UNITED STATES

                       SECURITIES AND EXCHANGE COMMISSION

                             Washington, D. C. 20549

                                    FORM 10-Q

(Mark one)

[x]                   QUARTERLY REPORT PURSUANT TO SECTION 13 or 15(d)
                      OF THE SECURITIES EXCHANGE ACT OF 1934

For the quarterly period ended           September 30, 1998
                              

                                       OR

[ ]                   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                      0-11176

                               NTS-PROPERTIES III
             (Exact name of registrant as specified in its charter)

          Georgia                                   61-1017240
(State or other jurisdiction of         (I.R.S. Employer Identification No.)
incorporation or organization)

    10172 Linn Station Road
    Louisville, Kentucky                              40223
(Address of principal executive                     (Zip Code)
offices)

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

                                 Not Applicable
               Former name, former address and former fiscal year,
                          if changed since last report

Indicate by check mark whether the registrant (l) 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,  and (2) has been subject to such filing  requirements
for the past 90 days.

                                                            YES  X         NO

Exhibit Index: See page 17
Total Pages: 18





<PAGE>



                                TABLE OF CONTENTS


                                                                          Pages

                                     PART I

Item 1.     Financial Statements

            Balance Sheets and Statement of Partners' Equity
              as of September 30, 1998 and December 31, 1997                  3

            Statements of Operations
              For the three months and nine months ended
              September 30, 1998 and 1997                                     4

            Statements of Cash Flows
              For the three months and nine months ended
              September 30, 1998 and 1997                                     5

            Notes To Financial Statements                                   6-9

Item 2.     Management's Discussion and Analysis of Financial
              Condition and Results of Operations                         10-16


                                     PART II

Item 3.     Defaults Upon Senior Securities                                  17
 
Item 6.     Exhibits and Reports on Form 8-K                                 17

Signatures                                                                   18




                                      - 2 -

<PAGE>



PART I.  FINANCIAL INFORMATION
Item 1.  Financial Statements
<TABLE>
                               NTS-PROPERTIES III

                BALANCE SHEETS AND STATEMENT OF PARTNERS' EQUITY

<CAPTION>
                                           As of             As of
                                     September 30,1998 December 31, 1997*
                                     ----------------- ------------------
<S>                                      <C>             <C>
ASSETS

Cash and equivalents                     $   255,398     $   266,940
Cash and equivalents - restricted            279,550         284,599
Investment securities                             --         101,591
Accounts receivable, net of allowance
 for doubtful accounts of $7,934 (1998)
 and $42,035 (1997)                          156,459         269,922
Land, buildings and amenities, net        10,124,054       9,828,962
Other assets                                 388,743         370,302
                                         -----------     -----------

  Total assets                           $11,204,204     $11,122,316
                                         ===========     ===========

LIABILITIES AND PARTNERS' EQUITY

Mortgages payable                        $ 6,710,864     $ 6,734,603
Accounts payable - operations                 78,238          36,773
Accounts payable - construction                4,790         102,655
Security deposits                             93,792         103,816
Other liabilities                            145,801         155,179
                                         -----------     -----------

                                           7,033,485       7,133,026

Commitments and Contingencies

Partners' equity                           4,170,719       3,989,290
                                         -----------     -----------

                                         $11,204,204     $11,122,316
                                         ===========     ===========
</TABLE>
<TABLE>
<CAPTION>


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

                                      15,600,000       2,584,680     18,184,680
Net income (loss) - prior years           74,801      (2,395,121)    (2,320,320)
Net income (loss) - current year         325,318         (68,890)       256,428
Cash distributions declared to
 date                                (11,349,844)       (206,985)   (11,556,829)
Repurchase of limited partnership
 units                                  (393,240)             --       (393,240)
                                    ------------    ------------   ------------

Balances at September 30, 1998      $  4,257,035    $    (86,316)  $  4,170,719
                                    ============    ============   ============
<FN>

*Reference is made to the audited financial statements in the Form 10-K as filed
with the Commission on March 30, 1998.
</FN>

</TABLE>

                                      - 3 -

<PAGE>

<TABLE>



                               NTS-PROPERTIES III

                            STATEMENTS OF OPERATIONS

<CAPTION>

                                                    Three Months Ended           Nine Months Ended
                                                       September 30,                September 30,
                                                    ------------------           -----------------

                                                    1998          1997           1998           1997
                                                -----------   -----------    -----------    -----------
<S>                                             <C>           <C>            <C>            <C>
REVENUES:
  Rental income, net of provision
  for doubtful accounts of $1,943
   (1998) and $22,570 (1997)                    $   864,393   $   790,256    $ 2,664,929    $ 2,305,780
  Rental income - affiliated                         73,834        70,388        223,430        211,016
  Interest and other income                           4,026         9,277         11,068         28,344
                                                -----------   -----------    -----------    -----------

                                                    942,253       869,921      2,899,427      2,545,140

EXPENSES:
  Operating expenses                                233,602       216,559        689,402        571,139
  Operating expenses - affiliated                    91,363       118,008        303,182        330,272
 Write-off of unamortized tenant
  improvements                                       39,670        69,912         48,108         69,912
  Interest expense                                  116,213       131,640        353,468        398,091
  Management fees                                    50,140        42,221        149,504        126,572
  Real estate taxes                                  51,727        49,651        155,496        155,369
  Professional and administrative
     expenses                                        14,252        15,031         45,965         45,819
  Professional and administrative
     expenses - affiliated                           32,601        33,610        103,127        103,028
  Depreciation and amortization                     257,023       209,322        729,489        628,280
                                                -----------   -----------    -----------    -----------

                                                    886,591       885,954      2,577,741      2,428,482
                                                -----------   ===========    -----------    -----------

Net income (loss) before
 extraordinary item                                  55,662       (16,033)       321,686        116,658
Extraordinary item - write-off of
 unamortized loan costs                                  --            --        (65,258)            --
                                                -----------   -----------    -----------    -----------

