FORM 10-QSB

                       SECURITIES AND EXCHANGE COMMISSION

                             Washington, D.C. 20549

(Mark One)

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

For the quarterly period ended June 30, 1998

                                       OR

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

For the transition period from ________ to ___________

Commission file number: 33-84336-LA


                                  JetFleet III
             (Exact name of Registrant as specified in its charter)

California                                                   94-3208983
(State or other jurisdiction of                              (I.R.S. Employer
incorporation or organization)                               Identification No.)

1440 Chapin Avenue, Suite 310
Burlingame, California 94010
(Address of principal executive offices)  (Zip code)

                                 (650) 340-1880
               (Registrant's telephone number including area code)

     Not applicable  (Former name,  former  address,  and former fiscal year, if
changed since last report)

     Check whether the issuer (1) has filed all reports  required to be filed by
Section 13 or 15(d) of the  Securities  Exchange  Act of 1934 during the past 12
months (or for such shorter period that the registrant was required to file such
reports),  and (2) has been subject to such filing  requirements for the past 90
days.
Yes X No ____

              APPLICABLE ONLY TO REGISTRANTS INVOLVED IN BANKRUPTCY
                  PROCEEDINGS DURING THE PRECEDING FIVE YEARS:

     Check whether the registrant  has filed all documents and reports  required
to be filed by Section 12, 13 or 15(d) of the  Securities  Exchange  Act of 1934
subsequent to the  distribution of securities under a plan confirmed by a court.
Yes ____ No ____


                   (APPLICABLE ONLY TO CORPORATE REGISTRANTS)

     State the number of shares  outstanding of each of the issuer's  classes of
common stock, as of the latest practicable date.

Title                                                        Outstanding

Common Stock                                                 815,200


Transitional Small Business Disclosure Format (check one);
Yes___ No X

<PAGE>

Part I.  Financial Information

Item 1.  Financial Statements

                                                             JETFLEET III
                                                            Balance Sheets

                                                                ASSETS
<TABLE>
<CAPTION>
                                                                         June 30,               December 31,
                                                                          1998                    1997
                                                                       (Unaudited)
<S>                                                                    <C>                     <C>
Current assets:
         Cash                                                          $         889,105       $         539,626
         Deposits                                                                134,931                 107,913
         Rent receivable                                                          39,432                  48,903
         Accounts receivable                                                      18,120                  19,875
                                                                       -----------------       -----------------
Total current assets                                                           1,081,588                 716,317

Aircraft under operating lease, net of
         accumulated depreciation of $1,062,139
         in 1998 and $761,600 in 1997                                         10,885,213              11,185,752
Debt issue costs, net of accumulated
         amortization of $442,143 in 1998
         and $327,833 in 1997                                                  1,219,309               1,333,619
Other, including deferred tax asset
         net of valuation allowance                                               65,000                  65,000
                                                                       -----------------       -----------------
Total assets                                                           $      13,251,110       $      13,300,688
                                                                       =================       =================

                                                 LIABILITIES AND SHAREHOLDERS' EQUITY
Current liabilities:
         Accounts payable - trade                                      $           1,349       $          17,435
         Interest payable                                                        238,880                 238,880
         Prepaid rents                                                            81,840                  57,675
         Maintenance reserves                                                    154,428                 127,788
                                                                       -----------------       -----------------
Total current liabilities                                                        476,497                 441,778

Medium-term secured bonds                                                     11,076,350              11,076,350
                                                                       -----------------       -----------------
Total liabilities                                                             11,552,847              11,518,128
                                                                       -----------------       -----------------
Preferred stock, no par value,
         300,000 shares authorized, 195,465
         issued and outstanding                                                1,661,452               1,661,452
Common stock, no par value,
         1,000,000 shares authorized, 815,200
         issued and outstanding                                                  815,200                 815,200
Accumulated deficit                                                             (778,389)               (694,092)
                                                                       -----------------       -----------------
Total shareholders' equity                                                     1,698,263               1,782,560
                                                                       -----------------       -----------------
Total liabilities and shareholders' equity                             $      13,251,110       $      13,300,688
                                                                       =================       =================
See accompanying notes.
</TABLE>
<PAGE>

                                                             JETFLEET III
                                                       Statements of Operations
                                                              (Unaudited)
<TABLE>
<CAPTION>


