# UNITED STATES
SECURITIES AND EXCHANGE COMMISSION 
WASHINGTON, D.C. 20549

# FORM 10-Q

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

For
the quarterly period ended September 30, 2003

OR

# [   ] TRANSITION REPORT
PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934

Commission File Number
0-11176

# NTS-PROPERTIES III

|Georgia                         | 61-1017240                       
|------------------------------- | ---------------------------------
|(State or other jurisdiction of | (IRS Employer Identification No.)
|incorporation or organization)  |                                  

10172 Linn Station
Road, Louisville, Kentucky 40223
(Address of Principal Executive Offices)

(502) 426-4800
(Registrants telephone number, including area code)

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

Indicate by 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 [     ]

Indicate by check mark whether registrant is an accelerated filer (as defined in Rule 12b-2 of the
Securities Exchange Act of 1934).
Yes [     ]        No [X]

---

# TABLE OF CONTENTS

| |  |  |  |      
| |  |  |  | -----
| |  |  |  | Pages

# PART I 
FINANCIAL INFORMATION

|        |  |                                                               |  |      
|------- |  | ------------------------------------------------------------- |  | -----
|       
|Item 1. |  | Financial Statements                                         
|       
|        |  | Balance Sheets as of September 30, 2003 and December 31, 2002 |  | 4    
|       
|        |  | Statement of Partners' Equity as of September 30, 2003        |  | 4    
|       
|        |  | Statements of Operations for the Three and Nine               |  |      
|        |  | Months Ended September 30, 2003 and 2002                      |  | 5    
|       
|        |  | Statements of Cash Flows for the Nine Months                  |  |      
|        |  | Ended September 30, 2003 and 2002                             |  | 6    
|       
|        |  | Notes to Financial Statements                                 |  | 7-12 
|       
|Item 2. |  | Management's Discussion and Analysis of Financial             |  |      
|        |  | Condition and Results of Operations                           |  | 13-18
|       
|Item 3. |  | Quantitative and Qualitative Disclosures About Market Risk    |  | 18   
|       
|Item 4. |  | Controls and Procedures                                       |  | 18   
|       

# PART II  OTHER INFORMATION

|              |  |  |  |   
|------------- |  |  |  | --
|             
|Items 1 - 6   |  |  |  | 19
|             
|Signatures    |  |  |  | 20
|             
|Exhibit Index |  |  |  | 21

2

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Some of the statements included in
this Quarterly Report on Form 10-Q, particularly those included in Part I, Item 2 
Managements Discussion and Analysis of Financial Condition and Results of Operations
(MD&A), may be considered forward-looking statements because
the statements relate to matters which have not yet occurred. For example, phrases such as
we anticipate, believe or expect indicate that it is
possible that the event anticipated, believed or expected may not occur. If these events
do not occur, the result which we expected also may not occur, or may occur in a different
manner which may be more or less favorable to us. We do not undertake any obligation to
update these forward-looking statements.

Any forward-looking statements
included in MD&A, or elsewhere in this report, reflect our general partners best
judgment based on known factors, but involve risks and uncertainties. Actual results could
differ materially from those anticipated in any forward-looking statements as a result of
a number of factors, including but not limited to those described in our filings with the
Securities and Exchange Commission, particularly our Annual Report on Form 10-K for the
year ended December 31, 2002. Any forward-looking information provided by us pursuant to
the safe harbor established by securities legislation should be evaluated in the context
of these factors.

3

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# PART I  FINANCIAL INFORMATION
Item 1  Financial Statements

# NTS-PROPERTIES III
BALANCE SHEETS

`As of                As of
                                                                   September 30,        December 31,
                                                                       2003                 2002
                                                                -------------------  -------------------
                                                                    (UNAUDITED)
ASSETS
Cash and equivalents                                           $            260,131 $            388,449
Cash and equivalents - restricted                                            64,191                6,078
Accounts receivable, net                                                    720,723              631,237
Land, buildings and amenities, net                                        9,158,323            9,730,665
Other assets                                                                372,045              337,558
                                                                -------------------  -------------------

     TOTAL ASSETS                                              $         10,575,413 $         11,093,987
                                                                ===================  ===================

LIABILITIES AND PARTNERS' EQUITY
Mortgages payable                                              $          6,416,185 $          7,296,088
Accounts payable                                                            214,616              128,023
Security deposits                                                           139,485              157,258
Other liabilities                                                           135,349               99,215
                                                                -------------------  -------------------

     TOTAL LIABILITIES                                                    6,905,635            7,680,584

COMMITMENTS AND CONTINGENCIES (Note 8)

PARTNERS' EQUITY                                                          3,669,778            3,413,403
                                                                -------------------  -------------------

TOTAL LIABILITIES AND PARTNERS' EQUITY                         $         10,575,413 $         11,093,987
                                                                ===================  ===================`

