SECURITIES AND EXCHANGE COMMISSION
                              WASHINGTON, DC 20549


                                   FORM 10-QSB

(Mark One)

[ X ] Quarterly Report Under Section 13 or 15(d) of the Securities Exchange Act
of 1934 For the quarterly period ended June 30, 2002

[ ] Transition  Report Under 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
                 (Name of small business issuer in its charter)


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

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

Issuer's telephone number, including area code: (650) 340-1880
Securities registered pursuant to Section 12(b) of the Act:    None

Securities registered pursuant to Section 12(g) of the Act:    None


Check whether the Issuer:  (1) 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
     -------       ------


On August 13, 2002 the aggregate market value of the voting and non voting
Common equity held by non-affiliates (computed by reference to the price at
which the common equity was sold) was $0.


As of August 13, 2002 the Issuer has 815,200 Shares of Common Stock and 195,465
Shares of Series A Preferred Stock outstanding.


Transitional Small Business Disclosure Format (check one):  Yes      No   X
                                                               ----     ----






<page>

                                  JETFLEET III
                                  Balance Sheet
                                  June 30, 2002
                                    Unaudited

                                     ASSETS
<table>
<S>   <C>                                                                               <C>

Current assets:
     Cash                                                                                    $   1,533,560
     Deposits                                                                                    1,923,030
     Accounts receivable                                                                           167,320
                                                                                              ------------
Total current assets                                                                             3,623,910

Aircraft and aircraft engines under operating leases,
     net of accumulated depreciation of $2,476,110                                              11,146,960
Debt issue costs, net of accumulated
     amortization of $1,356,630                                                                    304,830
Deferred taxes                                                                                     250,790
Prepaid expenses                                                                                     6,320
                                                                                              ------------

Total assets                                                                                 $  15,332,810
                                                                                              ============

                      LIABILITIES AND SHAREHOLDERS' EQUITY

Current liabilities:
     Accounts payable                                                                        $      12,710
     Interest payable                                                                              152,120
     Prepaid rents                                                                                 114,250
     Security deposits                                                                             328,480
     Maintenance deposits                                                                        1,643,190
                                                                                              ------------
Total current liabilities                                                                        2,250,750

Medium-term secured bonds                                                                       11,076,350
                                                                                              ------------

Total liabilities                                                                               13,327,100
                                                                                              ------------
Preferred stock, no par value,
     300,000 shares authorized, 195,465
     issued and outstanding                                                                      1,661,450
Common stock, no par value,
     1,000,000 shares authorized, 815,200
     issued and outstanding                                                                        815,200
Accumulated deficit                                                                              (470,940)
                                                                                              ------------
Total shareholders' equity                                                                       2,005,710
                                                                                              ------------

Total liabilities and shareholders' equity                                                   $  15,332,810
                                                                                              ============

The accompanying notes are an integral part of these statements.
</table>

<PAGE>





                                  JETFLEET III
                            Statements of Operations


<TABLE>
<S>                                 <c>                                        <c>

                                           For the Six Months Ended               For the Three Months Ended
                                                   June 30,                                June 30,
<CAPTION>

<S>                                       <C>               <C>                 <C>                 <C>

                                             2002            2001                   2002              2001
                                             ----            ----                   ----              ----
                                                    Unaudited                               Unaudited
Revenues:

     Rent income                        $   1,113,610     $   1,037,620         $     542,500    $     506,020
     Gain on sale of aircraft                       -           346,700                     -          312,230
     Other income                              23,120           104,940                13,440           48,730
                                         ------------      ------------          ------------       ----------

                                            1,136,730         1,489,260               555,940          866,980
                                         ------------      ------------          ------------       ----------

Expenses:

     Depreciation                             348,750           284,180               174,380          138,630
     Amortization                             114,310           114,310                57,150           57,150
     Interest                                 456,350           456,350               228,170          228,170
     Maintenance                                1,800           244,870                 1,800         (18,910)
     Professional fees and
        general and administrative             26,220            19,600                17,180           11,390
     Management fees                           97,730            97,730                48,870           48,870
                                         ------------      ------------          ------------       ----------

                                            1,045,160         1,217,040               527,550          465,300

Income before taxes                            91,570           272,220                28,390          401,680

Tax provision                                  37,010            98,040                10,550          139,930
                                         ------------      ------------          ------------       ----------

Net income                              $      54,560     $     174,180         $      17,840    $     261,750
                                         ============      ============          ============       ==========
Weighted average common
     shares outstanding                       815,200           815,200               815,200          815,200
                                         ============      ============          ============       ==========
Basic income per common share           $        0.07     $        0.21         $        0.02    $        0.32
                                         ============      ============          ============       ==========
</table>
The accompanying notes are an integral part of these statements.