                                                  For the Six Months                 For the Three Months
                                                    Ended June 30,                      Ended June 30,
                                               1998                1997             1998            1997
<S>                                     <C>                 <C>                 <C>                <C>   

Revenues:

     Rent income, net of
        finance charges                 $     1,138,620     $       858,194     $       569,310    $        472,650
     Interest income                             20,679              44,663              10,213               4,013
                                        ---------------     ---------------     ---------------    ----------------
                                              1,159,299             902,857             579,523             476,663
                                        ---------------     ---------------     ---------------    ----------------

Expenses:

     Depreciation expense                       300,539             216,879             150,269             123,438
     Amortization expense                       114,310              95,957              57,155              49,856
     Interest expense                           716,640             675,141             358,320             357,885
     Management fees                             97,733              96,307              48,866              48,866
     General and administrative                  14,374              11,572               7,190               4,750
                                        ---------------     ---------------     ---------------      --------------
                                              1,243,596           1,095,856             621,800             584,795
                                        ---------------     ---------------     ---------------      --------------
Net loss                                $       (84,297)    $      (192,999)    $       (42,277)     $     (108,132)
                                        ===============     ===============     ===============      ==============
Weighted average common shares                  815,200             580,903             815,200             613,650
                                        ===============     ===============     ===============      ==============
Net loss per common share               $        ( 0.10)    $        ( 0.33)    $         (0.05)     $        (0.18)
                                        ===============     ===============     ===============      ==============     













See accompanying notes.
</TABLE>
 


<PAGE>

                                                              JETFLEET III
                                                       Statements of Cash Flows
                                                              (Unaudited)
<TABLE>
<CAPTION>

                                                                      For the Six Months Ended June 30,
                                                                       1998                      1997

<S>                                                           <C>                       <C>    
Net cash provided by operating activities                     $          349,479        $          278,514

Investing activity -
         Purchase of interests in aircraft                                     -                  (991,550)

Financing activities:
         Proceeds from issuance of
            medium-term secured bonds                                          -                 2,269,500
         Debt issue costs                                                      -                  (226,950)
         Proceeds from issuance of preferred stock                             -                   400,500
         Offering costs                                                        -                   (40,050)
         Proceeds from issuance of common stock                                -                    95,600
                                                              ------------------        ------------------  
Net cash provided by financing activities                                      -                 2,498,600
                                                              ------------------        ------------------
Net increase in cash                                                     349,479                 1,785,564

Cash, beginning of period                                                539,626                   255,851
                                                              ------------------        ------------------
Cash, end of period                                           $          889,105        $        2,041,415
                                                              ==================        ==================

     Supplemental schedule of noncash investing and financing activities: During
January 1997, the Company  exercised its option to purchase three aircraft which
previously  served as collateral  for loans made by the Company during 1996. The
purchase price for the three aircraft was equal to the unpaid balance, including
principal  and  interest  totaling  $2,294,228,  on the  secured  note  for each
aircraft,  which balances were paid in full by the seller  immediately  prior to
the Company's purchase of each aircraft.

















See accompanying notes.
</TABLE>
<PAGE>

                                  JETFLEET III
                          Notes to Financial Statements
                                  June 30, 1998
                                   (Unaudited)


     1. Basis of presentation

     JetFleet III (the "Company") was incorporated in the state of California on
August 23, 1994 ("Inception").  All of the Company's outstanding common stock is
owned by JetFleet Management Corp.  ("JMC"), a California  corporation formed in
January 1994.  JMC is the management  company for the Company,  and also manages
AeroCentury  Corp.,  a  Delaware  corporation,   and  AeroCentury  IV,  Inc.,  a
California  corporation,  which are  affiliates  of the  Company  and which have
objectives  similar to the  Company's.  Neal D.  Crispin,  the  President of the
Company,  holds the same position with JMC and owns a significant  amount of the
common stock of JMC.

     The accompanying  balance sheets at June 30, 1998 and December 31, 1997 and
statements  of  operations  and cash flows for the six  months and three  months
ended June 30, 1998 and 1997 reflect all adjustments  (consisting of only normal
recurring  accruals)  which are, in the opinion of the Company,  necessary for a
fair  presentation of the financial  results.  The results of operations of such
periods are not necessarily indicative of results of operations for a full year.
The  statements  should be read in  conjunction  with the Summary of Significant
Account  Policies  and  other  notes to  financial  statements  included  in the
Company's Annual Report on Form 10-KSB for the year ended December 31, 1997.