# NTS-PROPERTIES III
STATEMENT OF PARTNERS EQUITY
(UNAUDITED)

`Limited            General
                                                    Partners            Partner              Total
                                                -----------------  ------------------  ------------------
PARTNERS' EQUITY/(DEFICIT)
Initial equity                                 $       15,600,000 $         8,039,710 $        23,639,710
Adjustment to historical basis                                 --          (5,455,030)         (5,455,030)
                                                -----------------  ------------------  ------------------

     EQUITY                                    $       15,600,000 $         2,584,680 $        18,184,680

Net income (loss) - prior years                           238,319          (2,754,526)         (2,516,207)
Net income (loss) - current year                          289,455             (33,081)            256,374
Cash distributions declared to date                   (11,349,844)           (206,985)        (11,556,829)
Repurchase of limited partnership interests              (698,240)                 --            (698,240)
                                                -----------------  ------------------  ------------------

BALANCES ON SEPTEMBER 30, 2003                 $        4,079,690 $          (409,912)$         3,669,778
                                                =================  ==================  ==================`

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

4

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# NTS-PROPERTIES III
STATEMENTS OF OPERATIONS
(UNAUDITED)

`Three Months Ended             Nine Months Ended
                                                       September 30,                  September 30,
                                                ----------------------------  -----------------------------
                                                    2003           2002            2003           2002
                                                -------------  -------------  --------------  -------------
REVENUES
Rental income                                  $      858,003 $      889,223 $     2,625,971 $    2,676,778
Rental income - affiliated                             73,834         73,834         221,503        221,503
Interest and other income                               3,749          5,159          13,949         16,884
                                                -------------  -------------  --------------  -------------

     TOTAL REVENUES                                   935,586        968,216       2,861,423      2,915,165
                                                -------------  -------------  --------------  -------------

EXPENSES
Operating expenses                                    212,024        210,328         643,017        633,550
Operating expenses - affiliated                        65,243         69,097         222,514        236,322
Loss on disposal of assets                              4,077             --           4,077          1,826
Interest expense                                      106,064        123,597         330,794        379,237
Management fees                                        44,799         46,694         137,710        140,992
Real estate taxes                                      52,041         51,570         156,123        154,710
Professional and administrative expenses               40,530         32,315         182,542         82,403
Professional and administrative expenses -
  affiliated                                           33,286         31,853         107,612         98,485
Depreciation and amortization                         267,107        289,842         820,660        888,485
                                                -------------  -------------  --------------  -------------

     TOTAL EXPENSES                                   825,171        855,296       2,605,049      2,616,010
                                                -------------  -------------  --------------  -------------

Net income                                     $      110,415 $      112,920 $       256,374 $      299,155
                                                =============  =============  ==============  =============

Net income allocated to the limited partners   $      121,030 $      124,944 $       289,455 $      335,624
                                                =============  =============  ==============  =============

Net income per limited partnership interest    $         9.63 $         9.94 $         23.03 $        26.70
                                                =============  =============  ==============  =============

Weighted average number of limited
  partnership interests                                12,570         12,570          12,570         12,570
                                                =============  =============  ==============  =============`

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

5

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# NTS-PROPERTIES III
STATEMENTS OF CASH FLOWS
(UNAUDITED)

`Nine Months Ended
                                                                             September 30,
                                                                ----------------------------------------
                                                                       2003                 2002
                                                                -------------------  -------------------
CASH FLOWS FROM OPERATING ACTIVITIES
Net income                                                     $            256,374 $            299,155
Adjustments to reconcile net income to net cash
  provided by operating activities:
    Provision for doubtful accounts                                          11,732               15,202
    Write - off of uncollectible accounts receivable                        (11,837)             (14,342)
    Loss on disposal of assets                                                4,077                1,826
    Depreciation and amortization                                           906,230              973,268
    Changes in assets and liabilities:
      Cash and equivalents - restricted                                     (58,113)             (48,207)
      Accounts receivable                                                   (89,381)             (77,304)
      Other assets                                                         (135,177)             (73,334)
      Accounts payable                                                       86,593              (39,993)
      Security deposits                                                     (17,773)              14,831
      Other liabilities                                                      36,134               80,134
                                                                -------------------  -------------------

     Net cash provided by operating activities                              988,859            1,131,236
                                                                -------------------  -------------------

CASH FLOWS FROM INVESTING ACTIVITIES
Additions to land, buildings and amenities                                 (237,274)            (305,256)
                                                                -------------------  -------------------

     Net cash used in investing activities                                 (237,274)            (305,256)
                                                                -------------------  -------------------

CASH FLOWS FROM FINANCING ACTIVITIES
Principal payments on mortgages payable                                    (879,903)            (998,801)
                                                                -------------------  -------------------

     Net cash used in financing activities                                 (879,903)            (998,801)
                                                                -------------------  -------------------

     Net decrease in cash and equivalents                                  (128,318)            (172,821)

CASH AND EQUIVALENTS, beginning of period                                   388,449              354,992
                                                                -------------------  -------------------

CASH AND EQUIVALENTS, end of period                            $            260,131 $            182,171
                                                                ===================  ===================