Net income (loss)                               $    55,662   $   (16,033)   $   256,428    $   116,658
                                                ===========   ===========    ===========    ===========

Net income allocated to the limited partners:
 Income before extraordinary item               $    78,970   $    17,005    $   389,923    $   196,710
 Extraordinary item                                      --            --        (64,605)            --
                                                -----------   -----------    -----------    -----------

Net income                                      $    78,970   $    17,005    $   325,318    $   196,710
                                                ===========   ===========    ===========    ===========

Net income per limited partnership unit:
 Income before extraordinary item               $      5.73   $      1.21    $     28.08    $     13.98
 Extraordinary item                                      --            --          (4.65)            --
                                                -----------   -----------    -----------    -----------

Net income per limited partnership
 unit                                           $      5.73   $      1.21    $     23.43    $     13.98
                                                ===========   ===========    ===========    ===========

Weighted average number of units                     13,770        14,070         13,883         14,073
                                                ===========   ===========    ===========    ===========
</TABLE>
                                      - 4 -

<PAGE>
<TABLE>

                               NTS-PROPERTIES III
                            STATEMENTS OF CASH FLOWS
<CAPTION>

                                                Three Months Ended           Nine Months Ended
                                                   September 30,                September 30,
                                                ------------------           -----------------

                                             1998            1997           1998           1997
                                          -----------    -----------    -----------    -----------
<S>                                       <C>            <C>            <C>            <C>
CASH FLOWS FROM OPERATING ACTIVITIES
Net income (loss)                         $    55,662    $   (16,033)   $   256,428    $   116,658
Adjustments to reconcile net income
 (loss)to net cash provided by
 operating activities:
   Provision for doubtful accounts              1,943          8,017          1,943         22,570
   Accrued interest on investment
    securities                                     --            (54)           923            (54)
  Write-off of unamortized tenant
    improvements                               39,670         69,912         48,108         69,912
  Write-off of unamortized loan costs              --             --         65,258             --
   Depreciation and amortization              257,023        209,322        729,489        628,280
   Changes in assets and liabilities:
      Cash and equivalents - restricted       (28,350)       (15,615)       (41,489)       (45,679)
      Accounts receivable                      59,235            833        111,520        (35,746)
      Other assets                             14,790          5,856        (13,790)        10,051
      Accounts payable - operations           (12,391)        18,096         41,465           (262)
      Security deposits                        (7,671)        (9,057)       (10,024)       (10,897)
      Other liabilities                        (1,143)         7,576         (9,375)       111,725
                                          -----------    -----------    -----------    -----------

  Net cash provided by operating
    activities                                378,768        278,853      1,180,456        866,558
                                          -----------    -----------    -----------    -----------
CASH FLOWS FROM INVESTING ACTIVITIES
Additions to land, buildings, and
  amenities                                  (209,717)      (255,064)    (1,163,170)      (830,338)
Decrease (increase) in cash and
  equivalents - restricted                     (1,217)        12,814        171,538          7,088
Purchase of investment securities                  --       (102,461)            --       (102,461)
Maturity of investment securities                  --             --        100,668             --
                                          -----------    -----------    -----------    -----------

   Net cash used in investing
     activities                              (210,934)      (344,711)      (890,964)      (925,711)
                                          -----------    -----------    -----------    -----------
CASH FLOWS FROM FINANCING ACTIVITIES
Increase in mortgage payable                       --             --      6,800,000             --
Principal payments on mortgages
  payable                                     (53,788)       (29,062)    (6,823,739)       (85,242)
Increase in loan costs                             --             --        (77,295)            --
Repurchase of limited partnership
  units                                            --             --        (75,000)        (5,408)
Decrease (increase)in cash and
  equivalents - restricted                   (125,000)            --       (125,000)        27,168
                                          -----------    -----------    -----------    -----------

   Net cash used in financing
      activities                             (178,788)       (29,062)      (301,034)       (63,482)
                                          -----------    -----------    -----------    -----------

 Net decrease in cash and equivalents         (10,954)       (94,920)       (11,542)      (122,635)
CASH AND EQUIVALENTS, beginning of
   period                                     266,352        633,668        266,940        661,383
                                          -----------    -----------    -----------    -----------

CASH AND EQUIVALENTS, end of period       $   255,398    $   538,748    $   255,398    $   538,748
                                          ===========    ===========    ===========    ===========

Interest paid on a cash basis             $   116,213    $   132,915    $   328,864    $   400,503
                                          ===========    ===========    ===========    ===========
</TABLE>
                                      - 5 -

<PAGE>



                               NTS-PROPERTIES III

                          NOTES TO FINANCIAL STATEMENTS


The financial  statements included herein should be read in conjunction with the
Partnership's  1997 Annual Report.  In the opinion of the General  Partner,  all
adjustments (only consisting of normal recurring  accruals) necessary for a fair
presentation  have been made to the  accompanying  financial  statements for the
three months and nine months ended September 30, 1998 and 1997.

1.   Use of Estimates in the Preparation of Financial Statements
     -----------------------------------------------------------

     The preparation of financial  statements in conformity with generally 
     accepted accounting  principles  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.

2.   Concentration of Credit Risk
     ----------------------------

     NTS-Properties III is a limited partnership which owns and operates 
     commercial properties  in  Norcross,  Georgia,  a suburb of Atlanta,  and  
     Jeffersontown, Kentucky, a suburb of Louisville. One tenant in Plainview 
     Triad North occupies 65% of the office  building's  net  rentable  area and
     one tenant in Plainview Plaza  II  occupies 46% of the  office   building's
     net  rentable  area.  Substantially  all of the  Partnership's  tenants are
     local businesses or are businesses which have operations in the location in
     which they lease space.