     2. Organization and Capitalization

     The Company was formed solely for the purpose of acquiring Income Producing
Assets, consisting mainly of aircraft, aircraft engines, aircraft parts or other
transportation  industry  equipment  subject to operating or full payout  leases
with third parties. The Company raised $13,031,000 in $1,000 Series A Units (the
"Offering")  consisting  of $850 of bonds  maturing  on  November  1,  2003 (the
"Bonds")  and $150 of  preferred  stock (the  "Preferred  Stock")  pursuant to a
prospectus dated September 27, 1995 (the "Prospectus").

     Organization and offering costs

     Pursuant to the terms of the  Prospectus,  the Company paid an Organization
and  Offering  Expense  Reimbursement  to JMC in cash in an amount up to 2.0% of
Aggregate Gross Offering Proceeds for reimbursement of certain costs incurred in
connection with the  organization  of the Company and the Offering.  The Company
also  issued  651,550  shares  of  common  stock  to  JMC  as  reimbursement  of
organization  and  offering  costs  JMC  incurred  in  excess  of the 2.0%  cash
reimbursement (collectively, the "Reimbursement").

     The Company  capitalized  the portion of the  Reimbursement  related to the
Bonds (85%) and amortizes  such costs over the life of the Bonds  (approximately
eight years).  The remainder of the amount paid by the Company for  organization
and offering costs was deducted from shareholders' equity.




<PAGE>

                                  JETFLEET III
                          Notes to Financial Statements
                                  June 30, 1998
                                   (Unaudited)


     3. Aircraft and Aircraft Engines Under Operating Leases

     Aircraft and aircraft engines

     The Company owns a  deHavilland  DHC-8-100,  serial number 13 ("S/N 13"), a
Shorts SD3-60,  serial number S/N 3611 ("S/N 3611"),  a Pratt & Whitney  JT8D-9A
aircraft  engine,  serial  number  674267  ("S/N  674267"),   three  deHavilland
DHC-6-300  aircraft  ("S/Ns 646, 751 and 696"), a Fairchild Metro III SA-227-AC,
Serial No. AC-621 ("S/N AC-621") a Shorts  SD3-60,  serial number S/N 3656 ("S/N
3656") and 50% undivided  interests in a Fairchild  Metro II  SA-226-TC,  serial
number TC-370 ("S/N TC-370") and a Shorts  SD3-60,  serial number S/N 3676 ("S/N
3676").

     The Company made no investments in aircraft  during the first six months of
1998.

     Aircraft and aircraft engines leases

     S/N 13 is subject to a 120-month  lease with the  seller.  The lease may be
terminated by either party,  with at least 120 days prior written notice, at the
end of the first 36 months of the lease.  The seller  also has a fixed  purchase
option at the end of the first 36 months of the  lease,  which may be  exercised
with at least 90 days prior written notice. Although the lessee has not provided
formal  notice  to  terminate  the  lease  on  November  30,  1998,   management
anticipates  that the lease will not be renewed and is,  therefore,  negotiating
with the sub-lessee,  an Australian carrier,  regarding its continued use of S/N
13.

     S/N 3611 is subject to a 27-month lease with the seller, a British regional
airline.

     S/N 674267 is used on a McDonnell Douglas DC-9 and is subject to a 60-month
sublease  between the seller and a Mexican based regional carrier which operates
between the United States and Mexico.

     S/Ns 646,  751 and 696 are subject to similar  36-month  leases with a U.S.
regional carrier.

     S/N AC-621 is subject to a 36-month lease with a U.S. regional carrier.

     S/N  TC-370 is subject to a lease  with a United  States  charter  operator
operating under FAA regulations. The lease contains a guaranty by the seller for
basic rent in an amount not to exceed a total aggregate amount of $29,250 (which
guaranty is shared equally by the Company and AeroCentury Corp., the co-owner of
S/N TC-370).

     S/N 3656 and S/N 3676 are subject to similar 48-month leases with a British
regional airline.