Interest paid on a cash basis                                  $            330,525 $            377,835
                                                                ===================  ===================`

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

6

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# NTS-PROPERTIES III
NOTES TO FINANCIAL STATEMENTS
(UNAUDITED)

The unaudited financial statements
included herein should be read in conjunction with NTS-Properties IIIs 2002 Annual
Report on Form 10-K as filed with the Securities and Exchange Commission on March 31,
2003. In the opinion of our general partner, all adjustments, consisting only of normal
recurring accruals, necessary for a fair presentation have been made to the accompanying
financial statements for the three and nine months ended September 30, 2003 and 2002. The
results of operations for the interim periods are not necessarily indicative of the
results that may be expected for the full year or any other interim period. As used in
this Quarterly Report on Form 10-Q the terms we, us or
our, as the context requires, may refer to NTS-Properties III or its interests
in its properties.

# Note 1  Use of
Estimates in the Preparation of Financial Statements

The preparation of financial
statements in accordance with accounting principles generally accepted in the United
States requires management to make estimates and assumptions that affect the reported
amounts of assets and liabilities and disclosure of contingent assets and 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.

# Note 2 
Concentration of Credit Risk

We own and operate three commercial
properties  Peachtree Corporate Center, in Norcross, Georgia, a suburb of Atlanta,
and NTS Center and Plainview Center, both in Jeffersontown, Kentucky, a suburb of
Louisville. One tenant in NTS Center occupies 46% of the office buildings net
rentable area. One tenant in Plainview Center occupies 49% of the office buildings
net rentable area.

Our financial instruments that are
exposed to concentrations of credit risk consist of cash and equivalents. We maintain our
cash accounts primarily with banks located in Kentucky. Cash balances are insured by the
FDIC up to $100,000 per bank account. We may at times, in certain accounts, have deposits
in excess of $100,000.

# Note 3  Cash and
Equivalents

Cash and equivalents include cash on
hand and short-term, highly liquid investments with initial maturities of three months or
less. We have a cash management program which provides for the overnight investment of
excess cash balances. Under an agreement with a bank, excess cash is invested in a
repurchase agreement for U.S. government or agency securities each night. As of September
30, 2003, approximately $163,000 of our overnight investment was included in cash and
equivalents.

7

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# Note 4  Cash and
Equivalents  Restricted

Cash and equivalents 
restricted represents funds which have been escrowed with a mortgage company for NTS
Centers property taxes in accordance with the loan agreement.

# Note 5  Basis of
Property and Depreciation

Land, buildings and amenities are
stated at historical cost, less accumulated depreciation. Depreciation is computed using
the straight-line method over the estimated useful lives of the assets which are 6-30
years for land improvements, 5-30 years for buildings and improvements, 3-27 years for
amenities and the applicable lease term for tenant improvements. The aggregate cost of our
properties for federal tax purposes is approximately $28,400,000.

Statement of Financial Accounting
Standards (SFAS) No. 144, Accounting for the Impairment or Disposal of
Long-Lived Assets, specifies circumstances in which certain long-lived assets must
be reviewed for impairment. If the carrying amount of an asset exceeds the sum of its
expected future cash flows, the assets carrying value must be written down to fair
value. Application of this standard during the period ended September 30, 2003 did not
result in an impairment loss.

# Note 6  Mortgages
Payable

Mortgages payable consist of the
following:

`September 30,         December 31,
                                                                       2003                  2002
                                                                -------------------   -------------------
Mortgage payable to an insurance company in monthly
installments, bearing interest at 6.89%, maturing April 10,
2015, secured by land and buildings.                           $          5,416,185  $          5,639,838

Mortgage payable to a bank in monthly installments, bearing
a variable interest rate of Prime -0.25%, due March 1, 2004,
secured by land and a building. The interest rate on September
30, 2003 was 3.75%.                                                       1,000,000             1,656,250
                                                                -------------------   -------------------

                                                               $          6,416,185  $          7,296,088
                                                                ===================   ===================`

Based on the borrowing rates
available to us for mortgages with similar terms and average maturities, the fair value of
long-term debt on September 30, 2003 was approximately $6,664,000.

We intend on renewing the mortgage
loan coming due March 1, 2004. There can be no assurance that we will be successful in
obtaining this renewal or that the rate or terms will be acceptable.

Our mortgages may be prepaid but are
generally subject to a yield-maintenance premium.

8

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# Note 7  Related
Party Transactions

Pursuant to an agreement with us, NTS
Development Company, an affiliate of our general partner, receives property management
fees on a monthly basis. The fees are paid in an amount equal to 5% of the gross revenues
from our properties. Also pursuant to an agreement, NTS Development Company receives a
repair and maintenance fee equal to 5.9% of the costs incurred which relate to capital
improvements. These repair and maintenance fees are capitalized as part of land, buildings
and amenities.

