U.S. SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549



FORM 10-Q



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



For the quarterly period ended June
30, 2012



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



For the transition period from



Commission File No.000-52849



AFH HOLDING III, INC.

(Name of Small Business Issuer in its
charter)



|Delaware                                                    |  | 26-1365024                             
|----------------------------------------------------------- |  | ---------------------------------------
|(State or other jurisdiction of incorporation or
formation) |  | (I.R.S. employer identification number)



9595 Wilshire Blvd.

Suite 700

Beverly Hills, CA 90212

(Address of principal executive
offices)

|Issuer’s telephone number: | (310) 492-9898
|-------------------------- | --------------
|Issuer’s facsimile number: | (310) 492-9926



N/A

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



Indicate by check mark whether the registrant: (1) has filed
all reports required to be filed by Section 13 or 15(d) of the Securities Exchange act of 1934 during the preceding 12 months (or
such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements
for the past 90 days.

[X] Yes [  ] No



Indicate by check mark whether the registrant has submitted
electronically and posted on its corporate Web site, if any, every Interactive Data File required to be submitted and posted pursuant
to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the
registrant was required to submit and post such files).

[  ] Yes [X] No



Indicate by check mark whether the registrant is a large
accelerated filer, an accelerated filer, a non-accelerated filer, or a smaller reporting company. See the definitions of “large
accelerated filer,” “accelerated filer,” “non-accelerated filer” and “smaller reporting company”
in Rule 12b-2 of the Exchange Act. (Check one):



|Large accelerated filer | [  ] | Accelerated filer         | [  ]
|----------------------- | ---- | ------------------------- | ----
|Non-accelerated filer   | [  ] | Smaller reporting company | [X] 



Indicate by check mark whether the registrant is a shell
company (as defined in Rule 12b-2 of the Exchange Act).

[X] Yes [  ] No



State the number of shares outstanding of each of the issuer’s
classes of common equity, as of the last practicable date: As of August 14, 2012, there were 5,355,000 shares of common stock,
par value $0.001 per share, of the Registrant issued and outstanding.


















TABLE OF CONTENTS



|                               |                                                                                       | Page
|------------------------------ | ------------------------------------------------------------------------------------- | ----
|PART I - FINANCIAL INFORMATION |                                                                                      
|                               |                                                                                       |     
|Item 1.                        | Financial Statements                                                                  | 3   
|                               |                                                                                       |     
|Item 2.                        | Management’s Discussion and Analysis of Financial Condition and Results of Operations | 5   
|                               |                                                                                       |     
|Item 3.                        | Quantitative and Qualitative Disclosures About Market Risk                            | 9   
|                               |                                                                                       |     
|Item 4.                        | Controls and Procedures                                                               | 9   
|                               |                                                                                      
|PART II - OTHER INFORMATION    |                                                                                      
|                               |                                                                                       |     
|Item 1.                        | Legal Proceedings                                                                     | 10  
|                               |                                                                                       |     
|Item 1A.                       | Risk Factors                                                                          | 10  
|                               |                                                                                       |     
|Item 2.                        | Unregistered Sale of Equity Securities and Use of Proceeds                            | 10  
|                               |                                                                                       |     
|Item 3.                        | Defaults Upon Senior Securities                                                       | 11  
|                               |                                                                                       |     
|Item 4.                        | Mine Safety Disclosures                                                               | 11  
|                               |                                                                                       |     
|Item 5.                        | Other Information                                                                     | 11  
|                               |                                                                                       |     
|Item 6.                        | Exhibits                                                                              | 11  
|                               |                                                                                      
|SIGNATURES                     | 12                                                                                   



2


Table of Contents




PART I – FINANCIAL INFORMATION

Item 1. Financial Statements.







AFH HOLDING III, INC.

(A DEVELOPMENT STAGE COMPANY)

(A DELAWARE CORPORATION)

Beverly Hills, CA



|FINANCIAL REPORTS
|-----------------
|AT               
|JUNE 30, 2012    



3


Table of Contents




|AFH HOLDING III, INC.        
|-----------------------------
|(A Development Stage Company)
|(A DELAWARE Corporation)     
|Beverly Hills, CA            
|                             
|TABLE OF CONTENTS            



|Balance Sheets at June 30, 2012 (Unaudited) and December 31, 2011                                                                                                               | 1  
|------------------------------------------------------------------------------------------------------------------------------------------------------------------------------- | ---
|                                                                                                                                                                                |    
|Statement of Changes in Stockholders’ Equity for the Period from Date of Inception (April 16, 2007) through June 30, 2012 (Unaudited)                                           | 2  
|                                                                                                                                                                                |    
|Statements of Operations for the Three and Six Months Ended June 30, 2012 and 2011 and for the Period from Date of Inception (April 16, 2007) through June 30, 2012 (Unaudited) | 3  
|                                                                                                                                                                                |    
|Statements of Cash Flows for the Six Months Ended June 30, 2012 and 2011 and for the Period from Date of Inception (April 16, 2007) through June 30, 2012 (Unaudited)           | 4  
|                                                                                                                                                                                |    
|Notes to Financial Statements                                                                                                                                                   | 5-8



