, the  Partnership had borrowed  approximately  $32,425,000.
The  remaining  unpaid  balance  of  such  borrowings  at  March  31,  1998  was
approximately  $2,042,000.  The  borrowings  are generally  non-recourse  to the
Partnership, that is, the only recourse of the lender upon default by the lessee
on the underlying lease will be to the equipment or corresponding lease acquired
with the loan proceeds. The General Partners expect that aggregate borrowings in
the future will not exceed 40% of aggregate  equipment  cost. In any event,  the
Agreement of Limited Partnership limits such borrowings to 40% of the total cost
of equipment, in aggregate.

No  commitments  of capital  have been or are expected to be made other than for
the  acquisition  of  additional  equipment.  At March 31,  1998,  there were no
commitments to purchase additional lease assets.

The Partnership made distributions of cash from 1998 first quarter operations in
February,  March and April 1998. The  distributions  were paid either monthly in
the  amounts  of $.125 in  February,  March and April 1998 or  quarterly  in the
amount of $.375 in April 1998.

If  inflation  in the general  economy  becomes  significant,  it may affect the
Partnership  inasmuch as the residual  (resale) values and rates on re-leases of
the  Partnership's  leased  assets may  increase as the costs of similar  assets
increase.  However,  the  Partnership's  revenues from existing leases would not
increase,  as such rates are generally fixed for the terms of the leases without
adjustment for inflation.

If interest rates increase  significantly,  the lease rates that the Partnership
can obtain on future  leases will be expected to increase as the cost of capital
is a significant  factor in the pricing of lease  financing.  Leases  already in
place, for the most part, would not be affected by changes in interest rates.

Cash flows  from  operations  decreased  by  $1,458,101  compared  to 1997.  The
decrease  resulted from a decrease in operating lease  revenues.  In both years,
the primary operating source of cash was operating lease revenues.

Cash flows provided by investing  activities  decreased by $499,401  compared to
1997.  Proceeds from the sales of assets  decreased  from  $1,049,374 in 1997 to
$566,160 in 1998, a decrease of $483,214. Asset sales are not currently expected
to be  consistent  from one  period to  another  as they do not occur at regular
intervals  nor do assets  come off lease in steady  amounts  from one  period to
another.  Overall cash flows from direct  financing leases decreased by $45,161,
including  both the portion  recognized  as revenues and the portion  applied to
reduce the net  investment in direct  financing  leases.  The decrease is due to
scheduled lease terminations and related asset sales.

There  were  no  financing  sources  of  cash  in  1997  or  1998.  Payments  of
non-recourse  debt have  decreased  as a result of certain  of the  non-recourse
notes  being  fully paid off since the first  quarter  of 1997.  All of the debt
payments were made as scheduled.


Results of Operations

Operations  in the first  quarter of 1998  resulted  in net  income of  $656,693
compared to $670,310 in 1997.

Operating lease revenues declined from $2,034,284 in 1997 to $1,357,597 in 1998.
The decrease is the result of scheduled lease  terminations and subsequent sales
of the related lease  assets.  Interest  income  increased as a result of higher
cash  balances  during the first  quarter of 1998 compared to the same period in
1997.

Depreciation and amortization  expense  decreased by $514,320  compared to 1997.
The decrease  resulted  from sales of assets which were  previously on operating
leases.  Interest  expense has decreased as the  Partnership  has made scheduled
debt payments and has reduced the overall amounts of its non-recourse debt since
1997.

Management fees are related to the Partnership's  revenues and have decreased as
a result of the decreases of those revenues compared to 1997.

<PAGE>

                           PART II. OTHER INFORMATION

Item 1.  Legal Proceedings.

         Inapplicable.

Item 2. Changes In Securities.

         Inapplicable.

Item 3. Defaults Upon Senior Securities.

         Inapplicable.

Item 4. Submission Of Matters To A Vote Of Security Holders.

         Inapplicable.

Item 5. Other Information.

         Inapplicable.

Item 6. Exhibits And Reports On Form 8-K.

    (a) Documents filed as a part of this report

      1.Financial Statements

        Included in Part I of this report:

        Balance Sheet, March 31, 1998

        Income statements for the three month periods ended March 31, 1998 and 
          1997

        Statements of changes in partners' equity for the three months ended 
          March 31, 1997

        Statements of cash flows for the three month periods ended March 31, 
          1998 and 1997

        Notes to the Financial Statements

      2.Financial Statement Schedules

        All other  schedules for which  provision is made in the
        applicable accounting  regulations of the Securities and
        Exchange  Commission  are not required under the related
        instructions  or are  inapplicable,  and therefore  have
        been omitted.

    (b) Report on Form 8-K
        None



<PAGE>

                                   SIGNATURES


Pursuant  to the  requirements  of the  Securities  Exchange  Act of  1934,  the
registrant  has duly  caused  this  report  to be  signed  on its  behalf by the
undersigned thereunto duly authorized.

Date:
May 12, 1998

                      ATEL CASH DISTRIBUTION FUND III, L.P.
                                  (Registrant)





                                 By: /s/ A. J. Batt
                                     -------------------------------------------
                                     A. J. Batt
                                     General Partner of registrant



                                 By: /s/ Dean L. Cash
                                     -------------------------------------------
                                     Dean L. Cash
                                     General Partner of registrant



                                 By: /s/ F. Randall Bigony
                                     -------------------------------------------
                                     F. Randall Bigony
                                     Principal financial officer and of
                                     registrant



                                 By: /s/ Donald E. Carpenter
                                     -------------------------------------------
                                     Donald E. Carpenter
                                     Principal accounting officer of registrant