We were charged the following amounts
pursuant to an agreement with NTS Development Company for the nine months ended September
30, 2003 and 2002. These charges include items which have been expensed as operating
expenses  affiliated or professional and administrative expenses  affiliated
and items which have been capitalized as other assets or as land, buildings and amenities.

`Nine Months Ended
                                                                         September 30,
                                                           -----------------------------------------
                                                                  2003                  2002
                                                           ------------------    -------------------

Property management fees                                $             137,710 $              140,992
                                                           ------------------    -------------------

Property management                                                   141,990                129,816
Leasing                                                                44,189                 79,563
Administrative - operating                                             30,227                 22,275
Other                                                                   6,108                  4,668
                                                           ------------------    -------------------

     Total operating expenses - affiliated                            222,514                236,322
                                                           ------------------    -------------------

Professional and administrative expenses - affiliated                 107,612                 98,485
                                                           ------------------    -------------------

Repair and maintenance fees                                            10,217                 14,726
Leasing commissions                                                     7,216                  2,340
                                                           ------------------    -------------------

     Total related party transactions capitalized                      17,433                 17,066
                                                           ------------------    -------------------

Total related party transactions                        $             485,269 $              492,865
                                                           ==================    ===================`

During the nine months ended
September 30, 2003 and 2002, we were charged $5,964 and $4,866, respectively, for property
maintenance fees from an affiliate of NTS Development Company.

During the nine months ended
September 30, 2003 and 2002, NTS Development Company leased 20,368 square feet in NTS
Center at a rental rate of $14.50 per square foot. We received $221,503 in rental payments
from NTS Development Company during the nine months ended September 30, 2003 and 2002. The
lease term for NTS Development Company ends on March 31, 2004.

9

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# Note 8 
Commitments and Contingencies

As an owner of real estate, we are
subject to various environmental laws of federal, state and local governments. Our
compliance with existing laws has not had a material adverse effect on our financial
condition or results of operations. However, we cannot predict the impact of new or
changed laws or regulations on our current properties or on properties that we may acquire
in the future.

Litigation

On December 12, 2001, three
individuals filed an action in the Superior Court of the State of California for the
County of Contra Costa captioned Buchanan et al. v. NTS-Properties Associates et
al. (Case No. C 01-05090) against our general partner, the general partners of four
public partnerships affiliated with us and several individuals and entities affiliated
with us. The action purports to bring claims on behalf of a class of limited partners
based on, among other things, tender offers made by the public partnerships and an
affiliate of our general partner. The plaintiffs allege, among other things, that the
prices at which limited partnership interests were purchased in these tender offers were
too low. The plaintiffs are seeking monetary damages and equitable relief, including an
order directing the disposition of the properties owned by the public partnerships and the
distribution of the proceeds. No amounts have been accrued as a liability for this action
in our financial statements. Under an indemnification agreement with our general partner,
we are responsible for the costs of defending any such action.

On June 20, 2003, our general
partner, along with the general partners of four public partnerships affiliated with us,
reached an agreement in principle with representatives of the class of plaintiffs to
settle the Buchanan action. This settlement is subject to, among other things,
preparing and executing a settlement agreement to be presented to the court for
preliminary and final approval. The proposed settlement would include releases for all of
the parties for any of the claims asserted in the Buchanan litigation and the
Bohm litigation described below. As part of the proposed settlement, the general
partners have agreed, among other things, to pursue a merger of the partnerships along
with other real estate entities affiliated with the general partners into a newly-formed
partnership.

On February 27, 2003, two individuals
filed a class and derivative action in the Circuit Court of Jefferson County, Kentucky
captioned Bohm et al. v. J.D. Nichols et al. (Case No. 03-CI-01740) against the
general partners of four public partnerships affiliated with us and several individuals
and entities affiliated with us. On March 21, 2003, the complaint was amended to include
our general partner and the general partner of a partnership that was affiliated with us
but is no longer in existence. In the amended complaint, the plaintiffs purport to bring
claims on behalf of a class of limited partners and derivatively on behalf of us and
affiliated public partnerships based on alleged overpayments of fees, prohibited
investments, improper failures to make distributions, purchases of limited partnership
interests at insufficient prices and other violations of the limited partnership
agreements. The plaintiffs are seeking, among other things, compensatory and

10

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punitive damages in an unspecified
amount, an accounting, the appointment of a receiver or liquidating trustee, the entry of
an order of dissolution against the public partnerships, a declaratory judgment, and
injunctive relief. No amounts have been accrued as a liability for this action in our
financial statements. Our general partner believes that this action is without merit, and
is vigorously defending it.

On October 1, 2003, in the
Bohm litigation, the judge granted the defendants motion to extend a stay
that had been previously agreed upon by the parties which expired on September 8, 2003.
The stay will remain in effect only if the parties in the Buchananlitigationseek preliminary approval of a settlement of that litigation by November 19, 2003 and
the final settlement of the Buchanan litigation includes releases relating to the
Bohm litigation. If these two conditions are satisfied, the stay will become
permanent when the Buchanan settlement is subject to a final, non-appealable order.
For the nine months ended September 30, 2003, our share of the legal costs for the
Buchanan and Bohm litigations was approximately $19,000, which was included
in our professional and administrative expenses.