3.   Cash and Equivalents - Restricted
     ---------------------------------

     Cash and equivalents - restricted represent 1) escrow funds which are to be
     released as the heating,  ventilating and air conditioning  ("HVAC") system
     at Peachtree Corporate Center is replaced (December 31, 1997 balance only),
     2) funds which have been escrowed with a mortgage company for NTS Plainview
     Plaza II's property taxes in accordance  with the loan  agreement,  3)funds
     which  the   Partnership   has  reserved  for  the  repurchase  of  limited
     partnership  Units 4) escrow  funds which are to be released as the roof is
     replaced at one of the three  buildings at Plainview Plaza II, and 5) funds
     which the Partnership has reserved to purchase  limited  Partnership  Units
     under the Tender  Offer (see Note 5). The funds  escrowed  for HVAC  system
     replacements  were  released  April 1,  1998 when the  $4,500,000  mortgage
     payable to an insurance company was repaid.

4.   Interest Repurchase Reserve
     ---------------------------

     On January  16,  1998,  the  Partnership  elected  to resume  the  Interest
     Repurchase  Program  and to  fund an  additional  $50,000  to its  Interest
     Repurchase  Reserve,  which was originally  established in 1995 pursuant to
     Section 16.4 of the Partnership's Amended and Restated Agreement of Limited
     Partnership.  With this funding, the Partnership repurchased 200 additional
     Units at a price of $250 per  Unit.  On  April  7,  1998,  the  Partnership
     elected to fund an additional $25,000 to its Interest  Repurchase  Reserve.
     With this funding,  the Partnership  repurchased 100 additional  Units at a
     price of $250 per Unit. The above  offering price per Unit was  established
     by the  General  Partner  in its sole  discretion  and does not  purport to
     represent  the fair market value or  liquidation  value of the Units.  From
     October 1995 to September 30, 1998, the Partnership has repurchased a total
     of  1,830  units  for  $393,240.  Repurchased  units  are  retired  by  the
     Partnership,  thus increasing the percentage of ownership of each remaining
     limited partner investor.  The Interest  Repurchase Reserve was funded from
     cash reserves. The balance in the reserve at September 30, 1998 was $0.


                                      - 6 -

<PAGE>



5.   Tender Offer
     ------------

     On September 30, 1998, the  Partnership  and ORIG, LLC, an affiliate of the
     Partnership,  commenced  a  Tender  Offer  to  purchase  up to 1,000 of the
     Partnership's  limited  partnership  Units  at a price  of $250  per  Unit.
     Although  the  Partnership  and  ORIG,  LLC  believes  that  this  price is
     appropriate,  the price of $250 per Unit may not equate to the fair  market
     value or the liquidation value of the Unit, and is less than the book value
     per Unit.  Approximately  $285,000  ($250,000 to purchase  1,000 Units plus
     approximately  $35,000 for expenses  associated with the Offer) is required
     to purchase all 1,000 Units.  The  Partnership  will purchase the first 500
     Units  tendered and will fund its purchases and its portion of the expenses
     from cash  reserves.  If more than 500 Units are tendered,  ORIG,  LLC will
     purchase  up to an  additional  500  Units.  If more than  1,000  Units are
     tendered,  the  Partnership  and  ORIG,  LLC  may  choose  to  acquire  the
     additional  Units on the same  terms.  Otherwise,  tendered  Units  will be
     purchased  on a pro rata basis up to 1,000.  Units that are acquired by the
     Partnership  will be retired.  Units that are acquired by ORIG, LLC will be
     held by it. The General Partner, NTS-Properties Associates, does not intend
     to participate in the Tender Offer.  The Tender Offer will expire  December
     29, 1998 unless extended.

6.   Investment Securities
     ---------------------

     Investment securities represent investments in Certificates of Deposit with
     initial  maturities  of greater  than three  months.  The  investments  are
     carried at cost which approximates market value. The Partnership intends to
     hold the securities  until maturity.  During 1997 and 1998, the Partnership
     sold no investment  securities.  As of September 30, 1998, the  Partnership
     held no investment securities.

     The following  provides details  regarding the investments held at December
     31, 1997:

                               Amortized           Maturity           Value at
             Type                 Cost               Date             Maturity
             ----                 ----               ----             --------
     
     Certificate of deposit     $101,591           02/13/98           $102,232
                                 =======                               =======


7.   Mortgages Payable
     -----------------

     Mortgages payable consist of the following:

                                                    September 30,  December 31,
                                                        1998          1997
                                                    -------------  ------------
     Mortgage payable to an insurance company,
     bearing interest at 6.89%, maturing April
     10, 2015, secured by land and buildings         $ 6,710,864   $    --
     
     Mortgage payable to an insurance company,
     bearing interest at 9.125%, maturing
     November 1, 1998, secured by land and
     buildings                                            --         2,234,603
     
     Mortgage payable to an insurance company,
     maturing June 1, 2001, secured by land
     and buildings, bearing a variable
     interest rate based on the 10-year
     treasury bill rate plus 60 basis points.
     The rate is adjusted quarterly.                      --         4,500,000
                                                     -----------   -----------
                                                     $ 6,710,864   $ 6,734,603
                                                     ===========   ===========

     Based on the borrowing  rates  currently  available to the  Partnership for
     mortgages with similar terms and average maturities, the fair value of long
     term debt approximately carrying value.

                                      - 7 -

<PAGE>



8.   Basis of Property
     -----------------

     Statement of Financial  Accounting Standards (SFAS) No. 121, Accounting for
     the  Impairment  of  Long-Lived  Assets  and for  Long-Lived  Assets  to be
     Disposed Of,  specifies  circumstances in which certain  long-lived  assets
     must be reviewed for impairment. If such review indicates that 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  market  value.
     Application  of this  standard  during the nine months ended  September 30,
     1998 and 1997 did not result in an impairment loss.

9.   Reclassification of 1997 Financial Statements
     ---------------------------------------------

     Certain  reclassifications  have  been  made  to  the  September  30,  1997
     financial   statements   to   conform   with   the   September   30,   1998
     classifications.  These  reclassifications  have no  effect  on  previously
     reported operations.