4


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|AFH HOLDING III, INC.         |  |  | 
|----------------------------- |  |  | 
|(A DEVELOPMENT STAGE COMPANY) |  |  | 
|(A DELAWARE CORPORATION)      |  |  | 
|Beverly Hills, CA             |  |  | 
|                              |  |  | 
|BALANCE SHEETS               



|                                                                                          |  | (Unaudited) |         |   |              |  
|----------------------------------------------------------------------------------------- |  | ----------- | ------- | - | ------------ | -
|                                                                                          |  | June 30,    |         |   | December 31, |  
|                                                                                          |  | 2012        |         |   | 2011         |  
|                                                                                          |  |             |         |   |              |  
|ASSETS                                                                                    |  |             |         |   |              |  
|Due from Parent                                                                           |  | $           | 710,000 |   |              | $
|                                                                                          |  |             |         |   |              |  
|LIABILITIES AND STOCKHOLDERS' EQUITY                                                      |  |             |         |   |              |  
|                                                                                          |  |             |         |   |              |  
|Liabilities                                                                               |  |             |         |   |              |  
|Accrued Expenses                                                                          |  | $           | 6,846   |   |              | $
|Due to Parent                                                                             |  |             | 31,804  |   |              |  
|                                                                                          |  |             |         |   |              |  
|Total Liabilities                                                                         |  |             | 38,650  |   |              |  
|                                                                                          |  |             |         |   |              |  
|Stockholders' Equity                                                                      |  |             |         |   |              |  
|Preferred Stock:  $.001 Par; 20,000,000 Shares Authorized, -0- Issued and Outstanding     |  |             | —       |   |              |  
|Common Stock:  $.001 Par; 100,000,000 Shares Authorized; 5,355,000 Issued and Outstanding |  |             | 5,355   |   |              |  
|Additional Paid-In-Capital                                                                |  |             | 711,666 |   |              |  
|Deficit Accumulated During Development Stage                                              |  |             | (45,671 | ) |              |  
|                                                                                          |  |             |         |   |              |  
|Total Stockholders' Equity                                                                |  |             | 671,350 |   |              |  
|                                                                                          |  |             |         |   |              |  
|Total Liabilities and Stockholders' Equity                                                |  | $           | 710,000 |   |              | $



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



F-1


Table of Contents




|AFH HOLDING III, INC.                                                |  |  |  |  |  |  |  |  | 
|-------------------------------------------------------------------- |  |  |  |  |  |  |  |  | 
|(A DEVELOPMENT STAGE COMPANY)                                        |  |  |  |  |  |  |  |  | 
|(A DELAWARE CORPORATION)                                             |  |  |  |  |  |  |  |  | 
|Beverly Hills, CA                                                    |  |  |  |  |  |  |  |  | 
|                                                                     |  |  |  |  |  |  |  |  | 
|STATEMENTS OF CHANGES IN STOCKHOLDERS' EQUITY FOR THE PERIOD FROM   
|DATE OF INCEPTION (APRIL 16, 2007) THROUGH JUNE 30, 2012 - UNAUDITED



|                                        |  |              |           |  |            |   |       |         |  |   | Deficit     |  |  |               |        
|--------------------------------------- |  | ------------ | --------- |  | ---------- | - | ----- | ------- |  | - | ----------- |  |  | ------------- | -------
|                                        |  |              |           |  |            |   |       |         |  |   | Accumulated |  |  |               |        
|                                        |  | Common Stock |           |  | Additional |   |       | During  |  |   | Total       | 
|                                        |  | Number       |           |  |            |   |       | Paid-In |  |   | Development |  |  | Stockholders' |        
|                                        |  | of Shares    |           |  | Value      |   |       | Capital |  |   | Stage       |  |  | Equity        |        
|                                        |  |              |           |  |            |   |       |         |  |   |             |  |  |               |        
|Balance - April 16, 2007                |  |              | —         |  |            | $ | —     |         |  | $ | —           |  |  | $             | —      
|                                        |  |              |           |  |            |   |       |         |  |   |             |  |  |               |        
|Common Stock Issued in Lieu of Services |  |              | 5,000,000 |  |            |   | 5,000 |         |  |   | —           |  |  |               | —      
|                                        |  |              |           |  |            |   |       |         |  |   |             |  |  |               |        
|Contributed Capital for Services        |  |              | —         |  |            |   | —     |         |  |   | 2,021       |  |  |               | —      
|                                        |  |              |           |  |            |   |       |         |  |   |             |  |  |               |        
|Net Loss                                |  |              | —         |  |            |   | —     |         |  |   | —           |  |  |               | (7,021 
|                                        |  |              |           |  |            |   |       |         |  |   |             |  |  |               |        
|Balance - December 31, 2007             |  |              | 5,000,000 |  |            |   | 5,000 |         |  |   | 2,021       |  |  |               | (7,021 
|                                        |  |              |           |  |            |   |       |         |  |   |             |  |  |               |        
|Common Stock Issued for Cash            |  |              | 355,000   |  |            |   | 355   |         |  |   | 709,645     |  |  |               | —      
|                                        |  |              |           |  |            |   |       |         |  |   |             |  |  |               |        
|Net Loss                                |  |              | —         |  |            |   | —     |         |  |   | —           |  |  |               | (3,550 
|                                        |  |              |           |  |            |   |       |         |  |   |             |  |  |               |        
|Balance - December 31, 2008             |  |              | 5,355,000 |  |            |   | 5,355 |         |  |   | 711,666     |  |  |               | (10,571
|                                        |  |              |           |  |            |   |       |         |  |   |             |  |  |               |        
|Net Loss                                |  |              | —         |  |            |   | —     |         |  |   | —           |  |  |               | (9,153 
|                                        |  |              |           |  |            |   |       |         |  |   |             |  |  |               |        
|Balance - December 31, 2009             |  |              | 5,355,000 |  |            |   | 5,355 |         |  |   | 711,666     |  |  |               | (19,724
|                                        |  |              |           |  |            |   |       |         |  |   |             |  |  |               |        
|Net Loss                                |  |              | —         |  |            |   | —     |         |  |   | —           |  |  |               | (9,467 
|                                        |  |              |           |  |            |   |       |         |  |   |             |  |  |               |        
|Balance - December 31, 2010             |  |              | 5,355,000 |  |            |   | 5,355 |         |  |   | 711,666     |  |  |               | (29,191
|                                        |  |              |           |  |            |   |       |         |  |   |             |  |  |               |        
|Net Loss                                |  |              | —         |  |            |   | —     |         |  |   | —           |  |  |               | (9,634 
|                                        |  |              |           |  |            |   |       |         |  |   |             |  |  |               |        
|Balance - December 31, 2011             |  |              | 5,355,000 |  |            |   | 5,355 |         |  |   | 711,666     |  |  |               | (38,825
|                                        |  |              |           |  |            |   |       |         |  |   |             |  |  |               |        
|Net Loss                                |  |              | —         |  |            |   | —     |         |  |   | —           |  |  |               | (6,846 
|                                        |  |              |           |  |            |   |       |         |  |   |             |  |  |               |        
|Balance - June 30, 2012                 |  |              | 5,355,000 |  |            | $ | 5,355 |         |  | $ | 711,666     |  |  | $             | (45,671