We do not believe there is any other
litigation threatened against us other than routine litigation arising out of the ordinary
course of business, some of which is expected to be covered by insurance, none of which is
expected to have a material effect on our financial position or results of operations,
except as discussed herein.

Proposed Merger

On June 20, 2003, our general
partner, along with the general partners of four public partnerships affiliated with us,
reached an agreement in principle with representatives of the class of plaintiffs to
settle the action captioned Buchanan et al. v. NTS-Properties Associates et al.
(Case No. C 01- 05090). The action was originally filed in the Superior Court of the State
of California for the County of Contra Costa against the general partners and several
affiliated individuals and entities in December 2001. The settlement is subject to, among
other things, preparing and executing a settlement agreement to be presented to the court
for preliminary and final approval. The proposed settlement would include releases for all
of the parties for any of the claims asserted in the Buchanan litigation and the
class action and derivative litigation filed in the Circuit Court of Jefferson County,
Kentucky and captioned Bohm et al. v. J.D. Nichols et al. (Case No. 03-CI- 01740).

As part of the proposed settlement of
the Buchanan and Bohm litigation, the general partners have agreed to pursue
a merger of the partnerships along with other real estate entities affiliated with the
general partners into a newly-formed partnership. The general partners would seek to list
the limited partnership interests to be issued in the merger on a national securities
exchange. The merger will be subject to, among other things, approval by holders of a
majority of the limited partner interests in each partnership, final approval of the court
in which the Buchanan litigation is pending and receipt by the general partners of
an opinion regarding the fairness of the merger to the limited partners from a financial
point of view. An independent appraiser has been retained

11

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to appraise all of the properties
owned by the existing partnerships and affiliated entities that would be owned after the
merger by the new partnership. The appraisal will be used in establishing exchange values
which will determine the number of interests that will be issued to each existing
partnership in the merger. The interests in the newly-formed partnership will be
subsequently distributed to the limited and general partners in each existing partnership
as though each partnership had been liquidated. The general partners have also retained a
third party to provide an opinion on the fairness of the merger to limited partners from a
financial point of view. For the nine months ended September 30, 2003, our share of the
legal and professional fees for the proposed merger was approximately $35,000.

# Note 9  Segment
Reporting

Our reportable operating segments
include only one segment  Commercial Real Estate Operations.

12

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# Item 2 
Managements Discussion and Analysis of Financial Condition and Results ofOperations

Managements Discussion and
Analysis of Financial Condition and Results of Operations (MD&A) should be
read in conjunction with the Financial Statements in Item 1 and the cautionary statements
below.

# Critical Accounting
Policies

The accompanying financial statements
were prepared in conformity with accounting principles generally accepted in the United
States. Application of these accounting principles requires us to make estimates about the
future resolution of existing uncertainties; as a result, actual results could differ from
these estimates. In preparing these financial statements, we have made our best estimates
and judgements of the amounts and disclosures included in the financial statements, giving
due regard to materiality.

Impairment

We review properties for impairment
on a property-by-property basis whenever events or changes in circumstances indicate that
the carrying value may not be recoverable. These circumstances include, but are not
limited to, declines in cash flows, occupancy and comparable sales per square foot at the
property. We would be required to recognize an impairment when a propertys estimated
undiscounted cash flow is less than the carrying value of the property. To the extent an
impairment has occurred, we charge to income the excess of the carrying value of the
property over its estimated fair value. We may decide to sell properties that are held for
use. The sales prices of these properties may differ from their carrying values.

# Results of Operations

The following table includes our
selected summarized operating data for the three and nine months ended September 30, 2003
and 2002. This data should be read in conjunction with our financial statements, including
the notes thereto, in Part I, Item 1 of this report.

`Three Months Ended                 Nine Months Ended
                                                 September 30,                      September 30,
                                         ------------------------------    -------------------------------
                                             2003             2002             2003              2002
                                         -------------    -------------    -------------     -------------
Total revenues                         $       935,586 $        968,216 $      2,861,423  $      2,915,165
Operating expenses and operating
  expenses - affiliated                        277,267          279,425          865,531           869,872
Interest expense                               106,064          123,597          330,794           379,237
Depreciation and amortization                  267,107          289,842          820,660           888,485
Net income                                     110,415          112,920          256,374           299,155`

13

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Rental and other income generated by
our properties for the three and nine months ended September 30, 2003 and 2002 were as
follows:

`Three Months Ended              Nine Months Ended
                                               September 30,                   September 30,
                                       ------------------------------  ------------------------------
                                           2003             2002           2003             2002
                                       -------------   --------------  -------------    -------------
NTS Center                            $      264,032 $        315,850 $      862,604 $        982,677
Plainview Center                      $      304,927 $        303,185 $      924,663 $        910,268
Peachtree Corporate Center            $      365,728 $        348,070 $    1,071,092 $      1,018,922`