10.  Related Party Transactions
     --------------------------

     Property management fees of $149,504 and $126,572 for the nine months ended
     September  30, 1998 and 1997,  respectively,  were paid to NTS  Development
     Company, an affiliate of the General Partner, pursuant to an agreement with
     the  Partnership.  The  fee is  equal  to 5% of  gross  revenues  from  the
     Partnership's  properties.  Also permitted by an agreement, NTS Development
     Company  will receive a repair and  maintenance  fee equal to 5.9% of costs
     incurred which relate to capital  improvements.  The  Partnership  incurred
     $61,009 and $52,486 as a repair and  maintenance fee during the nine months
     ended September 30, 1998 and 1997,  respectively,  and has capitalized this
     cost as a part  of  land,  buildings  and  amenities.  As  permitted  by an
     agreement,  the Partnership also was charged the following amounts from NTS
     Development  Company for the nine months ended September 30, 1998 and 1997.
     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 land,  buildings and
     amenities. These charges were as follows:



                                         1998                  1997
                                       --------              --------
          Leasing                     $ 125,397             $ 209,389
          Administrative                125,497               127,012
          Property manager              166,097               126,476
          Other                          49,715                23,701
                                       --------              --------

                                      $ 466,706             $ 486,578
                                       ========              ========

     During the nine months ended  September 30, 1998, NTS  Development  Company
     leased 20,368 square feet in Plainview  Plaza II at a rental rate of $14.50
     per square foot. The Partnership received  approximately $223,000 in rental
     payments  from  NTS  Development  Company  during  the  nine  months  ended
     September  30,  1998.  The lease term for NTS  Development  Company ends on
     March 31, 2002.

     During January 1997, NTS  Development  Company leased 23,160 square feet of
     the  available  space in  Plainview  Plaza II at a base rent of $13.50  per
     square foot.  During  February and March of 1997, NTS  Development  Company
     leased  20,368  square  feet at a rental  rate of $13.50 per  square  foot.
     Effective April 1, 1997, the NTS Development Company lease was extended for
     five  years to March 2002 at a rental  rate of $14.50  per square  foot for
     20,368 square feet.  The  Partnership  received  approximately  $211,000 in
     rental payments from NTS  Development  Company during the nine months ended
     September 30, 1997.

                                      - 8 -

<PAGE>



11.  Commitments and Contingencies
     -----------------------------

     One tenant at  Plainview  Triad  North  occupies  approximately  65% of the
     building. During the third quarter of 1997, the Partnership received notice
     that the tenant  would  vacate the  property  at the end of the lease term,
     August  1998.  The  Partnership  was  able to  negotiate  a 30 day  renewal
     (through  September 30, 1998) with the tenant for the approximately  63,000
     square feet that they leased.  The Partnership was also able to negotiate a
     renewal for approximately  11,000 square feet of the original 63,000 square
     feet through March 31, 1999.  Costs  associated  with this renewal were not
     significant. In the opinion of the General Partner of the Partnership,  the
     six-month  extension  for the 11,000  square feet of space will be all that
     can be anticipated.  As a result,  there will likely be a protracted period
     for the  property  to become  fully  leased  again and  substantial  funds,
     currently  estimated to be from  $2,000,000 to  $2,500,000,  will likely be
     needed for leasing expenses;  especially those needed to refinish space for
     new tenants.

     At Plainview  Triad North,  the Partnership is exploring the possibility of
     common area and exterior  building  renovations.  As of September 30, 1998,
     the  Partnership  has  made  a  commitment  of  approximately  $50,000  for
     architectural  services in connection with planning the renovations.  These
     renovations  will be designed to make the  property  more  competitive  and
     enhance its value.  The estimated cost of the renovations is  approximately
     $1,000,000 and is expected to begin during 1998.

     It may be  necessary  to borrow a portion  of the  funds  required  for the
     renovation and leasing costs discussed above.  With the partnership  having
     two of its three properties free and clear of debt, it is expected that any
     such  borrowings  could  be  readily  facilitated.  However,  there  is  no
     assurance that  financing will be able to be obtained when needed,  or that
     any financing will be on favorable terms.






















                                      - 9 -

<PAGE>



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

The management's  discussion and analysis of financial  condition and results of
operations  included herein should be read in conjunction with the Partnership's
1997 Annual Report.

Results of Operations
---------------------

The occupancy levels at the Partnership's  properties as of September 30 were as
follows:


                                  1998                  1997
                                  ----                  ----
Plainview Plaza II                 100%                   89%

Plainview Triad North               91%                   86%

Peachtree Corporate Center          86%                   89%

The rental and other income  generated by the  Partnership's  properties for the
three months and nine months ended September 30 were as follows:


                                   Three Months Ended        Nine Months Ended
                                     September 30,             September 30,
                                   ------------------        -----------------
                                   1998        1997          1998         1997
                                 ---------   ---------    ----------   ---------
Plainview Plaza II               $ 373,761   $ 316,746    $1,108,505   $ 924,158

Plainview Triad North            $ 293,604   $ 268,945    $  932,054   $ 781,317

Peachtree Corporate Center       $ 272,231   $ 275,218    $  849,806   $ 813,168


The 11% increase in occupancy  from  September 30, 1997 to September 30, 1998 at
Plainview Plaza II can be attributed to four new leases  totaling  approximately
18,800 square feet. Of this total, approximately 17,000 square feet represents a
new  five-year  lease.  The new leases are  partially  offset by the move-out of
three tenants,  who had occupied  approximately 4,300 square feet, at the end of
the lease terms, and the relocation of an approximately 1,000 square foot tenant
to  Plainview  Triad North.  There was no accrued  income  associated  with this
lease.  See below for  information  regarding  the  tenant  relocation.  Average
occupancy  increased from 89% in 1997 to 100% in 1998 for the three months ended
September 30 and from 88% in 1997 to 97% in 1998 for the nine month period.  The
increase in rental and other income at  Plainview  Plaza II for the three months
and nine months ended September 30, 1998 as compared to the same periods in 1997
can be  attributed to the increase in average  occupancy  and  increased  rental
rates for lease renewals.

