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           June 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 16
Total Pages: 17





<PAGE>



                                TABLE OF CONTENTS


                                                                   Pages

                                     PART I

Item 1.     Financial Statements

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

            Statements of Operations
              For the three months and six months ended
              June 30, 1998 and 1997                                   4

            Statements of Cash Flows
              For the three months and six months ended
              June 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                  10-15


                                     PART II

Item 3.     Defaults Upon Senior Securities                           16

Item 6.     Exhibits and Reports on Form 8-K                          16

Signatures                                                            17



                                      - 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
                                          June 30,1998   December 31, 1997*
                                          ------------   ------------------
<S>                                       <C>               <C>    
ASSETS

Cash and equivalents                      $   266,352       $   266,940
Cash and equivalents - restricted             124,983           284,599
Investment securities                           --              101,591
Accounts receivable, net of allowance
 for doubtful accounts of $4,200 (1998)
 and $42,035 (1997)                           217,637           269,922
Land, buildings and amenities, net         10,238,185         9,828,962
Other assets                                  404,665           370,302
                                          -----------       -----------

  Total assets                            $11,251,822       $11,122,316
                                          ===========       ===========
LIABILITIES AND PARTNERS' EQUITY

Mortgages payable                         $ 6,764,652       $ 6,734,603
Accounts payable - operations                  90,629            36,773
Accounts payable - construction                33,076           102,655
Security deposits                             101,463           103,816
Other liabilities                             146,946           155,179
                                          -----------       -----------

                                            7,136,766         7,133,026

Commitments and Contingencies

Partners' equity                            4,115,056         3,989,290
                                          -----------        ----------
                                          $11,251,822       $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         246,348         (45,583)       200,765
Cash distributions declared to
 date                                (11,349,844)       (206,985)   (11,556,829)
Repurchase of limited partnership
 units                                  (393,240)          --          (393,240)
                                    ------------     -----------    -----------

Balances at June 30, 1998           $  4,178,065    $    (63,009)  $  4,115,056
                                    ============     ===========    ===========

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



                                      - 3 -

<PAGE>
<TABLE>


                               NTS-PROPERTIES III

                            STATEMENTS OF OPERATIONS

<CAPTION>

                                                                          Three Months Ended                  Six Months Ended
                                                                               June 30,                            June 30,
                                                                          ------------------                  ----------------

                                                                      1998               1997             1998               1997
                                                                 -----------        -----------       -----------        -----------
<S>                                                              <C>                <C>               <C>               <C>    
REVENUES:
  Rental income, net of provision
  for doubtful accounts of $0
   (1998) and $14,552 (1997)                                     $   953,550        $   766,511       $ 1,800,542        $ 1,515,552
  Rental income - affiliated                                          73,834             68,742           149,590            140,600
  Interest and other income                                            2,986              7,096             7,042             19,068
                                                                 -----------        -----------       -----------        -----------

                                                                   1,030,370            842,349         1,957,174          1,675,220

EXPENSES:
  Operating expenses                                                 224,731            168,559           443,059            342,417
  Operating expenses - affiliated                                     89,106            108,128           211,820            212,264
 Write-off of unamortized tenant
  improvements                                                         8,438              --                8,438              --
 Amortization of capitalized
  leasing costs                                                        6,370              6,081            12,740             12,163
  Interest expense                                                   114,392            134,431           237,254            266,451
  Management fees                                                     50,922             42,072            99,364             84,352
  Real estate taxes                                                   52,042             52,921           103,770            105,719
  Professional and administrative
     expenses                                                         16,767             17,509            31,715             30,789
  Professional and administrative
     expenses - affiliated                                            33,779             34,805            70,525             69,417
  Depreciation and amortization                                      243,635            210,396           472,466            418,957
                                                                 -----------        -----------       -----------        -----------

                                                                     840,182            774,902         1,691,151          1,542,529
                                                                 -----------        -----------       -----------        -----------

Net income before extraordinary
 item                                                                190,188             67,447           266,023            132,691
Extraordinary item - write-off of
 unamortized loan costs                                               65,258              --               65,258              --
                                                                 -----------        -----------       -----------        -----------