The occupancy levels at our
properties as of September 30, 2003 and 2002 were as follows:

`2003                        2002
                                           -------------------         -------------------
NTS Center                                         72%                         85%
Plainview Center                                   66%                         70%
Peachtree Corporate Center                         76%                         87%`

The average occupancy levels at our
properties for the three and nine months ended September 30, 2003 and 2002 were as
follows:

`Three Months Ended                    Nine Months Ended
                                         September 30,                        September 30,
                                -------------------------------     ---------------------------------
                                    2003              2002               2003               2002
                                -------------     -------------     --------------     --------------
NTS Center                           72%               85%               77%                 87%
Plainview Center                     68%               69%               69%                 69%
Peachtree Corporate Center           84%               85%               85%                 83%`

We are making efforts to increase the
occupancy levels at our properties. The leasing and renewal negotiations for NTS Center
and Plainview Center are handled by leasing agents that are employees of NTS Development
Company, in Louisville, Kentucky. At Peachtree Corporate Center, in Norcross, Georgia, we
have an off-site leasing agent, who makes calls to potential tenants, negotiates lease
renewals with current tenants and manages local advertising with the assistance of NTS
Development Companys marketing staff located in Louisville, Kentucky.

The following discussion relating to
changes in our results of operations includes only those line items within our Statements
of Operations for which there was a material change between the three and nine months
ending September 30, 2002 and 2003.

Rental Income

Rental income decreased approximately
$31,000, or 4%, for the three months ended September 30, 2003, as compared to the same
period in 2002, primarily as a result of the decreased average occupancy at NTS Center.
The decrease is partially offset by increased rents at Peachtree Corporate Center.

Quarter-ending occupancy percentages
represent occupancy only on a specific date; therefore, the above analysis considers
average occupancy percentages, which are more representative of the entire year-to-date
results.

14

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Interest Expense

Interest expense decreased
approximately $18,000, or 14%, and $48,000, or 13%, for the three and nine months ended
September 30, 2003, respectively, as compared to the same periods in 2002, as a result of
additional principal payments made in 2003 which reduced the outstanding balance on our
mortgage payable secured by Plainview Center.

Professional and
Administrative Expenses

Professional and administrative
expenses increased approximately $8,000, or 25%, and $100,000, or 122%, for the three and
nine months ended September 30, 2003, respectively, as compared to the same periods in
2002, primarily as a result of costs incurred for legal and professional fees related to
our proposed merger and litigation filed by limited partners. See the following discussion
under the caption Proposed Merger, and Part II, Item 1 of this Form 10- Q.

Depreciation and
Amortization

Depreciation and amortization
decreased approximately $23,000, or 8%, and $68,000, or 8%, for the three and nine months
ended September 30, 2003, respectively, as compared to the same periods in 2002, as a
result of assets becoming fully depreciated. The decrease in depreciation and amortization
expense is partially offset by assets being placed in service, in the form of tenant
improvements and building improvements at NTS Center, Plainview Center and Peachtree
Corporate Center and land improvements at NTS Center. Depreciation is computed using the
straight-line method over the estimated useful lives of the assets which are 6-30 years
for land improvements, 5-30 years for buildings and improvements, 3-27 years for amenities
and the applicable lease term for tenant improvements.

# Liquidity and Capital
Resources

The following table sets forth the
cash provided by or used in operating activities, investing activities and financing
activities for the nine months ended September 30, 2003 and 2002.

Cash flows provided by (used in):

`Nine Months Ended
                                                                   September 30,
                                                     -----------------------------------------
                                                            2003                  2002
                                                     ------------------    -------------------
Operating activities                              $             988,859 $            1,131,236
Investing activities                                           (237,274)              (305,256)
Financing activities                                           (879,903)              (998,801)
                                                     ------------------    -------------------

     Net decrease in cash and equivalents         $            (128,318)$             (172,821)
                                                     ==================    ===================`

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Cash Flows

Net cash provided by operating
activities decreased approximately $142,000 for the nine months ended September 30, 2003,
as compared to the same period in 2002. The decrease was primarily driven by reduced
earnings from operations before non cash items which was partially offset by the change in
accounts payable.

Net cash used in investing activities
decreased approximately $68,000 for the nine months ended September 30, 2003, as compared
to the same period in 2002. The decrease is a result of decreased capital expenditures
primarily related to tenant finish activity.

Net cash used in financing activities
decreased approximately $119,000 for the nine months ended September 30, 2003, as compared
to the same period in 2002. The decrease is the result of additional principal payments on
a mortgage payable in 2002.

We indefinitely suspended
distributions starting December 31, 1996. Cash reserves which consist of unrestricted cash
as shown on our balance sheets were $260,131 and $388,449 on September 30, 2003 and
December 31, 2002, respectively.

Due to the fact that no distributions
were made during the nine months ended September 30, 2003 or 2002, the table which
presents that portion of the distributions that represents a return of capital in
accordance with accounting principles generally accepted in the United States has been
omitted.