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



F-2


Table of Contents




|AFH HOLDING III, INC.                |  |  |  |  |  |  |  |  |  | 
|------------------------------------ |  |  |  |  |  |  |  |  |  | 
|(A DEVELOPMENT STAGE COMPANY)        |  |  |  |  |  |  |  |  |  | 
|(A DELAWARE CORPORATION)             |  |  |  |  |  |  |  |  |  | 
|Beverly Hills, CA                    |  |  |  |  |  |  |  |  |  | 
|                                     |  |  |  |  |  |  |  |  |  | 
|STATEMENTS OF OPERATIONS - UNAUDITED



|                                           |  |                          |           |   |                            |   |           |                  |  |   |           |   |  | Period From       |          
|------------------------------------------ |  | ------------------------ | --------- | - | -------------------------- | - | --------- | ---------------- |  | - | --------- | - |  | ----------------- | ---------
|                                           |  |                          |           |   |                            |   |           |                  |  |   |           |   |  | Date of Inception |          
|                                           |  | For the Six Months Ended |           |   | For the Three Months Ended |   |           | (April 16, 2007) | 
|                                           |  | June 30,                 |           |   | June 30,                   |   |           | Through          | 
|                                           |  | 2012                     |           |   | 2011                       |   |           | 2012             |  |   | 2011      |   |  | June 30, 2012     |          
|                                           |  |                          |           |   |                            |   |           |                  |  |   |           |   |  |                   |          
|                                           |  |                          |           |   |                            |   |           |                  |  |   |           |   |  |                   |          
|Revenues                                   |  | $                        | —         |   |                            | $ | —         |                  |  | $ | —         |   |  | $                 | —        
|                                           |  |                          |           |   |                            |   |           |                  |  |   |           |   |  |                   |          
|Expenses                                   |  |                          |           |   |                            |   |           |                  |  |   |           |   |  |                   |          
|General and Administrative                 |  |                          | 4,346     |   |                            |   | 2,396     |                  |  |   | 1,828     |   |  |                   | 763      
|Interest                                   |  |                          | —         |   |                            |   | —         |                  |  |   | —         |   |  |                   | —        
|                                           |  |                          |           |   |                            |   |           |                  |  |   |           |   |  |                   |          
|Total Expenses                             |  | $                        | 4,346     |   |                            | $ | 2,396     |                  |  | $ | 1,828     |   |  | $                 | 763      
|                                           |  |                          |           |   |                            |   |           |                  |  |   |           |   |  |                   |          
|Net Loss for the Period Before Taxes       |  |                          | (4,346    | ) |                            |   | (2,396    | )                |  |   | (1,828    | ) |  |                   | (763     
|                                           |  |                          |           |   |                            |   |           |                  |  |   |           |   |  |                   |          
|Franchise Tax                              |  |                          | 2,500     |   |                            |   | 3,713     |                  |  |   | —         |   |  |                   | —        
|                                           |  |                          |           |   |                            |   |           |                  |  |   |           |   |  |                   |          
|Net Loss for the Period After Taxes        |  |                          | (6,846    | ) |                            |   | (6,109    | )                |  |   | (1,828    | ) |  |                   | (763     
|                                           |  |                          |           |   |                            |   |           |                  |  |   |           |   |  |                   |          
|Loss per Share - Basic and Diluted         |  | $                        | (0.00     | ) |                            | $ | (0.00     | )                |  | $ | (0.00     | ) |  | $                 | (0.00    
|                                           |  |                          |           |   |                            |   |           |                  |  |   |           |   |  |                   |          
|Weighted Average Common Shares Outstanding |  |                          | 5,355,000 |   |                            |   | 5,355,000 |                  |  |   | 5,355,000 |   |  |                   | 5,355,000





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



F-3


Table of Contents




|AFH HOLDING III, INC.                |  |  |  |  |  | 
|------------------------------------ |  |  |  |  |  | 
|(A DEVELOPMENT STAGE COMPANY)        |  |  |  |  |  | 
|(A DELAWARE CORPORATION)             |  |  |  |  |  | 
|Beverly Hills, CA                    |  |  |  |  |  | 
|                                     |  |  |  |  |  | 
|STATEMENTS OF CASH FLOWS - UNAUDITED