Plainview  Triad  North's  occupancy  increased  5% from  September  30, 1997 to
September  30, 1998 due to two new leases  totaling  approximately  4,500 square
feet,  of which  approximately  1,900 square feet  represents a former tenant of
Plainview Plaza II. The tenant relocated to Plainview Triad North from Plainview
Plaza II to  accommodate  the needs of a new  tenant at  Plainview  Plaza II who
required 17,000 square feet of contiguous  space.  Average  occupancy  increased
from 89% in 1997 to 91% in 1998 for the  three  months  ended  September  30 and
decreased from 91% in 1997 to 89% in 1998 for the nine month period.  Rental and
other income  increased  at Plainview  Triad North for the three months and nine
months ended  September  30, 1998 as compared to the same periods in 1997 due to
the increase in rental rates for lease  renewals and an increase in pass through
expense  reimbursements.  Leases at Plainview Triad North provide for tenants to
contribute toward the payment of increases in common area maintenance  expenses,
insurance, utilities and real estate taxes.



                                     - 10 -

<PAGE>



Results of Operations - Continued
---------------------------------

Peachtree  Corporate Center's occupancy  decreased 3% from September 30, 1997 to
September  30,  1998  due to  the  move-out  of six  tenants  who  had  occupied
approximately 18,400 square feet. Approximately 10,200 square feet of this total
represents  four tenants who vacated and ceased making rental payments in breach
of the lease terms.  There was no accrued income  associated  with these leases.
The remaining 8,200 square feet of total move-outs was the result of two tenants
who vacated at the end of the lease term. Partially offsetting the move-outs are
four new leases  totaling  approximately  11,600  square  feet.  Of this  total,
approximately  2,800 square feet  represents  an expansion by a current  tenant.
Average occupancy decreased from 89% in 1997 to 84% in 1998 for the three months
ended  September 30, and decreased  from 86% in 1997 to 85% in 1998 for the nine
month  period.  Rental and other  income  increased  for the nine  months  ended
September  30,  1998 as  compared  to the same  period in 1997 as the  result of
increased  rental rates on lease renewals and an increase in common area expense
reimbursements.  Tenants at Peachtree Corporate Center reimburse the Partnership
for common area expenses as part of the lease agreement. Rental and other income
remained  fairly  constant  for the three  months  ended  September  30, 1998 as
compared to the same period in 1997.

In cases of tenants who cease making rental  payments or abandon the premises in
breach of the lease terms, the Partnership pursues collection through the use of
collection  agencies or other remedies  available by law when practical.  In the
case  of  tenants  who  vacated  Peachtree  Corporate  Center  as  a  result  of
bankruptcy,  the  Partnership  has taken legal action when it was thought  there
could be a possible  collection.  There have been no significant funds recovered
as a result of these actions during the nine months ended  September 30, 1998 or
1997. As of September 30, 1998, there were no on-going cases.

Current  and  projected  future  occupancy  levels are  considered  adequate  to
continue the operation of the Partnership's  properties without the need for any
additional financing. See the discussion below regarding the Aetna Company lease
at Plainview Triad North.

Interest  and other  income  includes  interest  income  earned from  short-term
investments made by the Partnership with cash reserves. The decrease in interest
income for the three months and nine months ended September 30, 1998 as compared
to the same periods in 1997 is due  primarily  to the decrease in cash  reserves
available for investment.

Operating  expenses  increased  for the nine months ended  September 30, 1998 as
compared to the same period in 1997 as a result of  increased  utility  costs at
Plainview Plaza II and Peachtree  Corporate  Center,  and increased  janitorial,
security and landscaping  costs at Plainview Plaza II. The increase in operating
expenses  for the nine month  period is also  attributable  to the fact that the
Plainview  Triad North  parking lot was resealed  and striped  during the second
quarter  of 1998.  Operating  expenses  increased  for the  three  months  ended
September  30,  1998 as  compared  to the same  period  in 1997 as a  result  of
increased utility costs at Plainview Plaza II and Peachtree Corporate Center and
increased  janitorial  costs at  Plainview  Plaza II. The  increase in operating
expenses for the three month period is partially offset by decreased landscaping
costs at Plainview Triad North.

Operating  expenses - affiliated  decreased for the three months and nine months
ended  September  30, 1998 as compared to the same period in 1997 as a result of
decreased leasing costs at Peachtree Corporate Center and Plainview Triad North.
The  decrease in operating  expenses - affiliated  for both periods is partially
offset  by  increased  property  management  costs  at all of the  Partnership's
properties.  Operating  expenses-affiliated  are expenses  incurred for services
performed by employees of NTS Development  Company,  an affiliate of the General
Partner.



                                     - 11 -

<PAGE>



Results of Operations - Continued
---------------------------------

The 1998  write-off of  unamortized  tenant  improvements  can be  attributed to
Plainview Plaza II and Peachtree Corporate Center. At Plainview Plaza II, tenant
improvements  were made to accommodate  the new lease for  approximately  17,000
square feet.  Changes to current tenant  improvements  are a typical part of any
lease  negotiation.  Improvements  generally  include a revision  to the current
floor plan to  accommodate  a tenant's  needs,  new  carpeting  and paint and/or
wallcovering.  In order to complete the renovation, it is sometimes necessary to
replace  improvements which have not been fully  depreciated.  This results in a
write-off of unamortized tenant improvements.

The 1997 write-off of  unamortized  building  improvements  is the result of the
renovation  of common area lobbies,  corridors and restrooms at Plainview  Plaza
II. The write-off represents the cost of previous renovations which had not been
fully depreciated.