Future Liquidity

We believe the current occupancy
levels are adequate to fund the operations of our properties. However, our future
liquidity depends significantly on our properties occupancy remaining at a level
which provides for debt payments and adequate working capital, currently and in the
future. If occupancy were to fall below that level and remain at or below that level for a
significant period of time, our ability to make payments due under our debt agreements and
to continue paying daily operational costs would be greatly impaired. In addition, we may
be required to obtain financing in connection with the capital improvements and leasing
costs described below.

A major tenant at NTS Center with a
near lease term expiration is seeking alternatives to renewing its expiring lease with us.
This tenant is currently occupying 53,435 square feet, or 46% of the total rentable square
feet of the building, at an annual rate of $13.59 per square foot. The failure of this
tenant to renew its lease at NTS Center would result in a loss of annual rental revenue
and operating expense recoveries of approximately $726,000, or 19% of last years
total revenues. This would significantly impair our liquidity, and could result in
significant costs to refurbish the vacated space and locate new tenants. At this time, we
are not certain whether the tenant intends to renew its lease as allowed by the lease
agreement, or vacate its space. We do not have an estimate for the costs to locate a
replacement tenant or refinish the space occupied by this tenant.

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At the end of August 2003, a
significant tenant at Peachtree Corporate Center vacated its space. This tenant occupied
19,374 square feet, or 10% of the total rentable square feet of the building, at an annual
rate of $9.25 per square foot. In September 2003, a lease was negotiated with a current
tenant to occupy 8,037 square feet of the vacant space. This will leave 11,337 square feet
unoccupied resulting in an annual loss of approximately $105,000, or 3% of last
years total revenues. There may be significant demands on future liquidity as a
result of the remaining vacancy. Approximately $119,000 will be needed to refinish the
remaining vacated space and locate new tenants.

In the next 12 months, we expect the
demand on future liquidity to increase as a result of future leasing activity driven
primarily by the decreased occupancy at Plainview Center. There has been and will likely
continue to be a protracted period for Plainview Center to become fully leased again.
Approximately $406,000 will be needed for leasing costs, especially those needed to
refinish space for new tenants. As of September 30, 2003, we had not made any commitments
for tenant finish improvements at Plainview Center.

As of September 30, 2003, we
anticipate making certain building improvements in 2003 totaling approximately $14,000.
These improvements include HVAC replacements at NTS Center, estimated to cost $6,000, and
at Peachtree Corporate Center, estimated to cost $8,000.

We anticipate using cash provided by
operations and cash reserves to fund a portion of the capital improvements and leasing
costs described above. However, we believe that funding these expenses may also require
existing financing or additional financing secured by our properties and there is no
assurance that this financing will be available.

We have no other material commitments
for renovations or capital improvements as of September 30, 2003.

# Proposed Merger

On June 20, 2003, our general
partner, along with the general partners of four public partnerships affiliated with us,
reached an agreement in principle with representatives of the class of plaintiffs to
settle the action captioned Buchanan et al. v. NTS-Properties Associates et al.
(Case No. C 01- 05090). The action was originally filed in the Superior Court of the State
of California for the County of Contra Costa against the general partners and several
affiliated individuals and entities in December 2001. The settlement is subject to, among
other things, preparing and executing a settlement agreement to be presented to the court
for preliminary and final approval. The proposed settlement would include releases for all
of the parties for any of the claims asserted in the Buchanan litigation and the
class action and derivative litigation filed in the Circuit Court of Jefferson County,
Kentucky and captioned Bohm et al. v. J.D. Nichols et al. (Case No. 03-CI- 01740).

As part of the proposed settlement,
the general partners have agreed to pursue a merger of the partnerships along with other
real estate entities affiliated with the general partners into a newly-

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formed partnership.
The general partners would seek to list the limited partnership interests to be issued in
the merger on a national securities exchange. The merger will be subject to, among other
things, approval by holders of a majority of the limited partner interests in each
partnership, final approval of the court in which the Buchanan litigation is pending and
receipt by the general partners of an opinion regarding the fairness of the merger to the
limited partners from a financial point of view. An independent appraiser has been
retained to appraise all of the properties owned by the existing partnerships and
affiliated entities that would be owned after the merger by the new partnership. The
appraisal will be used in establishing exchange values which will determine the number of
interests that will be issued to each existing partnership in the merger. The interests in
the newly-formed partnership will be subsequently distributed to the limited and general
partners in each existing partnership as though each partnership had been liquidated. The
general partners have also retained a third party to provide an opinion on the fairness of
the merger to limited partners from a financial point of view. For the nine months ended
September 30, 2003, our share of the legal and professional fees for the proposed merger
was approximately $35,000.

# Website Information

Our website address is
www.ntsdevelopment.com. Our annual reports on Form 10-K, quarterly reports on Form
10-Q, current reports on Form 8-K and amendments to those reports filed or furnished
pursuant to Section 13(a) of the Securities Exchange Act are available and may be accessed
free of charge through the About NTS section of our website as soon as
reasonably practicable after we electronically file this material with, or furnish it to,
the SEC. Our website and the information contained therein or connected thereto are not
incorporated into this Quarterly Report on Form 10-Q.