<PAGE>



                                  JETFLEET III
                            Statements of Cash Flows

<TABLE>


                                                                    For the Six Months Ended June 30,
                                                                       2002                  2001
                                                                       ----                  ----
                                                                                Unaudited
<S>                                                             <C>                    <C>
Net cash provided by operating activities                         $      291,110        $     281,650
                                                                    ------------          -----------
Investing activity -
     Proceeds from sale of aircraft                                      197,000            1,239,060
                                                                    ------------          -----------
Net cash provided by investing activities                                197,000            1,239,060
                                                                    ------------          -----------
Net increase in cash                                                     488,110            1,520,710

Cash, beginning of period                                              1,045,450            2,788,090
                                                                    ------------          -----------

Cash, end of period                                               $    1,533,560        $   4,308,800
                                                                    ============          ===========

Supplemental disclosures of cash flow information:
Cash paid during the period for:                                       2002                  2001
                                                                       ----                  ----
     Interest (net of amount capitalized)                         $      456,350        $     456,350
     Income taxes                                                          2,950                    -

The accompanying notes are an integral part of these statements.

</table>

<PAGE>



                                  JETFLEET III
                          Notes to Financial Statements

1.       Summary of Significant Accounting Policies

         Basis of Presentation

         JetFleet III (the "Company") was incorporated in the state of
California in August 1994 ("Inception"). The Company was formed solely for the
purpose of acquiring Income Producing Assets. The Company offered up to
$20,000,000 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").

         All of the Company's outstanding common stock is owned by JetFleet
Holding Corp. ("JHC"), a California corporation formed in January 1994. In May
1998, JetFleet Management Corp., the sole shareholder of the Company was renamed
JetFleet Holding Corp. The rights and obligations under the management agreement
between the Company and JHC were assigned by JHC to its newly-created
wholly-owned subsidiary named "JetFleet Management Corp." ("JMC"). JMC also
manages AeroCentury Corp., a Delaware corporation, and AeroCentury IV, Inc., a
California corporation, which are affiliates of JHC and which have objectives
similar to the Company's. Neal D. Crispin, the President of the Company, holds
the same position with JHC and JMC and owns a significant amount of the common
stock of JHC.

         Cash and Cash Equivalents/Deposits

         The Company considers highly liquid investments readily convertible
into known amounts of cash, with original maturities of 90 days or less, as cash
equivalents. Deposits represent cash balances held related to maintenance
reserves and security deposits and generally are subject to withdrawal
restrictions. As of June 30, 2002, the Company maintained $2,863,930 of its cash
balances in two money market funds held by regional brokerage firms, which are
not federally insured.

         Aircraft and Aircraft Engines Under Operating Leases

         The Company's interests in aircraft are recorded at cost, which
includes acquisition costs (see Note 2). Depreciation is computed using the
straight-line method over each aircraft's estimated economic life to its
estimated residual value.

         Impairment of Long-lived Assets

         In accordance with Statement of Financial Accounting Standards ("SFAS")
No. 144, "Accounting for the Impairment or Disposal of Long-lived Assets",
assets are reviewed for impairment whenever events or changes in circumstances
indicate that the book value of the asset may not be recoverable. Periodically,
the Company reviews its long-lived assets for impairment based on estimated
future nondiscounted cash flows attributable to the assets. In the event such
cash flows are not expected to be sufficient to recover the recorded value of
the assets, the assets are written down to their estimated realizable value.

         Organization and Offering Costs

         Pursuant to the terms of the Prospectus, the Company paid an
Organization and Offering Expense Reimbursement to JHC 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 "Reimbursement").




<PAGE>



                                  JETFLEET III
                          Notes to Financial Statements

1.       Summary of Significant Accounting Policies (continued)

         Organization and Offering Costs (continued)

         JHC contributed $450,000 of the total it paid for organization and
offering expenses as a common stock investment in the Company (the "Initial
Contribution"). The Company issued 450,000 shares of common stock to JHC in
return for the Initial Contribution. To the extent that JHC incurred expenses in
excess of the 2.0% cash limit, such excess expenses were repaid to JHC in the
form of Common Stock issued by the Company at a price of $1.00 per share (the
"Excess Stock"). The amount of Excess Stock that the Company issued was limited
according to the amount of Aggregate Gross Offering Proceeds raised by the
Company.

         The Company capitalized the portions of both the Reimbursement paid and
the Initial Contribution related to the Bonds (85%) and amortizes such costs
over the life of the Bonds (approximately eight years). The remainder of any of
the Initial Contribution and Reimbursement is deducted from shareholders'
equity.