Interest  expense  has  decreased  for the three  months and nine  months  ended
September  30, 1998 as  compared to the same  periods in 1997 as the result of a
lower  interest  rate  (6.89%)  on  the  permanent  financing  obtained  by  the
Partnership April 1, 1998. Prior to the new financing,  the  Partnership's  debt
bore interest at a fixed rate of 9.125% (on an approximately $2,200,000 mortgage
payable)  and a variable  rate based on the 10-year  treasury  bill rate plus 60
basis points (on a $4,500,000  mortgage  payable).  The variable  rate was 6.94%
from January to March 1997,  7.39% April to June 1997 and was 7.05% from July to
September 1997. See the Liquidity and Capital Resources section of this item for
details regarding the Partnership's debt.

Management  fees are  calculated as a percentage of cash  collections;  however,
revenue  for  reporting  purposes  is on the  accrual  basis.  As a result,  the
fluctuations of revenues  between  periods will differ from the  fluctuations of
management fee expense.

Real estate taxes, professional and administrative expenses and professional and
administrative  expenses -  affiliated  remained  fairly  constant for the three
months and nine months ended  September 30, 1998 as compared to the same periods
in 1997.  Professional  and  administrative  expenses - affiliated  are expenses
incurred for services  performed by  employees of NTS  Development  Company,  an
affiliate of the General Partner.

The increase in depreciation and amortization  expenses for the three months and
nine months ended  September 30, 1998 as compared to the same periods in 1997 is
the result of assets  being  placed in  service.  Assets  placed in service  are
primarily tenant  improvements at all the Partnership's  properties and exterior
building  and land  improvement  costs at  Plainview  Plaza II. The  increase in
depreciation  and  amortization  expense is partially offset by a portion of the
Partnership's  assets  (primarily  tenant finish  improvements)  becoming  fully
depreciated.  Depreciation is computed using the  straight-line  method over the
estimated  useful  lives  of  the  assets  which  are  5 -  30  years  for  land
improvements, 30 years for buildings, 5 - 30 years for building improvements and
3 - 30 years for amenities.  The aggregate cost of the Partnership's  properties
for Federal tax purposes is approximately $25,400,000.

The 1998 write-off of unamortized loan costs (recorded as an extraordinary item)
relates to the loan costs associated with two mortgages of the Partnership.  The
unamortized  loan costs were  expensed due to the fact that the  mortgages  were
repaid April 1, 1998 prior to their maturity  (November 1998 and June 2001) as a
result of a new mortgage loan. See the Liquidity and Capital  Resources  section
of this item for further discussion.

Liquidity and Capital Resources
-------------------------------

On April 1, 1998, the Partnership obtained permanent financing from an insurance
company in the amount of $6,800,000.  The  outstanding  balance at September 30,
1998 was $6,710,864.  The mortgage payable is due April 10, 2015, bears interest
at a fixed rate of 6.89% and is secured by a first  mortgage on Plainview  Plaza
II. The  repayment of principal  is being  amortized  over 17 years with monthly
payments of principal and interest totaling approximately $56,650. The proceeds

                                     - 12 -

<PAGE>



Liquidity and Capital Resources - Continued
-------------------------------------------

of the mortgage were used to pay off the  $2,214,251  and  $4,500,000  mortgages
payable and to pay loan closing costs. At maturity,  the mortgage will have been
repaid based on the current rate of amortization. As part of the loan agreement,
the  Partnership was required to place in escrow $100,000 for the replacement of
the roof on one of the three  buildings  at  Plainview  Plaza II.  The source of
funds for this escrow was an escrow which had been maintained in connection with
the $4,500,000 mortgage payable.

The Partnership had cash flow from operations of $1,180,456  (1998) and $866,558
(1997) for the nine months ended September 30. The majority of the Partnership's
cash flow is derived  from  operating  activities.  Cash flows used in investing
activities  are  primarily  for tenant  finish  improvements  and other  capital
additions  and are funded by  operating  activities.  Changes to current  tenant
improvements are a typical part of any lease negotiation. Improvements generally
include a revision to the current floor plan to  accommodate  a tenant's  needs,
new  carpeting  and paint  and/or  wallcovering.  The  extent  and cost of these
improvements   are  determined  by  the  size  of  the  space  and  whether  the
improvements are for a new tenant or incurred  because of a lease renewal.  Cash
flows used in investing activities also include cash which is being escrowed for
the replacement of the heating, ventilating and air conditioning ("HVAC") system
(1997) at Peachtree  Corporate  Center and the replacement of the roof on one of
the three buildings at Plainview Plaza II (1998). As part of its cash management
activities,  the Partnership has purchased  Certificates of Deposit with initial
maturities greater than three months to improve the return on its cash reserves.
The Partnership has held the securities  until maturity.  Cash flows provided by
investing  activities are from the maturity of these  investment  securities and
the  release  of  funds  escrowed  for the  replacement  of the HVAC  system  at
Peachtree  Corporate  Center.  Cash flows used in financing  activities  include
principal  payments  on  the  mortgages  payable,   the  repurchase  of  limited
partnership  Units, cash reserved by the Partnership to fund the Tender Offer to
purchase  limited  partnership  Units, and the addition of loan costs associated
with the debt activity.  Cash flows provided by financing  activities  represent
the  utilization  of cash which has been  reserved  by the  Partnership  for the
repurchase  of limited  partnership  Units,  and  proceeds  received  from a new
mortgage  loan  obtained  April 1,  1998.  The  Partnership  does not expect any
material changes in the mix and relative cost of capital resources from those in
1997 except for change  resulting  from the new debt  financing  obtained by the
Partnership during 1998, as discussed above.

The Partnership  indefinitely suspended distributions starting December 31, 1996
in an  effort  to  conserve  funds in  anticipation  of the  loss of Aetna  Life
Insurance Company at Plainview Triad North. See below for a further  discussion.
Cash  reserves  (which are  unrestricted  cash and  equivalents  as shown on the
Partnership's  balance  sheet as of September  30) were $255,398 and $641,263 at
September 30, 1998 and 1997, respectively.