Net income                                                       $   124,930        $    67,447       $   200,765        $   132,691
                                                                 ===========        ===========       ===========        ===========
Net income allocated to the limited partners:
Income before extraordinary item                                 $   212,081        $    90,943       $   310,953        $   179,706
Extraordinary item                                                   (64,605)              --             (64,605)              --
                                                                 -----------        -----------       -----------        -----------

Net income                                                       $   147,476        $    90,943       $   246,348        $   179,706
                                                                 ===========        ===========       ===========        ===========
Net income per limited partnership unit:
 Income before extraordinary item                                $     15.36        $      6.46       $     22.30        $     12.77
 Extraordinary item                                                    (4.68)              --               (4.63)              --
                                                                 -----------        -----------       -----------        -----------
Net income per limited partnership
 unit                                                            $     10.68        $      6.46       $     17.67        $     12.77
                                                                 ===========        ===========       ===========        ===========
Weighted average number of units                                      13,813             14,074            13,941             14,074
                                                                 ===========        ===========       ===========        ===========

</TABLE>



                                      - 4 -

<PAGE>
<TABLE>


                               NTS-PROPERTIES III

                            STATEMENTS OF CASH FLOWS

<CAPTION>

                                                                     Three Months Ended                       Six Months Ended
                                                                          June 30,                                June 30,
                                                                     ------------------                       ----------------

                                                                    1998              1997                1998               1997
                                                               -----------        -----------        -----------        -----------

<S>                                                            <C>                <C>                <C>                <C>    
CASH FLOWS FROM OPERATING ACTIVITIES
Net income                                                     $   124,930        $    67,447        $   200,765        $   132,691
Adjustments to reconcile net income
 to net cash provided by operating
 activities:
   Provision for doubtful accounts                                  (5,700)             9,912                 --             14,552
   Accrued interest on investment
    securities                                                          --                 --                923                 --
  Amortization of capitalized
    leasing costs                                                    6,370              6,081             12,740             12,163
  Write-off of unamortized tenant
    improvements                                                     8,438                 --              8,438                 --
  Write-off of unamortized loan costs                               65,258                 --             65,258                 --
   Depreciation and amortization                                   243,635            210,396            472,466            418,957
   Changes in assets and liabilities:
      Cash and equivalents - restricted                             (2,729)           (15,615)           (13,139)           (30,064)
      Accounts receivable                                           39,239            (30,900)            52,285            (36,577)
      Other assets                                                  30,119             10,852            (41,319)            (9,570)
      Accounts payable - operations                                (88,572)           (29,024)            53,856            (18,358)
      Security deposits                                             (2,508)               759             (2,353)            (1,840)
      Other liabilities                                             (7,816)            48,573             (8,232)           104,149
                                                               -----------        -----------        -----------        -----------
  Net cash provided by operating
      activities                                                   410,664            278,481            801,688            586,103
                                                               -----------        -----------        -----------        -----------
CASH FLOWS FROM INVESTING ACTIVITIES
Additions to land, buildings, and                                 (558,751)          (382,451)          (953,453)          (573,671)
  amenities
Increase in cash and equivalents -
   restricted                                                     (101,831)            (2,914)           (88,819)            (5,727)
Decrease in cash and equivalents -
  restricted                                                       277,363                 --            261,574                 --
Maturity of investment securities                                       --                 --            100,668                 --
                                                                -----------        -----------        -----------       -----------
   Net cash used in investing
     activities                                                   (383,219)          (385,365)          (680,030)          (579,398)
                                                                -----------        -----------        -----------       -----------
CASH FLOWS FROM FINANCING ACTIVITIES
Increase in mortgage payable                                     6,800,000                 --          6,800,000                 --
Principal payments on mortgages
  payable                                                       (6,749,599)           (28,409)        (6,769,951)           (56,180)
Decrease (increase) in loan costs                                   42,552                 --            (77,295)                --
Repurchase of limited partnership
  units                                                            (75,000)                --            (75,000)            (5,408)
Decrease in cash and equivalents -
  restricted                                                        50,000                 --                 --             27,168
                                                               -----------        -----------        -----------        -----------
   Net cash provided by (used in)
      financing activities                                          67,953            (28,409)          (122,246)           (34,420)
                                                               -----------        -----------        -----------        -----------
  Net increase (decrease) in cash and
    equivalents                                                     95,398           (135,293)              (588)           (27,715)

