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           March 31, 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 March 31, 1998 and December 31, 1997                3

            Statements of Operations
              For the three months ended March 31, 1998 and 1997        4

            Statements of Cash Flows
              For the three months ended March 31, 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

1.     Legal Proceedings                                               17
2.     Changes in Securities                                           17
3.     Defaults upon Senior Securities                                 17
4.     Submission of Matters to a Vote of Security Holders             17
5.     Other Information                                               17
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
                                       March 31, 1998    December 31, 1997*
                                       --------------    ------------------

<S>                                      <C>               <C> 
ASSETS

Cash and equivalents                     $   170,954       $   266,940
Cash and equivalents - restricted            347,787           284,599
Investment Securities                          --              101,591
Accounts receivable, net of allowance
 for doubtful accounts of $40,700 (1998)
 and $42,035 (1997)                          251,176           269,922
Land, buildings and amenities, net        10,221,980         9,789,485
Construction in progress                      47,452            39,477
Other assets                                 550,093           370,302
                                         -----------       -----------

  Total assets                           $11,589,442       $11,122,316
                                         ===========       ===========

LIABILITIES AND PARTNERS' EQUITY

Mortgages payable                        $ 6,714,251       $ 6,734,603
Accounts payable - operations                179,201            36,773
Accounts payable - construction              372,132           102,655
Security deposits                            103,971           103,816
Other liabilities                            154,761           155,179
                                         -----------       -----------

                                           7,524,316         7,133,026
Commitments and Contingencies

Partners' equity                           4,065,126         3,989,290
                                         -----------       -----------

                                         $11,589,442       $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         98,872         (23,037)         75,835
Cash distributions declared to
 date                               (11,349,844)       (206,985)    (11,556,829)
Repurchase of limited partnership
 units                                 (318,240)          --           (318,240)
                                   ------------    ------------    ------------

Balances at March 31, 1998         $  4,105,589    $    (40,463)   $  4,065,126
                                   ============    ============    ============

</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
                                                       March 31,
                                                  ------------------
 
                                             1998                    1997
                                         ------------            -----------

<S>                                       <C>                    <C>    
Revenues:
 Rental income, net of provision for
  doubtful accounts of $5,700 (1998)
  and $4,640 (1997)                       $   846,996            $   749,016
 Rental income - affiliated                    75,752                 71,883
 Interest and other income                      4,055                 11,971
                                          -----------            -----------

                                              926,803                832,870
Expenses:
 Operating expenses                           218,329                173,857
 Operating expenses - affiliated              122,713                104,135
 Amortization of capitalized leasing
  costs                                         6,370                  6,082
 Interest expense                             122,863                132,020
 Management fees                               48,442                 42,279
 Real estate taxes                             51,727                 52,798
 Professional and administrative
  expenses                                     15,006                 13,280
 Professional and administrative
  expenses - affiliated                        36,688                 34,612
 Depreciation and amortization                228,830                208,563
                                          -----------             ----------

                                              850,968                767,626
                                          -----------             ----------

Net income                                $    75,835             $   65,244
                                          ===========             ==========

Net income allocated to the
 limited partners                         $    98,872             $   88,767
                                          ===========             ==========

Net income per limited
 partnership unit                         $      7.03             $     6.30
                                          ===========             ==========

Weighted average number of limited
 partnership units                             14,070                 14,079
                                          ===========             ==========

</TABLE>

                                      - 4 -

<PAGE>
<TABLE>


                               NTS-PROPERTIES III

                            STATEMENTS OF CASH FLOWS
<CAPTION>



                                                         Three Months Ended
                                                              March 31,
                                                         ------------------