     4. Medium-term secured bonds

     Each $1,000 Unit  subscribed in the Offering  included an $850  medium-term
secured bond  maturing on November 1, 2003.  During 1997,  the Company  accepted
subscriptions for 2,310 Units aggregating $2,310,000 in Gross Offering Proceeds.
Pursuant to the Prospectus,  the Company subsequently issued $1,963,500 in Bonds
and 40,050 shares of Preferred Stock. The Bonds bear interest at an annual


<PAGE>

                                  JETFLEET III
                          Notes to Financial Statements
                                  June 30, 1998
                                   (Unaudited)

     4. Medium-term secured bonds (continued)

rate of 12.94%  from  issuance  through  October  31,  1998 and,  thereafter,  a
variable  rate,  adjusted  annually on November 1, equal to the one-year  United
States Treasury bill rate plus 2%, but not less than 8.24%.  Interest is due and
payable on a quarterly basis, in arrears, on the first business day of February,
May, August and November.  The carrying amount of the notes payable approximates
fair value.
     
     5. Related Party Transactions

     The Company's  Income Producing Asset portfolio is managed and administered
under the terms of a management agreement with JMC. Under this agreement, on the
last day of each calendar quarter, JMC receives a quarterly management fee equal
to 0.375% of the Company's  Aggregate Gross Proceeds  received  through the last
day of such quarter.  During the first six months of 1998 and 1997,  the Company
paid a total of $97,733 and $96,307, respectively, in management fees to JMC.

     JMC may  receive a  brokerage  fee for  locating  assets  for the  Company,
provided that such fee is not more than the  customary  and usual  brokerage fee
that would be paid to an unaffiliated party for such a transaction. The total of
the  Aggregate  Purchase  Price plus the  brokerage  fee cannot  exceed the fair
market value of the asset based on appraisal. JMC may also receive reimbursement
of Chargeable  Acquisition  Expenses  incurred in connection  with a transaction
which are  payable  to third  parties.  Because  the  Company  did not  purchase
aircraft  during the first six months of 1998, it did not pay any brokerage fees
or  Chargeable  Acquisition  Expenses to JMC.  The Company  paid JMC $73,200 and
$3,350 for brokerage fees and  Chargeable  Acquisition  Expenses,  respectively,
during the first six months of 1997.

     As  discussed  in Note 1, the  Company  reimburses  JMC for  certain  costs
incurred in connection  with the  organization  of the Company and the Offering.
Because the  Offering  was closed to new  subscriptions  during  June 1997,  the
Company did not reimburse JMC for any organization and offering  expenses during
the first six months of 1998.  The Company  reimbursed  JMC  $53,400  during the
first six months of 1997.



     Item 2.  Management's  Discussion  and Analysis of Financial  Condition and
Results of Operation

     Capital Resources and Liquidity
 
     On June 30,  1998,  the Company had cash  balances of  $1,024,036.  Of this
amount,  $134,931 was deposits which represent  maintenance  reserves  collected
from lessees and interest earned on those funds, as applicable. The remainder of
the Company's cash balance was held  primarily for the interest  payment made to
the Unitholders in August 1998 and for normally recurring expenses.
 
     Since  Inception,  the Company's  funds have come in the form of an initial
contribution  from JMC,  proceeds from the Offering and rental  revenue from the
Income Producing Assets purchased using those proceeds.  The Company's liquidity
will vary in the future,  increasing  to the extent  cash flows from  operations
exceed expenses, and decreasing as interest payments are made to the Unitholders
and to the extent expenses exceed cash flows from leases.
 
     The Company's  primary use of its operating cash flow is interest  payments
to its  Unitholders.  Excess cash flow,  after payment of interest and operating
expenses is held for investment in additional Income Producing Assets. Since the
Company has  acquired  Income  Producing  Assets which are subject to triple net
leases  (the lessee pays  operating  and  maintenance  expenses,  insurance  and
taxes), the Company does not anticipate that it will incur significant operating
expenses in connection with ownership of its Income  Producing Assets as long as
they remain on lease.
 
     The Company currently has available adequate reserves to meet its immediate
cash requirements. The leases for the Company's aircraft expire at varying times
between  November  1998 and  November  2001.  Although  S/N 13 is  subject  to a
120-month  lease,  the lease may be terminated by either the lessor or lessee at
the end of the first 36  months  with at least 120 days  prior  written  notice.
Although the lessee has not  provided  formal  notice to terminate  the lease on
November 30, 1998, management anticipates that the lease will not be renewed and
is, therefore, negotiating with the sub-lessee, an Australian carrier, regarding
its continued use of S/N 13.
 