In the next 12 months,  the General Partner expects a demand on future liquidity
as a result of 122,897  square feet in leases  expiring  from October 1, 1998 to
September  30, 1999  (Plainview  Plaza II - 2,121 square feet,  Plainview  Triad
North - 70,900 square feet and Peachtree Corporate Center - 49,876 square feet).
The  majority  of the square  feet in leases  which  expire in 1998  relate to a
single tenant (Aetna Life Insurance Company) at Plainview Triad North. See below
for a discussion  regarding the lease for this tenant.  At this time, the future
leasing  and tenant  finish  costs  which will be  required to renew the current
leases or obtain new tenants are unknown.

One tenant at Plainview Triad North occupies  approximately 65% of the building.
During the third  quarter of 1997,  the  Partnership  received  notice  that the
tenant would vacate the property at the end of the lease term,  August 1998. The
Partnership was able to negotiate a 30 day renewal (through  September 30, 1998)
with the tenant for the approximately  63,000 square feet that they leased.  The
Partnership was also able to negotiate a renewal for approximately 11,000 square
feet of the original 63,000 square feet through March 31, 1999. Costs associated
with this renewal were not significant. In the opinion of the General Partner



                                     - 13 -

<PAGE>



Liquidity and Capital Resources - Continued
-------------------------------------------

of the Partnership, the six-month extension for 11,000 square feet of space will
be all that can be anticipated.  As a result,  there will likely be a protracted
period for the  property to become fully  leased  again and  substantial  funds,
currently  estimated to be from $2,000,000 to $2,500,000,  will likely be needed
for  leasing  expenses,  particularly  those  needed to  refinish  space for new
tenants.

At Plainview Triad North, the Partnership is exploring the possibility of common
area  and  exterior  building  renovations.   As  of  September  30,  1998,  the
Partnership  has made a commitment of  approximately  $50,000 for  architectural
services in connection with planning the renovations.  These renovations will be
designed to make the  property  more  competitive  and  enhance  its value.  The
estimated cost of the renovations is approximately $1,000,000 and is expected to
begin during 1998.

It may  be  necessary  to  borrow  a  portion  of the  funds  required  for  the
renovations and leasing costs discussed above.  With the partnership  having two
of its three  properties  free and clear of debt,  it is expected  that any such
borrowings  could be readily  facilitated.  However,  there is no assurance that
financing will be able to be obtained when needed, or that any financing will be
on favorable terms.

On January 16, 1998, the Partnership  elected to resume the Interest  Repurchase
Program and to fund an additional  $50,000 to its Interest  Repurchase  Reserve,
which  was  originally  established  in 1995  pursuant  to  Section  16.4 of the
Partnership's  Amended and Restated Agreement of Limited Partnership.  With this
funding, the Partnership repurchased 200 additional Units at a price of $250 per
Unit. On April 7, 1998, the Partnership elected to fund an additional $25,000 to
its Interest Repurchase Reserve. With this funding, the Partnership  repurchased
100  additional  Units at a price of $250 per Unit. The above offering price per
Unit was  established by the General Partner in its sole discretion and does not
purport to represent  the fair market value or  liquidation  value of the Units.
From October 1995 to September 30, 1998, the Partnership has repurchased a total
of 1,830 units for $393,240.  Repurchased  units are retired by the Partnership,
thus  increasing the percentage of ownership of each remaining  limited  partner
investor.  The Interest  Repurchase  Reserve was funded from cash reserves.  The
balance in the reserve at September 30, 1998 was $0.

On  September  30,  1998,  the  Partnership  and ORIG,  LLC, an affiliate of the
partnership,   commenced  a  Tender  Offer  to  purchase  up  to  1,000  of  the
Partnership's  limited  partnership Units at a price of $250 per Unit.  Although
the Partnership and ORIG, LLC believes that this price is appropriate, the price
of $250 per Unit may not  equate  to the fair  market  value or the  liquidation
value of the  Unit,  and is less than the book  value  per  Unit.  Approximately
$285,000  ($250,000  to  purchase  1,000  Units plus  approximately  $35,000 for
expenses associated with the Offer) is required to purchase all 1,000 Units. The
Partnership  will  purchase  the  first  500  Units  tendered  and will fund its
purchases and its portion of the expenses from cash  reserves.  If more than 500
Units are tendered,  ORIG, LLC will purchase up to an additional  500 Units.  If
more than 1,000 Units are tendered,  the Partnership and ORIG, LLC may choose to
acquire the additional Units on the same terms.  Otherwise,  tendered Units will
be  purchased  on a pro rata basis up to 1,000.  Units that are  acquired by the
Partnership  will be retired.  Units that are acquired by ORIG, LLC will be held
by it.  The  General  Partner,  NTS-Properties  Associates,  does not  intend to
participate in the Tender Offer.  The Tender Offer will expire December 29, 1998
unless extended.

The primary  source of future  liquidity  is  expected  to be derived  from cash
generated by the  Partnership's  properties  after  adequate  cash  reserves are
established for future leasing and tenant finish costs. In addition to cash flow
from  operations  and cash reserves it may be necessary for the  Partnership  to
obtain debt financing as discussed above.



                                     - 14 -

<PAGE>



Liquidity and Capital Resources - Continued
-------------------------------------------

All divisions of NTS, the General Partner of the Partnership,  are reviewing the
effort  necessary to prepare our  information  systems (IT) and  non-information
technology  with embedded  technology  (ET) for the Year 2000.  The  information
technology  solutions have been  addressed  separate for the Year 2000 since the
company saw the need to move to more advanced  management and accounting systems
made available by new technology and software  developments during the decade of
the 1990's.

The PILOT software system,  purchased in the early 1990's, needed to be replaced
by a windows based network system both for our headquarters  functions and other
locations.  The real estate accounting system developed,  sold, and supported by
the Yardi Company of Santa  Barbara,  California  has been selected to supercede
PILOT. The Yardi system is compatible with Year 2000 and beyond.  This system is
being  implemented with the help of third party  consultants and should be fully
operational by the third quarter of 1999. Our system for multi-family  apartment
locations was converted to GEAC's Power Site System  earlier in 1998 and is Year
2000 compliant.