         Assets Subject to Lien

         The Company's obligations under the Bonds are secured by a security
interest in all of the Company's right, title and interest in the Income
Producing Assets acquired by the Company.

         Income Taxes

         The Company follows the liability method of accounting for income taxes
as required by the provisions of Statement of Financial Accounting Standards No.
109 - Accounting for Income Taxes.

         Use of Estimates

         The preparation of financial statements in conformity with generally
accepted accounting principles requires management to make estimates and
assumptions that affect certain reported amounts and disclosures. Accordingly,
actual results could differ from those estimates.

         The most significant estimates with regards to these financial
statements are the residual values of the aircraft, the useful lives of the
aircraft, and the estimated amount and timing of cash flow associated with each
aircraft that are used to evaluate impairment, if any.

         Recent Accounting Pronouncements

In August 2001, the Financial  Accounting  Standards  Board issued SFAS No. 144,
"Accounting  for  the  Impairment  or  Disposal  of  Long-lived  Assets,"  which
supercedes SFAS No. 121, "Accounting for the Impairment of Long-lived Assets and
Long-lived  Assets to Be Disposed  of." SFAS No. 144 is effective  for financial
statements  issued for fiscal years  beginning  after  December  15,  2001,  and
interim  periods within those fiscal years.  The Company adopted SFAS No. 144 on
January 1, 2002. Because SFAS No. 144 retains the fundamental provisions of SFAS
No. 121 for (a)  recognition  and  measurement  of the  impairment of long-lived
assets  to be held and used  and (b)  measurement  of  long-lived  assets  to be
disposed of by sale, the adoption of SFAS No. 144 has not had a material  effect
on the Company's results of operations or financial position.





<PAGE>



                                  JETFLEET III
                          Notes to Financial Statements

2.       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 deHavilland DHC-8-102, serial number 106 ("S/N 106"), three deHavilland
DHC-6-300 aircraft ("S/Ns 640, 751 and 696") and a Saab 340A, serial number 24
("S/N 24"). During March 2002, the Company sold its Pratt & Whitney JT8D-9A
aircraft engine, serial number 674267 ("S/N 674267"). The Company did not
acquire any assets during the first six months of 2002.

         Since June 2001, S/N 13 has been on lease with the same Australian
carrier under a series of short-term lease extensions and is on lease through
October 2002. The Company is currently discussing the terms of the lessee's
continued use of the aircraft.

         S/N 751 is leased to a regional carrier in the Maldives for a term
expiring in October 2004. During March 2002, the Company agreed to the terms for
the lease of S/N 640 to the same lessee, expiring in August 2005. The Company
delivered the aircraft to the lessee during August 2002.

         S/N 696 is leased to a regional carrier in the United Kingdom for a
term expiring in April 2003.

         S/N 24 is subject to a lease, expiring in October 2002, with a regional
carrier in North America.

         S/N 106 is subject to a lease, expiring in November 2004, with a
regional carrier in the Caribbean.

         During March 2002, the Company sold S/N 674267, which had been written
down to the net sales price during 2001.

         As of June 30, 2002, minimum future lease rent payments receivable
under noncancelable leases were as follows:

         Year                          Amount

         2002                       $     926,250
         2003                             975,000
         2004                             730,000
                                       ----------
                                    $   2,631,250
                                       ==========




<PAGE>



                                  JETFLEET III
                          Notes to Financial Statements

3.       Medium-Term Secured Bonds

         The Company raised $13,031,000 through the Offering from November 1995
to June 1997. Each $1,000 Unit subscribed in the offering included an $850
medium-term secured bond maturing on November 1, 2003. The Bonds bore interest
at an annual rate of 12.94% 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%. Based on the one-year
Treasury Bill rate at the measurement dates, the Bonds have borne interest at
the rate of 8.24% per annum for the periods November 1, 1998 through October 31,
2001. The rate will remain at 8.24% through October 31, 2002. The carrying
amount of the Bonds approximates fair value.