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

<S>                                                   <C>            <C>    
CASH FLOWS FROM OPERATING ACTIVITIES
Net income                                            $   75,835     $   65,244
Adjustments to reconcile net income to net cash
 provided by operating activities:
  Provision for doubtful accounts                          5,700          4,640
  Accrued interest on investment securities                  923           --
  Amortization of capitalized leasing costs                6,370          6,082
  Depreciation and amortization                          228,830        208,563
  Change in assets and liabilities:
   Cash and equivalents - restricted                     (10,410)       (14,449)
   Accounts receivable                                    13,046         (5,675)
   Other assets                                          (71,438)       (20,422)
   Accounts payable - operations                         142,428         10,666
   Security deposits                                         155         (2,599)
   Other liabilities                                        (416)        55,572
                                                     -----------     ----------

  Net cash provided by operating activities              391,023        307,622
                                                     -----------     ----------

CASH FLOWS FROM INVESTING ACTIVITIES
Additions to land, buildings, amenities and
 construction in progress                               (394,701)      (191,220)
Increase in cash and equivalents - restricted             (2,777)        (2,813)
Maturity of investment securities                        100,668           --
                                                     -----------      ---------

  Net cash used in investing activities                 (296,810)      (194,033)
                                                     -----------     ----------

CASH FLOWS FROM FINANCING ACTIVITIES
Principal payments on mortgage payable                   (20,352)       (27,771)
Additions to loan costs                                 (119,847)          --
Repurchase of limited partnership units                     --           (5,408)
(Increase) decrease in cash and equivalents -
 restricted                                              (50,000)        27,168
                                                     -----------     ----------

  Net cash used in financing activities                 (190,199)        (6,011)
                                                     -----------     ----------

  Net increase (decrease) in cash and equivalents        (95,986)       107,578

CASH AND EQUIVALENTS, beginning of period                266,940        661,383
                                                     -----------     ----------

CASH AND EQUIVALENTS, end of period                  $   170,954     $  768,961
                                                     ===========     ==========

Interest paid on a cash basis                        $    81,458     $  133,157
                                                     ===========     ==========

</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 ended March 31, 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  are  replaced,  2) funds  which have been
     escrowed  with a mortgage  company for NTS  Plainview  Plaza II's  property
     taxes  in  accordance  with the  loan  agreement,  and  3)funds  which  the
     Partnership has reserved for the repurchase of limited  partnership  Units.
     The funds escrowed for HVAC system replacements were released subsequent to
     March 31,  1998 when the  $4,500,000  was  repaid.  See Note 10  Subsequent
     Events.

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

     On January 16,  1998,  NTS-Properties  III  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 will be able to repurchase
     up to 200 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.  As of March 31, 1998, the Partnership had
     repurchased  a total of 1,530 units.  Repurchased  units are retired by the
     Partnership,  thus  increasing  the share of  ownership  of each  remaining
     investor.  The Interest  Repurchase  Reserve was funded from cash reserves.
     See  Note 10  Subsequent  Events  for  further  information  regarding  the
     Interest Repurchase Program.





                                      - 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 March  31,  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:


                                                  March 31,     December 31,
                                                    1998            1997
                                                 ----------     -----------
     Mortgage payable to an insurance company 
     bearing  interest at 9.125%,  maturing
     November 1, 1998, secured by land and
     buildings                                  $ 2,214,251     $ 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.  The
     current rate at March 31, 1998 is 6.34%      4,500,000       4,500,000
                                                 ----------      ----------
                                                $ 6,714,251     $ 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 $6,800,000.

     The $2,214,251  mortgage matures within the next twelve months. See Note 10
     Subsequent Events for a further discussion regarding this mortgage.

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

     Certain  reclassifications  have been made to the March 31, 1997  financial
     statements  to  conform  with the March  31,  1998  classifications.  These
     reclassifications have no effect on previously reported operations.