# Item 3 
Quantitative and Qualitative Disclosures About Market Risk

Our primary market risk exposure with
regard to financial instruments stems from changes in interest rates. Our debt bears
interest at a fixed rate with the exception of the $3,500,000 mortgage payable obtained on
May 9, 2000, which had a balance of $1,000,000 as of September 30, 2003. On September 30,
2003, a hypothetical 100 basis point increase in interest rates would result in an
approximate $282,000 decrease in the fair value of the debt and would increase interest
expense on the variable rate mortgage by approximately $10,000 annually.

# Item 4  Controls
and Procedures

The Chief Executive Officer and Chief
Financial Officer of NTS Capital Corporation, the general partner of our general partner,
have concluded, based on their evaluation as of September 30, 2003, that our disclosure
controls and procedures are effective for gathering, analyzing and disclosing the
information we are required to disclose in our reports filed under the Securities Exchange
Act of 1934. There have been no significant changes in our internal controls over
financial reporting or in other factors that could significantly affect these controls
subsequent to the date of the previously mentioned evaluation.

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# PART II  OTHER
INFORMATION

# Item 1  Legal
Proceedings

On October 1, 2003, in the litigation
against our general partner, the general partners of four public partnerships affiliated
with us and several individuals and entities affiliated with us captioned Bohm
et al. v. J.D. Nichols et al. (Case No. 03-CI-01740) that is pending in the Circuit
Court of Jefferson County, Kentucky, the judge granted the defendants motion to
extend a stay that had been previously agreed upon by the parties which expired on
September 8, 2003. The stay will remain in effect only if the parties in the litigation
captioned Buchanan et al. v. NTS-Properties Associates et al. (Case No. C
01-05090), filed against our general partner, the general partners of four public
partnerships affiliated with us and several individuals and entities affiliated with us
that is pending in the Superior Court of the State of California, seek preliminary
approval of a settlement of that litigation by November 19, 2003 and the final settlement
of the Buchanan litigation includes releases relating to the Bohm
litigation. If these two conditions are satisfied, the stay will become permanent when the
Buchanan settlement is subject to a final, non-appealable order.

Items 2 through 5 are omitted
because these items are inapplicable or the answers to the items are negative.

# Item 6  Exhibits
and Reports on Form 8-K

|(a) | Exhibits
|--- | --------

|(3) | Amended and Restated Agreement and Certificate of Limited Partnership of
               NTS-Properties III. *
|--- | -------------------------------------------------------------------------------------------------------------

|(31.1) | Certification of Chief Executive Officer Pursuant to SEC Rules 13a-15(e) and
               15d-15(e), as adopted pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.
               **
|------ | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

|(31.2) | Certification of Chief Financial Officer Pursuant to SEC Rules 13a-15(e) and
               15d-15(e), as adopted pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.
               **
|------ | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

|(32.1) | Certification of Chief Executive Officer Pursuant to Section 906 of the
               Sarbanes-Oxley Act of 2002. **
|------ | ---------------------------------------------------------------------------------------------------------------------

|(32.2) | Certification of Chief Financial Officer Pursuant to Section 906 of the
               Sarbanes-Oxley Act of 2002. **
|------ | ---------------------------------------------------------------------------------------------------------------------

|(b) | Reports on Form 8-K None.
|--- | -------------------------

|* | Incorporated by reference to documents filed with the Securities and Exchange
Commission in connection with the filing of the Registration Statements on Form S-11 on
June 25, 1982 (effective October 13, 1982) under Commission File No. 2-78152.
|- | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

|** | Attached as an exhibit
to this Quarterly Report on Form 10-Q.
|-- | -------------------------------------------------------------

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# 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.

|NTS-PROPERTIES III
|------------------
|                  
|                  
|By:               
|                  
|                  
|                  
|                  
|                  

|/s/ Brian F. Lavin                                
|--------------------------------------------------
|                                                  
|Brian F. Lavin                                    
|President of NTS Capital Corporation              
|                                                  
|                                                  
|/s/ Gregory A. Wells                              
|                                                  
|Gregory A. Wells                                  
|Chief Financial Officer of NTS Capital Corporation

Date: November 13, 2003

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# EXHIBIT INDEX

|Exhibit Number | Description of Document
|-------------- | -----------------------
|               | 3                      
|               | 31.1                   
|               | 31.2                   
|               | 32.1                   
|               | 32.2                   

|*  | Incorporated by reference to documents filed with the Securities and Exchange
Commission in connection with the filing of the Registration Statements on Form
S-11 on June 25, 1982 (effective October 13, 1982) under Commission File No.
2-78152.
|-- | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|** | Attached as an exhibit
to this Quarterly Report on Form 10-Q.                                                                                                                                                                                      

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