4.       Income Taxes

         The items comprising income tax expense are as follows:

<TABLE>
<S>                                                                                 <C>              <C>
                                                                                          2002             2001
                                                                                          ----             ----
         Current tax provision
              Federal                                                               $           -    $            -
              State                                                                         3,750               570
                                                                                            -----               ---
              Current provision                                                             3,750               570
                                                                                            -----               ---
         Deferred tax provision
              Federal                                                                      31,140            90,690
              State                                                                         2,120             6,780
                                                                                           ------            ------
              Deferred tax provision                                                       33,260            97,470
                                                                                           ------            ------

         Total provision for income taxes                                           $      37,010    $       98,040
                                                                                          =======           =======
         The total provision for income taxes differs from the amount which
would be provided by applying the statutory federal income tax rate to pretax
earnings as illustrated below:

                                                                                          2002             2001

         Income tax expense at statutory federal income tax rate                    $      31,140    $       92,550
         State taxes net of federal benefit                                                   800             3,770
         Tax rate differences                                                               5,070             1,720
                                                                                           ------            ------
         Total provision for income taxes                                           $      37,010    $       98,040
                                                                                          =======           =======
</table>
<PAGE>



                                  JETFLEET III
                          Notes to Financial Statements

4.       Income Taxes (continued)

         Temporary differences and carryforwards which gave rise to a
significant portion of deferred tax assets and liabilities as of June 30, 2002
are as follows:

 Deferred tax assets:
      Net operating loss                         $     165,940
      Maintenance deposits                             573,080
      Prepaid rent and other                            40,120
                                                     ---------
          Subtotal                                     779,140
          Valuation allowance                                -
                                                     ---------
          Net deferred tax assets                      779,140
 Deferred tax liability -
      Depreciation of aircraft                       (528,350)
                                                     ---------
                                                 $     250,790
                                                     =========

         The Company expects to generate adequate future taxable income to
realize the benefits of the remaining deferred tax assets on the balance sheet.
The Company's net operating losses of $623,990 may be carried forward for
fifteen or twenty years, depending on when they were created, and begin to
expire in 2012.

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. In the first six months of 2002
and 2001, the Company accrued a total of $97,730 and $97,730, respectively, in
management fees.

         JMC may receive an acquisition fee for locating assets for the Company
and a remarketing fee in connection with the sale of the Company's assets,
provided that such fees are not more than the customary and usual fees that
would be paid to an unaffiliated party for such a transaction. The total of the
Aggregate Purchase Price plus the acquisition 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 2002 or 2001, it did not pay any acquisition fees
or Chargeable Acquisitions Expenses to JMC. During the first six months of 2002
and 2001, remarketing fees of $0 and $14,330, respectively, were paid to JMC in
connection with the sale of aircraft.

         As discussed in Note 1, the Company reimbursed JHC for certain costs
incurred in connection with the organization of the Company and the Offering.
The Company made no such payments during 2002 or 2001.

6.       Subsequent Event

          During  August  2002,  the  Company  delivered  S/N 640 to a  regional
carrier in the Maldives, for a term expiring in August 2005.






<PAGE>



Item 2.           Management's Discussion and Analysis or Plan of Operation.

Forward-Looking Statements

Certain statements contained in this report and, in particular, the discussion
regarding the Company's beliefs, plans, objectives, expectations and intentions
regarding the Company's lack of significant operating expenses in connection
with assets that remain on lease and the sufficiency of the Company's cash flow
to meet interest obligations and fund sinking fund deposits; are forward looking
statements. While the Company believes that such statements are accurate, actual
results may differ due to the depth and length of the current aircraft industry
downturn, unanticipated defaults or terminations by lessees, and future trends
and results that cannot be predicted with certainty. The Company's actual
results could differ materially from those discussed in such forward looking
statements. Factors that could cause or contribute to such differences include
those discussed below in the section entitled "Factors that May Affect Future
Results." The cautionary statements made in this Report should be read as being
applicable to all related forward-looking statements wherever they appear in
this Report.

Critical Accounting Policies

In response to the Securities and Exchange Commission's Release No. 33-8040,
"Cautionary Advice Regarding Disclosure About Critical Accounting Policies", the
Company has identified the most critical accounting policies upon which its
financial status depends. It determined the critical principles by considering
accounting policies that involve the most complex or subjective decisions or
assessments. The Company identified its most critical accounting policies to be
those related to lease rental revenue recognition, depreciation policies and
valuation of aircraft.

Revenue Recognition

Revenue from leasing of aircraft assets is recognized as operating lease revenue
on a straight-line basis over the terms of the applicable lease agreements.

Depreciation Policies

The Company's interests in aircraft and aircraft engines are recorded at cost,
which includes acquisition costs. Depreciation is computed using the
straight-line method over the aircraft's estimated economic life (generally
assumed to be twelve years), to an estimated residual value based on appraisal.

Valuation of Aircraft

In accordance with Statement of Financial Accounting Standards ("SFAS") No. 144,
"Accounting for the Impairment or Disposal of Long-lived Assets," assets are
reviewed for impairment whenever events or changes in circumstances indicate
that the book value of the asset may not be recoverable. Periodically, the
Company reviews its long-lived assets for impairment based on estimated future
nondiscounted cash flows attributable to the assets. In the event such cash
flows are not expected to be sufficient to recover the recorded value of the
assets, the assets are written down to their estimated realizable value.