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

     Property  management fees of $48,442 and $42,279 for the three months ended
     March  31,  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
     $39,531 and $19,833 as a repair

                                      - 7 -

<PAGE>



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

     and  maintenance fee during the three months ended March 31, 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 three
     months ended March 31, 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,  land,  buildings  and  amenities,  or  construction  in
     progress. These charges were as follows:



                                                1998                1997
                                             ---------           ---------
     Leasing                                 $  53,957           $  64,603
     Administrative                             44,140              43,081
     Property manager                           59,398              38,160
     Other                                      15,077               9,360
                                              --------            --------

                                             $ 172,572           $ 155,204
                                              ========            ========

     During the three  months  ended March 31,  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  $76,000 in rental
     payments from NTS  Development  Company during the three months ended March
     31,  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.  The
     Partnership  received  approximately  $72,000 in rental  payments  from NTS
     Development Company during the three months ended March 31, 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 120 day renewal
     with the tenant at their request.  Any costs  associated  with this renewal
     would not be  significant.  In the  opinion of the  General  Partner of the
     Partnership,  the 120 day extension 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 will likely be needed for
     leasing  expenses;  especially  those  needed  to  refinish  space  for new
     tenants. At this time, the amount of such expenses are unknown.

     At Plainview Plaza II, the Partnership  expects to complete the landscaping
     and exterior building renovations,  and the addition of a handicap restroom
     facility  during  1998.  The  remaining  commitment  for  this  project  is
     approximately $80,000.

     At Plainview Triad North, the Partnership is exploring the possibility of a
     common area and exterior  building  renovation.  As of March 31, 1998,  the
     Partnership   had  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.  Estimated  cost for the
     renovation is approximately $500,000 and the renovation is expected

                                      - 8 -

<PAGE>



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

      to begin during the summer of 1998. It is  anticipated  that the cash flow
      from  operations and cash reserves will be sufficient to meet the needs of
      the Partnership in regard to the renovations.

      For additional commitments see Note 10 Subsequent Events.


10.   Subsequent Events
      -----------------

      Subsequent  to  March  31,  1998,  the  Partnership  elected  to  fund  an
      additional amount of $25,000 to its Interest Repurchase Reserve. With this
      funding,  the Partnership  will be able to repurchase up to 100 additional
      Units at a price of $250 per Unit.  If the number of Units  submitted  for
      repurchase  exceeds that which can be repurchased by the Partnership  with
      the  current  funding,  those  additional  Units  may  be  repurchased  in
      subsequent quarters.

      Subsequent to March 31, 1998, the  Partnership  obtained from an insurance
      company  permanent  financing  in the amount of  $6,800,000.  The mortgage
      payable bears  interest at a fixed rate of 6.89% and is secured by a first
      mortgage on Plainview  Plaza II. The  repayment of the  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. As a result of the repayment
      of the  $4,500,000  mortgage  payable,  the funds escrowed for HVAC system
      replacements, as discussed in Note 1, were released.




















                                      - 9 -

<PAGE>



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

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

The  occupancy  levels at the  Partnership's  properties  as of March 31 were as
follows:


                                        1998         1997
                                       -----         ----
     Plainview Plaza II                 100%          86%

     Plainview Triad North               88%          91%

     Peachtree Corporate Center          88%          83%

The rental and other income  generated by the  Partnership's  properties for the
three months ended March 31 were as follows:


                                        1998        1997
                                     ---------    ---------
     Plainview Plaza II              $ 343,364    $ 292,614

     Plainview Triad North           $ 295,735    $ 264,915

     Peachtree Corporate Center      $ 283,950    $ 266,581

The 14% increase in occupancy from March 31, 1997 to March 31, 1998 at Plainview
Plaza II can be  attributed  to five new leases  totaling  approximately  22,000
square feet. Of this total,  approximately  17,000 square feet  represents a new
five-year lease and approximately 4,000 square feet represents an expansion by a
current  tenant.  The new leases are  partially  offset by the move-out of three
tenants, approximately 4,000 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  regrading the tenant relocation.  Average occupancy  increased from
87% for the three  months  ended  March 31,  1997 to 92% for the same  period in
1998.  The  increase in rental and other  income at  Plainview  Plaza II for the
three  months ended March 31, 1998 as compared to the same period in 1997 can be
attributed to the increase in average occupancy during the period.