CASH AND EQUIVALENTS, beginning of
   period                                                          170,954            768,961            266,940            661,383
                                                               -----------        -----------        -----------        -----------
CASH AND EQUIVALENTS, end of period                            $   266,352        $   633,668        $   266,352        $   633,668
                                                               ===========        ===========        ===========        ===========
Interest paid on a cash basis                                  $   148,441        $   134,431        $   212,650        $   267,588
                                                               ===========        ===========        ===========        ===========

</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 six months ended June 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 and 4) escrow funds which are to be released as the roof
     is replaced at one of the three  buildings at Plainview Plaza II. 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 was able to repurchase up
     to 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  was  able  to
     repurchase  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  3,  1995  (date  Interest
     Repurchase  Reserve  established)  to June 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 June 30, 1998
     was $0.

                                      - 6 -

<PAGE>



5.   Investment Securities
     ---------------------

     Investment  securities represent  investments in Certificates of Deposit or
     securities issued by the U.S. Government 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 June  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
                                ========                              ========

6.   Mortgages Payable
     -----------------

     Mortgages payable consist of the following:


                                                 June 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   $ 6,764,652      $    --

     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
                                                -----------     -----------
                                                $ 6,764,652     $ 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 is approximately $6,700,000.

7.   Reclassification of 1997 Financial Statements
     ---------------------------------------------

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









                                      - 7 -

<PAGE>



8.   Related Party Transactions
     --------------------------

     Property  management  fees of $99,364 and $84,352 for the six months  ended
     June 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
     $51,082 and $38,338 as a repair and  maintenance  fee during the six months
     ended June 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 six months  ended June 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              $  80,372             $ 127,538
          Administrative          85,429                86,355
          Property manager       114,288                81,288
          Other                   36,861                16,167
                               ---------             ---------
                               $ 316,950             $ 311,348
                               =========             =========

     During the six months ended June 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  $150,000 in rental
     payments from NTS Development  Company during the six months ended June 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  $141,000 in
     rental  payments from NTS  Development  Company during the six months ended
     June 30, 1997.

9.   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  will  vacate the  property  at the end of the lease  term,
     August 1998. The Partnership is currently negotiating a 30 day renewal with
     the tenant for the  approximately  63,000  square feet that they  currently
     lease.  Such renewal terms would also include an extended renewal on 10,000
     square feet of the original  63,000 square feet through March 31, 1999. Any
     costs  associated with this renewal are not expected to be significant.  In
     the  opinion of the  General  Partner  of the  Partnership,  the  six-month
     extension  for  10,000  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.




                                      - 8 -

<PAGE>



9.   Commitments and Contingencies - Continued
     -----------------------------------------

     At Plainview Triad North, the Partnership is exploring the possibility of a
     common area and exterior  building  renovation.  As of June 30,  1998,  the
     Partnership   has  made  a  commitment   for   approximately   $42,000  for
     architectural  services.  These  renovations  will be  designed to make the
     property more  competitive and enhance its value. The estimated cost of the
     renovation is  approximately  $1,000,000  and the renovation 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.

     At  Plainview  Plaza II, the  Partnership  has a  commitment  of $86,000 to
     replace the roof on one of the three  buildings at Plainview Plaza II. This
     project  should be  completed  by the end of 1998.  The source of funds for
     this project will be funds which are escrowed in  accordance  with the loan
     agreement obtained April 1, 1998.





