The few remaining  systems not addressed by these conversions are being modified
by our in-house staff of programmers.  The Hewlett Packard 3000 system, used for
PILOT and custom applications, was purchased in 1997 and will be part of our new
network.  It will be retained as long as necessary to assure  smooth  operations
and has been upgrades to meet Year 2000 requirements.

All risks identified with information technology are believed to be addressed by
these plans.

The cost of these advances in our systems  technology is not all attributable to
the Year  2000  issue  since  we had  already  identified  the need to move to a
network  based system  regardless of the Year 2000.  The costs  involved will be
approximately  $55,000  over  1998  and  1999.  These  costs  include  hardware,
software, internal staff and outside consultants.

NTS  property  management  staff has been  surveying  our  vendors  to  evaluate
embedded technology in our alarm systems,  HVAC controls,  telephone systems and
other  computer  associated  facilities.  In a few  cases,  equipment  is  being
replaced. In some cases circuitry is being upgraded.  The cost involved is still
being evaluated. There are no known significant risks that are currently without
solutions.  Management  anticipates that applications  involving ET will be Year
2000 compliant by the third quarter of fiscal year 1999.

We are also currently  addressing the Year 2000 readiness of third parties whose
business interruption could have a material negative impact on our business. All
significant  vendors and tenants have  indicated  that they will be compliant by
the end of 1999. Such assurances are being evaluated and documented.

Management has determined that at our current state of readiness,  the need does
not  presently  exist for a  contingency  plan. We will continue to evaluate the
need for such a plan.

Despite diligent preparation,  unanticipated  third-party failures, more general
public   infrastructure   failures  or  failure  to  successfully  conclude  our
remediation  efforts as planned  could  have a  material  adverse  impact on our
results  of  operations,  financial  conditions  and/or  cash  flows in 1999 and
beyond.

The  Partnership  had no other material  commitments  for renovations or capital
improvements at September 30, 1998.

Due to the fact that no  distributions  were made during the nine  months  ended
September  30,  1998 or 1997,  the table  which  presents  that  portion  of the
distribution  that  represents  a return  of  capital  on a  Generally  Accepted
Accounting Principle basis has been omitted.

                                     - 15 -

<PAGE>



Liquidity and Capital Resources - Continued
-------------------------------------------

The following  describes the efforts being taken by the  Partnership to increase
the occupancy levels at the  Partnership's  properties.  At Peachtree  Corporate
Center in Norcross,  Georgia,  the  Partnership has an on-site leasing agent, an
employee of NTS Development  Company (an affiliate of the General Partner),  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. The leasing and renewal  negotiations for Plainview Triad North
are handled by leasing agents,  employees of NTS Development Company, located in
Louisville,  Kentucky.  The  leasing  agents are located in the same city as the
property. All advertising for the Louisville property is also coordinated by NTS
Development Company's marketing staff located in Louisville, Kentucky.

Leases at all the  Partnership's  properties  provide for tenants to  contribute
toward the payment of increases in common area maintenance expenses,  insurance,
utilities  and real  estate  taxes.  This lease  provision  should  protect  the
Partnership's operations from the impact of inflation and changing prices.

Some of the statements included in Item 2, Management's  Discussion and Analysis
of  Financial  Condition  and Results of  Operations,  may be  considered  to be
"forward-looking  statements" since such statements relate to matters which have
not yet occurred.  For example,  phrases such as the Partnership  "anticipates",
"believes" or "expects" indicate that it is possible that the event anticipated,
believed or expected may not occur. Should such event not occur, then the result
which  the  Partnership  expected  also may not  occur  or occur in a  different
manner, which may be more or less favorable to the Partnership.  The Partnership
does not  undertake  any  obligations  to  publicly  release  the  result of any
revisions to these  forward-looking  statements  that may be made to reflect any
future events or circumstances.

Any forward-looking statements included in Managements's Discussion and Analysis
of Financial  Condition and Results of Operations,  or elsewhere in this report,
which reflect  management's best judgment based on factors known,  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  discussed  below.  Any  forward-looking  information
provided by the  Partnership  pursuant to the safe harbor  established by recent
securities legislation should be evaluated in the context of these factors.

The Partnership's principal activity is the leasing and management of commercial
office buildings and a business center. If a major commercial tenant defaults on
its  lease,  the  Partnership's  ability  to make  payments  due  under its debt
agreements,  payment of operating costs and other partnership  expenses would be
directly  impacted.  A lessee's  ability to make  payments  are subject to risks
generally  associated with real estate,  many of which are beyond the control of
the Partnership,  including general or local economic  conditions,  competition,
interest rates, real estate tax rates, other operating expenses and acts of God.

















                                     - 16 -

<PAGE>



PART II.  OTHER INFORMATION

3.    Defaults Upon Senior Securities
      -------------------------------

      None.

6.    Exhibits and Reports on Form 8-K
      --------------------------------

      (a)    Exhibits

             Exhibit 27. Financial Data Schedule

      (b)    Reports on Form 8-K

             None.

Items 1,2,4, and 5 are not applicable and have been omitted.
















































                                     - 17 -

<PAGE>



                                   SIGNATURES
                                   ----------


Pursuant to the  requirements of Section 13 or 15(d) 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
                                       ------------------
                                          (Registrant)

                                       BY:    NTS-Properties Associates,
                                              General Partner,
                                              BY:  NTS Capital Corporation,
                                                   General Partner


                                                   /s/ Richard L. Good
                                                   -------------------
                                                   Richard L. Good
                                                   President


                                                   /s/ Lynda J. Wilbourn
                                                   ---------------------
                                                   Lynda J. Wilbourn
                                                   Vice President
                                                   Principal Accounting Officer



Date: November 13, 1998
     



                                     - 18 -

<PAGE>