Plainview Triad North's occupancy  decreased 3% from March 31, 1997 to March 31,
1998 as a  result  of an  early  move-out  by one  tenant  (occupied  a total of
approximately  5,000  square  feet).  The  tenant is  continuing  to pay rent in
accordance with the lease terms. Partially offsetting the tenant move-out is one
new lease  totaling  approximately  1,900  square  feet with 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 94% in 1997 to 87% in 1998. Rental and other income increased for the three
months  ended  March 31,  1998 as compared to the same period 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.

Peachtree Corporate Center's occupancy increased 5% from March 31, 1997 to March
31, 1998, due to nine new leases totaling  approximately  22,000 square feet, of
which  approximately  8,600 square feet  represents  expansions by three current
tenants.  Partially offsetting the new leases were the move- outs of six tenants
who had occupied  approximately  15,000 square feet.  Approximately 5,200 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

                                     - 10 -

<PAGE>



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

9,800  square  feet of total  move-outs  were the  result of three  tenants  who
vacated at the end of the lease terms.  Average occupancy at Peachtree Corporate
Center  increased  from 84% in 1997 to 87% in 1998.  Rental and other  income at
Peachtree  Corporate  Center increased for the three months ended March 31, 1998
as  compared  to the  same  period  in 1997 as a  result  of a  decrease  in the
provision for doubtful accounts.

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 March 31, 1998 or
1997. As of March 31, 1998, there were no on-going cases.

Current  and  projected  future  occupancy  levels are  considered  adequate  to
continued 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 and from funds escrowed
for the replacement of the heating,  ventilating and air  conditioning  ("HVAC")
system and  asphalt  paving at  Peachtree  Corporate  Center.  The  decrease  in
interest  and other income for the three months ended March 31, 1998 as compared
to the same period in 1997 is due  primarily  to the  decrease in cash  reserves
available for investment.

Operating  expenses  increased  for the three  months  ended  March 31,  1998 as
compared to the same  period in 1997 as a result of  increased  landscaping  and
advertising  costs at Plainview  Plaza II and Plainview Triad North, an increase
in repair and maintenance costs and restroom supplies at Plainview Plaza II, and
an increase roof repairs at Peachtree Corporate Center. Partially offsetting the
increase in  operating  expenses  during the three month period is a decrease in
utility costs at Plainview Triad North.

The increase in operating  expenses-affiliated  for the three months ended March
31,  1998 as  compared  to the same period in 1997 is a result of an increase in
property  management  costs at Plainview Triad North and Plainview Plaza II. The
increase in operating expenses - affiliated is partially offset by a decrease in
leasing costs at Peachtree Corporate Center and Plainview Triad North. Operating
expenses-affiliated are expenses incurred for services performed by employees of
NTS Development Company, an affiliate of the General Partner.

Amortization  of capitalized  leasing costs for the three months ended March 31,
1998 as compared to the same period in 1997 remained fairly constant.

Interest  expense has  decreased  for the three  months  ended March 31, 1998 as
compared to the same period in 1997 due to a decrease  in the  interest  rate on
the Partnership's  $4,500,000  mortgage payable - 6.34% (1998) compared to 6.94%
(1997). The interest rate on this note adjusts quarterly to 60 basis points over
the 10-year  treasury bill rate. The decrease in interest expense is also due to
a decrease in interest expense on the $2,214,251 mortgage payable as a result of
continued principle payments. See the Liquidity and Capital Resources section of
this item for details regarding the Partnership's debt.




                                     - 11 -

<PAGE>



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

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 for the three  months ended March 31, 1998 as compared to the
same period in 1997 remained fairly constant.

Professional and  administrative  expenses and  professional and  administrative
expenses - affiliated  remained fairly constant for the three months ended March
31, 1998 as compared to the same period 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
ended  March 31,  1998 as  compared  to the same period in 1997 is the result of
fixed assets being placed in service since March 31, 1997 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 March 31, 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.