|                                                |  |                          |        |   |                  |   |        | Period From       | 
|----------------------------------------------- |  | ------------------------ | ------ | - | ---------------- | - | ------ | ----------------- | 
|                                                |  |                          |        |   |                  |   |        | Date of Inception | 
|                                                |  | For the Six Months Ended |        |   | (April 16, 2007) |  
|                                                |  | June 30,                 |        |   | Through          |  
|                                                |  | 2012                     |        |   | 2011             |   |        | June 30, 2012     | 
|                                                |  |                          |        |   |                  |   |        |                   | 
|Cash Flows from Operating Activities            |  |                          |        |   |                  |   |        |                   | 
|                                                |  |                          |        |   |                  |   |        |                   | 
|Net Loss                                        |  | $                        | (6,846 | ) |                  | $ | (6,109 | )                 | 
|                                                |  |                          |        |   |                  |   |        |                   | 
|Non Cash Adjustments:                           |  |                          |        |   |                  |   |        |                   | 
|Common Stock Issued in Lieu of Services         |  |                          | —      |   |                  |   | —      |                   | 
|Contributed Capital for Services                |  |                          | —      |   |                  |   | —      |                   | 
|                                                |  |                          |        |   |                  |   |        |                   | 
|Changes in Assets and Liabilities:              |  |                          |        |   |                  |   |        |                   | 
|Accrued Expenses                                |  |                          | (2,788 | ) |                  |   | 4,565  |                   | 
|                                                |  |                          |        |   |                  |   |        |                   | 
|Net Cash Flows from Operating Activities        |  |                          | (9,634 | ) |                  |   | (1,544 | )                 | 
|                                                |  |                          |        |   |                  |   |        |                   | 
|Net Cash Flows from Investing Activities        |  |                          | —      |   |                  |   | —      |                   | 
|                                                |  |                          |        |   |                  |   |        |                   | 
|Cash Flows from Financing Activities            |  |                          |        |   |                  |   |        |                   | 
|Cash Advance by Parent                          |  |                          | 9,634  |   |                  |   | 1,544  |                   | 
|                                                |  |                          |        |   |                  |   |        |                   | 
|Net Change in Cash and Cash Equivalents         |  |                          | —      |   |                  |   | —      |                   | 
|                                                |  |                          |        |   |                  |   |        |                   | 
|Cash and Cash Equivalents - Beginning of Period |  |                          | —      |   |                  |   | —      |                   | 
|                                                |  |                          |        |   |                  |   |        |                   | 
|Cash and Cash Equivalents - End of Period       |  | $                        | —      |   |                  | $ | —      |                   | 
|                                                |  |                          |        |   |                  |   |        |                   | 
|SUPPLEMENTAL NON-CASH DISCLOSURES               |  |                          |        |   |                  |   |        |                   | 
|Common Stock Proceeds Held by Parent            |  | $                        | —      |   |                  | $ | —      |                   | 
|                                                |  |                          |        |   |                  |   |        |                   | 
|Cash Paid During the Period for:                |  |                          |        |   |                  |   |        |                   | 
|Interest                                        |  | $                        | —      |   |                  | $ | —      |                   | 
|Income Taxes                                    |  | $                        | —      |   |                  | $ | —      |                   | 



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



F-4


Table of Contents




|AFH HOLDING III, INC.        
|-----------------------------
|(A DEVELOPMENT STAGE COMPANY)
|(A DELAWARE Corporation)     
|Beverly Hills, CA            
|                             
|NOTES TO FINANCIAL STATEMENTS



|Note A - | The Company                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                            
|-------- | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|         | AFH Holding III, Inc., a development stage company (the “Company”), was incorporated under the laws of the State of Delaware on April 16, 2007.  The Company is 93.4% owned by AFH Holding & Advisory, LLC (the “Parent”).  The financial statements presented represent only those transactions of AFH Holding III, Inc.  The Company is looking to acquire an existing company or acquire the technology to begin operations.                                                                                                                                                        
|         |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                        
|         | As a blank check company, the Company’s business is to pursue a business combination through acquisition, or merger with, an existing company. As of the date of the financial statements, the Company is not conducting negotiations with any target business. No assurances can be given that the Company will be successful in locating or negotiating with any target company.                                                                                                                                                                                                     
|         |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                        
|         | Since inception, the Company has been engaged in organizational efforts.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                               
|         |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                        
|         | The accompanying unaudited interim financial statements reflect all adjustments of a normal and recurring nature which are, in the opinion of management, necessary to present fairly the financial position, results of operations and cash flows of the Company for the interim periods presented.  The results of operations for these periods are not necessarily comparable to, or indicative of, results of any other interim period or for the fiscal year taken as a whole. Certain information that is not required for interim financial reporting purposes has been omitted.
|         |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                        
|         |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                        
|Note B - | Summary of Significant Accounting Policies                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                             
|         | Method of Accounting                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                   
|         | The Company maintains its books and prepares its financial statements on the accrual basis of accounting.                                                                                                                                                                                                                                                                                                                                                                                                                                                                              
|         |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                        
|         | Development Stage                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                      
|         | The Company has operated as a development stage enterprise since its inception by devoting substantially all of its efforts to financial planning, raising capital, research and development, and developing markets for its services.  The Company prepares its financial statements in accordance with the requirements of FASB ASC 915.                                                                                                                                                                                                                                             
|         |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                        
|         | Cash and Cash Equivalents                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                              
|         | Cash and cash equivalents include time deposits, certificates of deposit, and all highly liquid debt instruments with original maturities of three months or less. The Company maintains cash and cash equivalents at financial institutions, which periodically may exceed federally insured amounts.                                                                                                                                                                                                                                                                                 