     As discussed in Item 1, the  interest  rate on the Bonds is 12.94%  through
October 31,  1998 and a variable  rate  thereafter.  The  variable  rate will be
dependent on the  one-year  United  States  Treasury  bill rate and,  therefore,
management believes that the rate will be lower than the current rate.
 
     1998 versus 1997
 
     The increase in cash flow from  operations was due partially to a decreased
net loss (see  Results  of  Operations).  The other  significant  factor  was an
increase in prepaid rent received from lessees.
 
     The Company did not purchase  aircraft  during the first six months of 1998
and, therefore,  had no cash flows from investing  activities.  The Company also
had no cash flows from  financing  activities  because the  Offering  terminated
during June 1997.
 
     Results of Operations
 
     The  Company  recorded a net loss of  ($84,297)  or  ($0.10)  per share and
($192,999) or ($0.33) per share for the six months ended June 30, 1998 and 1997,
respectively  and  ($42,277) or ($0.05) and  ($108,132) or ($0.18) per share for
the three months ended June 30, 1998 and 1997, respectively.
 
     1998 versus 1997
 
     Rental income  increased as a result of the  additional  rent received from
aircraft  purchased during 1997.  Interest income decreased in 1998 because,  at
the end of January 1997,  the Company  exercised its purchase  options for three
aircraft which  previously  served as collateral  for three secured loans.  As a
result,  the Company  recognized  no interest  income for the loans during 1998,
compared to one month of interest income during 1997.
 
     Amortization  and  depreciation  increased from year to year as a result of
the additional funds raised during 1997 and the depreciable  aircraft  purchased
with those funds. Interest expense and management fees also increased in 1998 as
a result of the additional proceeds raised.
 
     Factors that May Affect Future Results
 
     Year  2000  Considerations.   The  Company's  internal  and  administrative
operations are not highly dependent on advanced  technological computer or other
electronic systems,  and,  consequently,  management believes that the Company's
exposure  to loss as a result of Year 2000 issues is not  significant.  Further,
management  believes that the electronic systems used in the equipment leased by
the  Company  to  lessees  will not be  affected  by the Year 2000  issue,  and,
therefore,  this  issue  should not  directly  affect  the  Company's  financial
performance  or the  lessees'  ability  to comply  with their  respective  lease
obligations.  Of course, to the extent that a lessee has Year 2000 problems that
significantly  adversely  affect its overall  financial  status,  such  material
problems may affect the lessee's  operations and increase the risk of default by
a lessee  under its lease with the  Company.  Furthermore,  Year 2000 issues may
have a material  impact on FAA  operations  and the  operations  of certain  air
carriers,  which in turn  would  negatively  affect  the  aircraft  industry  in
general.
 

Part II. Other Information

Item 1. Legal Proceedings

     None.

Item 2. Changes in Securities and Use of Proceeds

     The effective date of the Form SB-2 Registration Statement for JetFleet III
was  September  27, 1995,  and assigned  Commission  File No.  33-84336-LA.  The
offering  terminated  on June 2, 1997.  Of the 20,000 Units  registered,  13,134
Units were  sold.  The Dealer  Manager  for the  offering  was  Crispin  Koehler
Securities. The offering price of the Units was $1000, each Unit consisting of a
secured bond with a principal amount of $850, and 15 shares of  non-convertible,
redeemable  Preferred Stock. The gross proceeds of the offering of the Units was
$13,031,000,  representing 13,031 Units sold. The amount of expenses incurred in
connectiion with the issuance and distribution  consisted of sale commissions of
$1,042,480  and offering  expenses of $260,620.  The remaining  $11,727,900  was
applied toward purchase of aircraft  equipment,  of which $927,542  consisted of
brokerage fees paid to JetFleet Management Corp., the sole common shareholder of
and management company for the Company.


Item 3.  Defaults Upon Senior Securities

     No disclosure required.



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

     No disclosure required.


Item 5.  Other Information

     No disclosure required.


Item 6.  Exhibits and Reports on Form 8-K

     1. Exhibit 27. Financial Data Schedule



                                   SIGNATURES

     Pursuant to the  requirements  of the Securities  Exchange Act of 1934, the
registrant  has duly  caused  this  report  to be  signed  on its  behalf by the
undersigned, thereunto duly authorized.

                                            JetFleet III

August 10, 1998                      By: /s/ Neal D. Crispin  
Date                                    ---------------------------------------
                                        Neal D. Crispin, President and Chairman
                                        of the Board of Directors of the
                                        Registrant