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

The  Partnership  had cash flow from  operations of $391,023 (1998) and $307,622
(1997)  for the three  months  ended  March  31.  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  March  31)  were   $170,954  and  $768,961  at  March  31,  1998  and  1997,
respectively.

As of March 31,  1998 the  Partnership  had a mortgage  payable to an  insurance
company in the amount of $4,500,000. The mortgage bears a variable interest rate
which adjusts  quarterly to 60 basis points over the 10-year treasury bill rate.
The  current  rate at March 31,  1998 was 6.34%.  The loan is secured by a first
mortgage on Plainview Triad North and Peachtree  Corporate  Center with a second
position behind the holder of the permanent  mortgage on Plainview Plaza II. The
unpaid balance of the loan is due June 1, 2001.

As of March  31,  1998,  the  Partnership  also  had a  mortgage  payable  to an
insurance  company  in the  amount of  $2,214,251.  The  mortgage  bears a fixed
interest  rate of 9.125% and is due November 1, 1998.  This loan is secured by a
first mortgage on Plainview Plaza II. The outstanding  balance at maturity based
on the current rate of amortization will be $2,140,539.

Subsequent to March 31, 1998, the Partnership  obtained permanent financing from
an insurance  company in the amount of  $6,800,000.  The mortgage  payable 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 to and to pay loan  closing
costs.



                                     - 12 -

<PAGE>



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

The  primary  source of future  liquidity  and  distributions  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.

The  majority  of  the  Partnership's   cash  flow  is  derived  from  operating
activities.  Cash  flows used in  investing  activities  are 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 HVAC system and asphalt paving at
Peachtree  Corporate  Center.  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  excess  cash.  The  Partnership  has held the  securities  until
maturity.  Cash flows provided by investing  activities are from the maturity of
these investment  securities.  Cash flows used in financing  activities  include
principal  payments  on the $2.2  million  mortgage  payable,  the  funding of a
reserve for the purpose of the repurchase of limited  partnership Units,  actual
repurchase  of such Units,  and the  addition of loan costs in 1998.  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.  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.

In the next 12 months,  the General Partner expects a demand on future liquidity
as a result of  121,226  square  feet in leases  expiring  from April 1, 1998 to
March 31, 1999 (Plainview Plaza II - 2,121 square feet,  Plainview Triad North -
70,900 square feet and  Peachtree  Corporate  Center - 50,605 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.  It is  anticipated  that the cash flow from
operations  and  cash  reserves  will be  sufficient  to meet  the  needs of the
Partnership.

At Plainview  Triad North,  the  Partnership  is exploring the  possibility of a
common  area and  exterior  building  renovation.  As of  March  31,  1998,  the
Partnership had 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.  Estimated  costs for the  renovation  is
approximately $500,000 and the renovation is expected to begin during the summer
of 1998.

At Plainview Plaza II, the  Partnership's  renovation of the property is nearing
completion.  Remaining  items to be completed  during 1998 include  landscaping,
exterior staircase renovation,  sidewalk replacements,  a handicap restroom, and
new  signage.   Currently,   the  remaining   project  costs  are  estimated  at
approximately  $80,000.  All of these  projects  are  part of the  Partnership's
continued  effort to make the Plainview  Plaza II property more  competitive and
enhance its value.

The source of funds for the commitments listed above is expected to be cash flow
from operations and/or cash reserves.


                                     - 13 -

<PAGE>



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

On  January  16,  1998,  NTS-Properties  III  elected  to  resume  the  Interest
Repurchase Program and to fund an additional $50,000 to its Interest  Repurchase
Reserve  which  was  established  in  1995  pursuant  to  Section  16.4  of  the
partnership's  Amended and Restated Agreement of Limited Partnership.  With this
funding,  the Partnership  will be able to repurchase up to 200 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 Unit.  As of March 31, 1998,
the Partnership had  repurchased a total of 1,530 Units.  Repurchased  Units are
retired by the  Partnership,  thus  increasing  the share of  ownership  of each
remaining  investor.  The  Interest  Repurchase  Reserve  was  funded  from cash
reserves.  See below for further  information  regarding the Interest Repurchase
Program.