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|AFH HOLDING III, INC.        
|-----------------------------
|(A DEVELOPMENT STAGE COMPANY)
|(A DELAWARE Corporation)     
|Beverly Hills, CA            
|                             
|NOTES TO FINANCIAL STATEMENTS



| | Loss Per Common Share                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                 
| | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| | Loss per common share is computed in accordance with FASB ASC 260-10 by dividing income (loss) available to common stockholders by weighted average number of common shares outstanding for each period. The calculation of diluted net loss per share gives effect to common stock equivalents, however, potential common shares are excluded if their effect is anti-dilutive.                                                                                                                                                                                                                                                                                                                                                                                                                      
| |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                       
| | Use of Estimates                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                      
| | The preparation of financial statements in conformity with U.S. 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 can differ from those estimates.                                                                                                                                                                                                                                                                                                                                                  
| |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                       
| | Income Taxes                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                          
| | The Company accounts for income taxes in accordance with FASB ASC 740, using the asset and liability approach, which requires recognition of deferred tax liabilities and assets for the expected future tax consequences of temporary differences between the carrying amounts and the tax basis of such assets and liabilities.  This method utilizes enacted statutory tax rates in effect for the year in which the temporary differences are expected to reverse and gives immediate effect to changes in income tax rates upon enactment.  Deferred tax assets are recognized, net of any valuation allowance, for temporary differences and net operating loss and tax credit carry forwards.  Deferred income tax expense represents the change in net deferred assets and liability balances.
| |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                       
| | Financial Instruments                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                 
| | The Company’s financial instruments consist of cash and due to parent. Unless otherwise noted, it is management’s opinion that the Company is not exposed to significant interest, currency or credit risks arising from these financial instruments.  The fair value of these financial instruments approximates their carrying value, unless otherwise noted.                                                                                                                                                                                                                                                                                                                                                                                                                                       
| |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                       
| | Recent Pronouncements                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                 
| | The Company does not expect the adoption of recently issued accounting pronouncements to have a significant impact on the Company’s results of operations, financial position, or cash flow.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                          



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|AFH HOLDING III, INC.        
|-----------------------------
|(A DEVELOPMENT STAGE COMPANY)
|(A DELAWARE Corporation)     
|Beverly Hills, CA            
|                             
|NOTES TO FINANCIAL STATEMENTS



|Note C - | Equity Securities                                                                                                                                                                                                                                                                                                                                                                                                                                                     
|-------- | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|         | Holders of shares of common stock shall be entitled to cast one vote for each common share held at all stockholder’s meetings for all purposes, including the election of directors.  The common stock does not have cumulative voting rights.                                                                                                                                                                                                                        
|         |                                                                                                                                                                                                                                                                                                                                                                                                                                                                       
|         | The preferred stock of the Company shall be issued by the Board of Directors of the Company in one or more classes or one or more series within any class and such classes or series shall have such voting powers, full or limited, or no voting powers, and such designations, preferences, limitations or restrictions as the Board of Directors of the Company may determine, from time to time.                                                                  
|         |                                                                                                                                                                                                                                                                                                                                                                                                                                                                       
|         | No holder of shares of stock of any class shall be entitled as a matter of right to subscribe for or purchase or receive any part of any new or additional issue of shares of stock of any class, or of securities convertible into shares of stock or any class, whether now hereafter authorized or whether issued for money, for consideration other than money, or by way of dividend.                                                                            
|         |                                                                                                                                                                                                                                                                                                                                                                                                                                                                       
|Note D - | Going Concern                                                                                                                                                                                                                                                                                                                                                                                                                                                         
|         | The Company’s financial statements have been presented on the basis that it is a going concern, which contemplates the realization of assets and the satisfaction of liabilities in the normal course of business. The Company has reported recurring losses from operations.  As a result, there is an accumulated deficit of $45,671 at June 30, 2012.                                                                                                              
|         |                                                                                                                                                                                                                                                                                                                                                                                                                                                                       
|         | The Company’s continued existence is dependent upon its ability to raise capital or acquire a marketable company. The financial statements do not include any adjustments that might be necessary should the Company be unable to continue as a going concern.                                                                                                                                                                                                        
|         |                                                                                                                                                                                                                                                                                                                                                                                                                                                                       
|Note E - | Due to Parent                                                                                                                                                                                                                                                                                                                                                                                                                                                         
|         | Due to parent represents cash advances from AFH Holding & Advisory LLC.  AFH Holding & Advisory LLC is related to the Company through common ownership. There are no repayment terms.                                                                                                                                                                                                                                                                                 
|         |                                                                                                                                                                                                                                                                                                                                                                                                                                                                       
|Note F - | Stock Transactions and Due from Parent                                                                                                                                                                                                                                                                                                                                                                                                                                
|         | In February 2008, the Company commenced a private placement (the “Offering”) of up to 350,0000 shares (the “Shares”) of Common Stock at a purchase price of $2.00 per share on a “best efforts” basis with expected gross proceeds of up to $700,000 to “accredited investors” (as defined in Rule 501 promulgated under Regulation D under the Securities Act of 1933, amended (the “Securities Act”)) pursuant to Rule 506 of Regulation D under the Securities Act.
|         |                                                                                                                                                                                                                                                                                                                                                                                                                                                                       
|         | - continued -                                                                                                                                                                                                                                                                                                                                                                                                                                                         



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|AFH HOLDING III, INC.        
|-----------------------------
|(A DEVELOPMENT STAGE COMPANY)
|(A DELAWARE Corporation)     
|Beverly Hills, CA            
|                             
|NOTES TO FINANCIAL STATEMENTS



|Note F - | Stock Transactions and Due from Parent– continued                                                                                                                                                                                                                                                                                                                                           
|-------- | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|         | From February 1, 2008 to March 12, 2008 the Company sold an aggregate of 230,500 Shares with gross proceeds of $461,000.  From April 8, 2008 to April 28, 2008 the Company sold an aggregate of 124,500 Shares with gross proceeds of $249,000.  The total amount of Shares sold in the Offering was 355,000 with gross proceeds of $710,000.  These funds are held by the Company’s parent.