                                      - 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 June 30 were as
follows:


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

Plainview Triad North               91%                   91%

Peachtree Corporate Center          86%                   87%

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


                                 Three Months Ended      Six Months Ended
                                      June 30,               June 30,
                                 ------------------      ----------------

                                 1998       1997        1998         1997
                              ---------  ---------   ---------    ---------

Plainview Plaza II            $ 391,380  $ 314,798   $ 734,744    $ 607,412

Plainview Triad North         $ 342,714  $ 247,457   $ 638,450    $ 512,372

Peachtree Corporate Center    $ 293,625  $ 271,369   $ 577,575    $ 537,950


The 11% increase in  occupancy  from June 30, 1997 to June 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 June 30
and from 88% in 1997 to 96% in 1998 for the six month  period.  The  increase in
rental  and other  income at  Plainview  Plaza II for the three  months  and six
months  ended  June 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 was 91% at June 30, 1997 and 1998. During the
twelve  month  period  ended  June  30,  1998,  one  tenant,  who  had  occupied
approximately  5,000  square feet,  vacated  prior to the end of the lease term,
which ended May 31, 1998.  The tenant  continued to pay rent in accordance  with
the lease terms.  Offsetting  the tenant  move-out  are 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 the
new tenant at Plainview  Plaza II who required  17,000 square feet of contiguous
space. Average occupancy decreased from 91% in 1997 to 89% in 1998 for the three
months ended June 30 and  decreased  from 92% in 1997 to 88% in 1998 for the six
month period. Rental and other income increased at Plainview Triad North for the
three  months and six months ended June 30, 1998 as compared to the same periods
in 1997 due to the increase in rental rates for lease renewals and an increase




                                     - 10 -

<PAGE>



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

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.

Peachtree  Corporate Center's occupancy  decreased 1% from June 30, 1997 to June
30, 1998 due to the  move-out of four  tenants  who had  occupied  approximately
14,000  square feet.  Approximately  7,000 square feet of this total  represents
three  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  7,000 square feet of total move-outs was the result of one tenant who
vacated at the end of the lease term. Partially offsetting the move-outs are six
new  leases   totaling   approximately   13,000  square  feet.  Of  this  total,
approximately 5,800 square feet represents the expansion by two current tenants.
Average occupancy at Peachtree Corporate Center remained constant at 86% for the
three  month  period  ended June 30, 1998 as compared to the same period in 1997
and increased  from 85% in 1997 to 87% in 1998 for the six month period.  Rental
and other income at Peachtree  Corporate  Center  increased for the three months
and six months  ended June 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 Peachtree Corporate Center provide for
tenants to contribute toward the payment of increases in common area maintenance
expenses, insurance, utilities and real estate taxes.

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 three  months  ended June 30,  1998 or
1997. As of June 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 six months  ended June 30,  1998 as compared to
the same  periods in 1997 is due  primarily  to the  decrease  in cash  reserves
available for investment.

Operating  expenses at Plainview Plaza II increased for the three months and six
months  ended June 30, 1998 as compared to the same  periods in 1997 as a result
of increased  utility costs,  janitorial  service and supply expenses,  security
service expenses and landscaping  costs. The increase in operating  expenses for
both periods 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 at Peachtree  Corporate  Center remained fairly constant for
both the three month and six month periods.

Operating  expenses -  affiliated  remained  fairly  constant for the six months
ended June 30, 1998 as compared to the same period in 1997.  Operating  expenses
affiliated decreased for the three months ended June 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  is  partially  offset  by  increased  property  management  costs at
Plainview Plaza II and Peachtree Corporate Center. 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.  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.

Amortization  of  capitalized  leasing costs for the three months and six months
ended June 30,  1998 as  compared to the same  periods in 1997  remained  fairly
constant.