The lease for Aetna Life  Insurance  Company,  the largest  tenant of  Plainview
Triad North,  occupying  approximately 65% of the building,  was extended during
the second quarter of 1997 from August 1997 to August 1998. There were no tenant
finish  improvements as a result of this renewal.  Aetna accounts for nearly 22%
of the NTS-Properties  III total revenue.  During the third quarter of 1997, the
Partnership  received  notice that Aetna will vacate the  property at the end of
the extended  lease term.  The  Partnership  is currently  negotiating a 120 day
renewal with the tenant at their request. Any costs associated with this renewal
would  not  be  significant.  In  the  opinion  of the  General  Partner  of the
Partnership,  the 120 day extension  will be all that can be  anticipated.  As a
result of the expected  move-out,  there will likely be a protracted  period for
the property to become fully leased again and  substantial  funds will likely be
needed for leasing  expenses  especially  those needed to refinish space for new
tenants. As this time, the amount of such expenses are unknown.  The Partnership
is actively seeking new tenants for this space.

Accordingly,   to  conserve  funds  in   anticipation  of  the  loss  of  Aetna,
distributions were suspended starting December 31, 1996.

Subsequent  to March 31, 1998,  the  Partnership  elected to fund an  additional
amount of $25,000 to its Interest  Repurchase  Reserve.  With this funding,  the
Partnership  will be able to repurchase up to 100 additional Units at a price of
$250 per Unit.  If the number of Units  submitted  for  repurchase  exceeds that
which can be  repurchased by the  Partnership  with the current  funding,  those
additional  Units  may be  repurchased  in  subsequent  quarters  as  cash  flow
availability permits.

The source of funds for the commitments listed above is expected to be cash flow
from operations and/or cash reserves.  It is anticipated that the cash flow from
operations  and  cash  reserves  will be  sufficient  to meet  the  needs of the
Partnership.

During  1998,  the  Partnership  plans to  replace  the roof on one of the three
buildings at Plainview Plaza II. This project is expected to be completed by the
end of 1998. The estimated cost for the project is $100,000. The source of funds
for this project will be funds which were escrowed in  accordance  with the loan
agreement obtained subsequent to March 31, 1998, 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
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

                                     - 14 -

<PAGE>



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

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 March 31, 1998.

Due to the fact that no  distributions  were made during the three  months ended
March  31,  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 Plaza II and
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 both commercial properties.  All advertising for the
Louisville properties 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.





                                     - 15 -

<PAGE>



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

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.

A portion of the  Partnership's  debt  service  is based on a variable  interest
rate.  Any  fluctuations  in the  interest  rate are beyond  the  control of the
Partnership.  These  variances  could,  for  example,  impact the  Partnership's
projected cash and cash requirements as well as its ability to pay distributions
to the limited partners.
















































                                     - 16 -

<PAGE>



PART II.  OTHER INFORMATION

     1.  Legal Proceedings
         -----------------

         None

     2.  Changes in Securities
         ---------------------

         None

     3.  Defaults upon Senior Securities
         -------------------------------

         None

     4.  Submission of Matters to a Vote of Security Holders
         ---------------------------------------------------

         None

     5.  Other Information
         -----------------

         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  January  21,  1998  to  report  that  the
                Partnership  has  elected to resume the  Repurchase  Program and
                fund an additional $50,000 to its Interest Repurchase Reserve.
































                                     - 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/ John W. Hampton
                                                     -------------------
                                                     John W. Hampton
                                                     Senior Vice President


Date:     May 14, 1998
          ------------



                                     - 18 -

<PAGE>