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



Overview



AFH Holding III, Inc. (“we”, “us”, “our”
or the “Registrant”) was incorporated in the State of Delaware on April 16, 2007, and maintains its principal executive
offices at 9595 Wilshire Blvd., Suite 700, Beverly Hills, CA 90212. Since the Registrant’s inception, it has been engaged
in organizational efforts and obtaining initial financing. The Registrant was formed as a vehicle to pursue a business combination
through the acquisition of, or merger with, an operating business. The Registrant filed a registration statement on Form 10-SB
with the U.S. Securities and Exchange Commission (the “SEC”) on October 5, 2007, and since its effectiveness, the Registrant
has focused its efforts to identify a possible business combination. Since the effective date of the Registrant’s Form 10-SB,
the Registrant has been a reporting company and required to file periodic and current reports with the SEC under the Exchange Act.



Plan of Operation



The Registrant will attempt to locate and negotiate with
a business entity for the combination of that target company with the Registrant. The combination will normally take the form of
a merger, stock-for-stock exchange or stock-for- assets exchange (the “business combination”). In most instances the
target company will wish to structure the business combination to be within the definition of a tax-free reorganization under Section
351 or Section 368 of the Internal Revenue Code of 1986, as amended. As of the date of this report, the Registrant has identified
an undisclosed potential target company for a possible business combination. No assurances can be given that the Registrant will be successful in locating or negotiating
with any target company.



The Registrant has not restricted its search for any specific
kind of businesses, and it may acquire a business which is in its preliminary or development stage, which is already in operation,
or in essentially any stage of its business life. It is impossible to predict the status of any business in which the Registrant
may become engaged, in that such business may need to seek additional capital, may desire to have its shares publicly traded, or
may seek other perceived advantages which the Registrant may offer.



In implementing a structure for a particular business acquisition,
the Registrant may become a party to a merger, consolidation, reorganization, joint venture, or licensing agreement with another
corporation or entity.



The Registrant has not realized any revenues from operations
since inception, and its plan of operation for the next twelve months is to locate a suitable acquisition or merger candidate and
consummate a business combination. The Registrant may need additional cash advances from its stockholder or loans from other parties
to pay for operating expenses until the Registrant consummates a merger or business combination with a privately-held operating
company. Although it is currently anticipated that the Registrant can satisfy its cash requirements with additional cash advances
or loans from other parties, if needed, for at least the next twelve months, the Registrant can provide no assurance that it can
continue to satisfy its cash requirements for such period.



Since our formation on April 16, 2007, our purpose has been
to effect a business combination with an operating business which we believe has significant growth potential. We are currently
considered to be a “blank check” company in as much as we have no specific business plans, no operations, revenues
or employees. We currently have no definitive agreements or understanding with any prospective business combination candidates
and have not targeted any business for investigation and evaluation nor are there any assurances that we will find a suitable business
with which to combine. The implementation of our business objectives is wholly contingent upon a business combination and/or the
successful sale of securities in the Registrant.



As a result of our limited resources, we expect to
effect only a single business combination. Accordingly, the prospects for our success will be entirely dependent upon the future
performance of a single business. Unlike certain entities that have the resources to consummate several business combinations
or entities operating in multiple industries or multiple segments of a single industry, we will not have the resources to diversify
our operations or benefit from the possible spreading of risks or offsetting of losses. A target business may be dependent upon
the development or market acceptance of a single or limited number of products, processes or services, in which case there will
be an even higher risk that the target business will not prove to be commercially viable.



Our officers and directors are only required to devote a
very limited portion of their time to our affairs on a part-time or as-needed basis. We expect to use outside consultants, advisors,
attorneys and accountants as necessary, none of which will be hired on a retainer basis. We do not anticipate hiring any full-time
employees so long as we are seeking and evaluating business opportunities.



We expect our present management to play no managerial role
in the Registrant following a merger or business combination. Although we intend to scrutinize closely the management of a prospective
target business in connection with our evaluation of a business combination with a target business, our assessment of management
may be incorrect. We cannot assure you that we will find a suitable business with which to combine.



It is anticipated that any securities issued in any such
business combination would be issued in reliance upon exemption from registration under applicable federal and state securities
laws. In some circumstances, however, as a negotiated element of its transaction, the Registrant may agree to register all or a
part of such securities immediately after the transaction is consummated or at specified times thereafter. If such registration
occurs, it will be undertaken by the surviving entity after the Registrant has entered into an agreement for a business combination
or has consummated a business combination. The issuance of additional securities and their potential sale into any trading market
which may develop in the Registrant’s securities may depress the market value of the Registrant’s securities in the future if such
a market develops, of which there is no assurance. However, if the Registrant cannot effect a non-cash acquisition, the Registrant
may have to raise funds from a private offering of its securities under Rule 506 of Regulation D. There is no assurance the Registrant
would obtain any such equity funding.



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The Registrant will participate in a business combination
only after the negotiation and execution of appropriate agreements. Negotiations with a target company will likely focus on the
percentage of the Registrant which the target company shareholders would acquire in exchange for their shareholdings.



Although the terms of such agreements cannot be predicted,
generally such agreements will require certain representations and warranties of the parties thereto, will specify certain events
of default, will detail the terms of closing and the conditions which must be satisfied by the parties prior to and after such
closing and will include miscellaneous other terms. Any merger or acquisition effected by the Registrant can be expected to have
a significant dilutive effect on the percentage of shares held by the Registrant’s shareholders at such time.



GOING CONCERN



In our accountant’s report for the fiscal year ended
December 31, 2011, they expressed their doubt as to the Registrant’s ability to continue as a going concern. The financial
statements included in this Quarterly Report have been prepared assuming that the Registrant will continue as a going concern,
which contemplates the recoverability of assets and the satisfaction of liabilities in the normal course of business.



At June 30, 2012, the Registrant had $0 cash on hand. The
Registrant has had no revenue and has incurred an accumulated deficit from April 16, 2007 (inception) through the period ended
June 30, 2012 of $45,671. The Registrant’s development activities since inception have been financially sustained through
equity financings and a loan from AFH Holding & Advisory, LLC, the Registrant’s parent company and of which the Registrant’s
officer and director, Amir F. Heshmatpour, is the Management Member.