Interest  expense has  decreased  for the three months and six months ended June
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 and was 7.39%  April to June 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 six months  ended June 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
six months  ended June 30, 1998 as  compared to the same  periods in 1997 is the
result of assets being placed in service  since June 30, 1997.  Assets placed in
service are primarily tenant  improvements at all the  Partnership's  properties
and exterior  building and land  improvements  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  since June 30, 1997.  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
retired 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 June 30, 1998
was $6,764,652.  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  will be  amortized  over 17 years,  with  monthly
payments of principal and interest totaling  approximately $56,650. The proceeds
of the mortgage were used to pay off the  $2,214,251  and  $4,500,000  mortgages
payable  outstanding  at  March  31,  1998  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

                                     - 12 -

<PAGE>



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

$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 $801,688 (1998) and $586,103
(1997) for the six months ended June 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 or securities
issued by the U. S. Government 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 funding of a reserve for the purpose of the  repurchase of 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,  proceeds received from a new mortgage obtained April 1, 1998
and  the  decrease  in  loan  costs  associated  with  the  debt  activity.  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 June 30) were  $266,352 and $633,668 at June
30, 1998 and 1997, respectively.

In the next 12 months,  the General Partner expects a demand on future liquidity
as a result of 142,183 square feet in leases  expiring from July 1, 1998 to June
30, 1999 (Plainview Plaza II - 2,121 square feet, Plainview Triad North - 73,516
square feet and Peachtree  Corporate  Center - 66,546 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 will vacate the property at the end of the lease term,  August 1998.  The
Partnership  is currently  negotiating  a 30 day renewal with the tenant for the
approximately  63,000 square feet that they currently lease.  Such renewal terms
would also  include an extended  renewal on 10,000  square feet of the  original
63,000  square feet  through  March 31,  1999.  Any costs  associated  with this
renewal  are not  expected  to be  significant.  In the  opinion of the  General
Partner of the  Partnership,  the six-month  extension for 10,000 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.

                                     - 13 -

<PAGE>



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

At Plainview  Triad North,  the  Partnership  is exploring the  possibility of a
common  area  and  exterior  building  renovation.  As of  June  30,  1998,  the
Partnership has made a commitment for  approximately  $42,000 for  architectural
services.  These  renovations  will  be  designed  to  make  the  property  more
competitive  and enhance its value.  The  estimated  cost of the  renovation  is
approximately $1,000,000 and the renovation 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.

At Plainview  Plaza II, the  Partnership  has a commitment of $86,000 to replace
the roof on one of the three  buildings  at  Plainview  Plaza II.  This  project
should be  completed  by the end of 1998.  The source of funds for this  project
will be funds which are escrowed in accordance with the loan agreement  obtained
April 1, 1998 (see discussion above).

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 was able to repurchase up to 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  was able to repurchase 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  3,  1995  (date  Interest
Repurchase   Reserve   established)  to  June  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 June 30, 1998 was $0.

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.

The Partnership has conducted a comprehensive  review of its computer systems to
identify  the  systems  that  could be  affected  by the Year 2000  Issue and is
developing an  implementation  plan to resolve the issue. The Year 2000 Issue, a
worldwide  issue,  is the result of computer  programs  being  written using two
digits rather than four to define the applicable year. Any of the  Partnership's
computer programs that have  time-sensitive  software may recognize a date using
"00" as the year 1900  rather  than the year 2000.  This  could  result in major
systems failures or  miscalculations.  The Partnership  presently believes that,
with  modifications  to existing  software and conversions to new software,  the
Year  2000  problem  will  not pose  significant  operational  problems  for the
Partnership's   computer   systems.   The  Partnership   continues  to  evaluate
appropriate  courses of  corrective  action,  including  replacement  of certain
systems whose  associated  costs would be recorded as assets and amortized.  The
Partnership does not expect the costs associated with the resolution of the Year
2000 Issue to have a material  effect on its  financial  position  or results of
operations.  The associated costs will be funded by cash flow from operations or
cash reserves.  The amount expensed in 1998 was immaterial.

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


                                     - 14 -

<PAGE>



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

Due to the fact that no  distributions  were made during the three  months ended
June 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.

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.












                                     - 15 -

<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

                Form 8-K was  filed  April 7,  1998 to report in Item 5 that the
                Partnership has elected to fund an additional  amount of $25,000
                to its Interest Repurchase Reserve.

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














































                                     - 16 -

<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:    August 12, 1998
         ---------------



                                     - 17 -

<PAGE>