The ability of the Registrant to continue as a going
concern is dependent upon its ability to find a suitable acquisition/merger candidate, raise additional capital from the sale
of common stock, and receive additional paid-in capital from its shareholder and, ultimately, the achievement of significant operating
revenues. The accompanying financial statements do not include any adjustments that might be required should the Registrant be
unable to recover the value of its assets or satisfy its liabilities.



6


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Results of Operations



The Company has not conducted any active operations since
inception, except for its efforts to locate a suitable acquisition or merger transaction. No revenue has been generated by the
Company during such period, and it is unlikely the Company will have any revenues unless it is able to effect an acquisition of
or merger with another operating company, of which there can be no assurance.



Assets



At June 30, 2012 and December 31, 2011, the Company had no
cash and no other assets.



Liabilities



The Company’s total current liabilities at June 30,
2012 and December 31, 2011 were $38,650 and $31,804, respectively, comprised of accrued expenses and due to parent. The increase
in liabilities was due to accounting fees for second quarter.



Deficit Accumulated During Development Stage



At June 30, 2012, the Company had a stockholders’ deficit
of $45,671 compared to $38,825 at December 31, 2011. The increase was due to increased liabilities and a net operating loss since inception.



Revenues



To date, the Company has not generated any revenues.



7


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Net Loss



For the three month periods ended June 30, 2012 and 2011,
the Company had a net loss of $1,828 and $763, respectively. For the six month periods ended June 30, 2012 and 2011, the Company
had a net loss of $6,846 and $6,109, respectively. From April 16, 2007 (Inception) to June 30, 2012, the Company had a net loss
of $45,671.



Expenses



For the three months ended June 30, 2012, the Company had
expenses of $1,828, compared to $763 for the three month period ended June 30, 2011. For the six months ended June 30, 2012, the
Company had expenses of $6,846, compared to $6,109 for the six month period ended June 30, 2011. This decrease was primarily due
to Delaware state tax decrease. For the period from April 16, 2007 (Inception) to June 30, 2012, the Registrant had operating expenses
of $45,671. These expenses were due to accounting, audit and SEC filing fees incurred in relation to the filing of the Registrant’s
Registration Statement on Form 10-SB filed on October 5, 2007 and annual and quarterly reports filed since the effectiveness of
such registration statement.



Liquidity and Capital Resources



At June 30, 2012, the Registrant had $- in cash on hand and
total assets of $710,000. Such assets consist of monies held by the Registrant’s parent company, AFH Holding & Advisory,
LLC, and are the net proceeds of the sale of the Registrant’s shares of common stock in a Private Placement Offering which
commenced in February 2008. The Registrant’s current liabilities as of June 30, 2012 totaled $38,650 which comprised of $6,846
in Accrued Expenses and $31,804 due to AFH Holding & Advisory, LLC, the majority owner of the Registrant, under a loan. The
loan does not have any repayment terms. The Company has not generated any revenues since its inception. In their report for the
fiscal year ended December 31, 2011, the Registrant’s principal accountants expressed their doubt as to our ability to continue
as a going concern. The ability of the Registrant to continue as a going concern is dependent upon its ability to find a suitable
acquisition/merger candidate, raise additional capital from the sale of common stock, and receive additional paid-in capital from
its shareholder and, ultimately, the achievement of significant operating revenues. The accompanying financial statements do not
include any adjustments that might be required should the Registrant be unable to recover the value of its assets or satisfy its
liabilities.



On April 16, 2007, the Registrant sold 5,000,000 shares of
Common Stock to AFH Holding & Advisory, LLC, which is controlled by our sole officer and director, Amir F. Heshmatpour, for
an aggregate purchase price equal to $5,000. The Registrant sold these shares of Common Stock under the exemption from registration
requirements of the Securities Act of 1933, as amended (the “Securities Act”) afforded the Registrant by Section 4(2)
of the Securities Act in light of the fact that the offering did not involve a public offering of securities.



8


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In February 2008, the Registrant commenced a private placement
(the “Offering”) of up to 350,000 shares (the “Shares”) of Common Stock at a purchase price of $2.00 per Share
on a “best efforts” basis with expected gross proceeds of up to $700,000 to “accredited investors” (as
defined in Rule 501 promulgated under Regulation D under the Securities Act) pursuant to the exemption from the registration requirements
of the Securities Act afforded the Registrant Company under Rule 506 of Regulation D under the Securities Act due to the fact that
it did not involve a public offering of securities. From February 1, 2008 to March 12, 2008, the Registrant sold an aggregate of
230,500 Shares with gross proceeds of $461,000. From April 8, 2008 to April 28, 2008, the Registrant sold an aggregate of 124,500
Shares with gross proceeds of $249,000. The Registrant increased the size of the Offering as permitted. The total amount of Shares
sold in the Offering was 355,000 with gross proceeds of $710,000. The Registrant intends to use the net proceeds of the Offering
to pursue an acquisition of an operating company and working capital purposes. These funds are held by the Company’s parent.



The following is a summary of the Company’s cash flows from
operating, investing, and financing activities:



|                                          |  | For the Six
        Months Ended |        |   | For the Period
April 16, 2007
(Inception) to |  
|----------------------------------------- |  | -------------------------------- | ------ | - | -------------------------------------------- | -
|                                          |  | June 30, 2012                    |        |   | June 30, 2011                                |  
|Net Cash Used in Operating Activities     |  | $                                | (9,634 | ) |                                              | $
|Net Cash Provided by Investing Activities |  |                                  | —      |   |                                              |  
|Net Cash Provided by Financing Activities |  | $                                | 9,634  |   |                                              | $
|Net Effect on Cash                        |  | $                                | —      |   |                                              | $



Off-Balance Sheet Arrangements



The Registrant does not have any off-balance sheet arrangements
that have or are reasonably likely to have a current or future effect on the Registrant’s financial condition, changes in
financial condition, revenues or expenses, results of operations, liquidity, capital expenditures or capital resources that is
material to investors.



Item 3. Quantitative and Qualitative Disclosures About
Market Risk.



N/A



Item 4. Controls and Procedures.



Evaluation of Disclosure Controls and Procedures



Our Principal Executive Officer and Principal Financial Officer
are responsible for establishing and maintaining adequate internal control over financial reporting (as defined in Rule 13a-15(f)
under the Exchange Act). Our internal control over financial reporting is a process designed to provide reasonable assurance regarding
the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with accounting
principles generally accepted in the United States.



9


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Our Principal Executive Officer and Principal Financial Officer
evaluated the effectiveness of our disclosure controls and procedures as of June 30, 2012. Based on that evaluation, our Principal
Executive Officer and Principal Financial Officer concluded that our disclosure controls and procedures as of the end of the period
covered by this report were effective such that the information required to be disclosed by us in reports filed under the Securities
Exchange Act of 1934 is (i) recorded, processed, summarized and reported within the time periods specified in the SEC’s rules and
forms and (ii) accumulated and communicated to the Principal Executive Officer and Principal Financial Officer, as appropriate
to allow timely decisions regarding disclosure.



Changes in Internal Controls.



There have been no significant changes to the Company’s
internal controls over financial reporting that occurred during our last fiscal quarter of the three months ended June 30, 2012,
that materially affected, or were reasonably likely to materially affect, our internal controls over financial reporting.



PART II – OTHER INFORMATION



Item 1. Legal Proceedings.



The Registrant is not party to any legal proceedings nor
is it aware of any investigation, claim or demand made on the Registrant that may reasonably result in any legal proceedings.



Item 1A. Risk Factors.



As a smaller company we are not required to provide this information.



Item 2. Unregistered Sale of Equity Securities
and Use of Proceeds.



On April 16, 2007, the Registrant issued 5,000,000 shares
of Common Stock to AFH Holding & Advisory, LLC, which is controlled by our sole officer and director, Amir F. Heshmatpour,
for an aggregate purchase price equal to $5,000. The Registrant sold these shares of Common Stock under the exemption from registration
requirements of the Securities Act of 1933, as amended (the “Securities Act”) afforded the Registrant by Section 4(2)
of the Securities Act in light of the fact that the offering did not involve a public offering of securities.



10


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In February 2008, the Registrant commenced a private placement
(the “Offering”) of up to 350,000 shares (the “Shares”) of Common Stock at a purchase price of $2.00 per share
on a “best efforts” basis with expected gross proceeds of up to $700,000 to “accredited investors” (as
defined in Rule 501 promulgated under Regulation D under the Securities Act). From February 1, 2008 to March 12, 2008, the Registrant
sold an aggregate of 230,500 Shares with gross proceeds of $461,000. From April 8, 2008 to April 28, 2008, the Registrant sold
an aggregate of 124,500 Shares with gross proceeds of $249,000. The Registrant increased the size of the Offering as permitted.
The total amount of Shares sold in the Offering was 355,000 with gross proceeds of $710,000. The Registrant intends to use the
net proceeds of this offering to pursue an acquisition of a private company and working capital purposes. The Registrant sold these
shares of Common Stock under the exemption from registration requirements of the Securities Act of 1933, as amended (the “Securities
Act”) afforded the Registrant under Section 4(2) and Rule 506 of Regulation D under the Securities Act in light of the fact
that the offering did not involve a public offering of securities.



Item 3. Defaults Upon Senior Securities.



None.



Item 4. Mine Safety Disclosures



Not Applicable



Item 5. Other Information.



None.



Item 6. Exhibits.



|Exhibit
No. |  | Description                                                                                                                                                                                                                                             
|----------- |  | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|31.1        |  | Certification by Amir F. Heshmatpour, the Principal Executive Officer and Principal Financial and Accounting Officer of AFH Holding III, Inc., pursuant to Rule 13a-14(a)/15d-14(a) of the Securities Exchange Act of 1934, as amended.                 
|32.1        |  | Certification by Amir F. Heshmatpour, the Principal Executive Officer and Principal Financial and Accounting Officer of AFH Holding III, Inc., pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.
|101.INS     |  | XBRL Instance Document                                                                                                                                                                                                                                  
|101.SCH     |  | XBRL Taxonomy Extension Schema Document                                                                                                                                                                                                                 
|101.CAL     |  | XBRL Taxonomy Extension Calculation Linkbase Document                                                                                                                                                                                                   
|101.DEF     |  | XBRL Taxonomy Extension Definition Linkbase Document                                                                                                                                                                                                    
|101.LAB     |  | XBRL Taxonomy Extension Label Linkbase Document                                                                                                                                                                                                         
|101.PRE     |  | XBRL Taxonomy Extension Presentation Linkbase Document                                                                                                                                                                                                  



11


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SIGNATURES



In accordance with the requirements
of the Exchange Act, the registrant caused this report to be signed on its behalf by the undersigned, there unto duly authorized.



Dated: August 14, 2012



| | AFH HOLDING III, INC.                                                             
| | ----------------------------------------------------------------------------------
| | (Registrant)                                                                      
| |                                                                                   
| | /s/
    Amir F. Heshmatpour                                                       
| | Amir F. Heshmatpour                                                               
| | President, Secretary and Sole Director                                            
| | (Principal Executive Officer)
        (Principal Financial and Accounting Officer)



12