Results of Operations

The Company recorded net income of $54,560 and $174,180 or $0.07 and $0.21 per
share for the six months ended June 30, 2002 and 2001, respectively. The Company
recorded net income of $17,840 and $261,750 or $0.02 and $0.32 per share for the
three months ended June 30, 2002 and 2001, respectively.

Rent income was approximately $76,000 and $36,000 higher in the six months and
three months, respectively, ended June 30, 2002 than 2001, due to the
acquisition of S/N 106 during the fourth quarter of 2001, the effect of which
was only partially offset by the sale of an aircraft during January 2001 and the
disposition of S/N 3656 during the second quarter of 2001. In early 2002, the
Company disposed of one aircraft, which had been written down to its sales price
during 2001, versus two dispositions in the first six months of 2001, both of
which resulted in gains. Therefore, gain on sale of aircraft was approximately
$346,000 and $312,000 lower in the six month and three month periods,
respectively, of 2002 versus 2001. Interest income was lower in the six month
and three month periods of 2002 by approximately $82,000 and $34,000,
respectively, due to lower cash balances and lower prevailing interest rates.

Depreciation increased approximately $65,000 and $36,000 during the six month
and three month periods, respectively, of 2002 due to the acquisition of S/N 106
during the fourth quarter of 2001, the effect of which was only partially offset
by the asset dispositions noted above. Maintenance expense was approximately
$243,000 lower in the six month period of 2002 than in 2001, primarily because
of the purchase of a replacement engine for S/N 3656 in January 2001. The
replacement was necessary because of hours flown by the previous lessee, which
filed for reorganization and returned the aircraft during late 2000. Rather than
overhaul the original engine, the Company determined that it was more
cost-effective to purchase a replacement, which purchase was partially funded by
maintenance reserves collected from the new lessee. Maintenance expense was
approximately $21,000 higher in the three month period of 2002 compared to 2001
because the Company recorded a credit to maintenance expense during the three
months ended June 30, 2001 as a result of the reversal of certain expenses
accrued during the first quarter of 2001.

Capital Resources and Liquidity

Since Inception, the Company's funds have come primarily in the form of an
initial contribution from JHC, proceeds from the Offering and rental income from
the Income Producing Assets purchased using those proceeds. The Company's
liquidity varies, increasing to the extent cash flows from operations exceed
expenses, and decreasing to the extent expenses, including interest payments to
the Unitholders, 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,
has been 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 has not and does not anticipate that it will incur
significant operating expenses in connection with ownership of its Income
Producing Assets while 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
through November 2004. The revenue generated from the Income Producing Assets is
used to fund interest payments on the Bonds and deposits to a sinking fund
established to facilitate repayment of principal of the Bonds on their maturity
(or such earlier time if the Company decides to make prepayments on the
principal of the Bonds).

As discussed in Item 1, the interest rate on the Bonds was 12.94% through
October 31, 1998 and has been a variable rate thereafter, calculated annually on
November 1. The variable rate is equal to the higher of (i) 2% plus the annual
yield rate on one-year U.S. Treasury Bills on the last business day of October
of that year or (ii) 8.24%. Based on the one-year Treasury Bill rate at the
measurement dates, the Bonds have borne interest at the rate of 8.24% per annum
for the periods November 1, 1998 through October 31, 2001. The Company has
determined that the rate will remain at 8.24% through October 31, 2002.

Although the Company's cash flow from operations was approximately the same in
both years, this was a result of the net effect of changes in several asset and
liability accounts, as well as decreased net income in 2002.

Specifically, the Company's cash flow from operations for the six months ended
June 30, 2002 consisted of net income of $54,560 and adjustments consisting
primarily of depreciation and amortization of $348,750 and $114,310,
respectively, increases in cash classified as deposits, accounts receivable,
security deposits and maintenance deposits of $377,650, $68,750, $52,480 and
$280,280, respectively, and a decrease in accounts payable of $161,760.

Specifically, the Company's cash flow from operations for the six months ended
June 30, 2001 consisted of net income of $174,180 and adjustments consisting
primarily of depreciation, amortization and gain on sale of aircraft of
$284,180, $114,310 and $346,700, respectively, and decreases in cash classified
as deposits, deferred taxes and maintenance deposits of $131,020, $97,460 and
$156,420, respectively.

Cash flow provided by investing activities was $1,042,060 lower in the six
months ended June 30, 2002 versus the prior year because, although the Company
sold an aircraft during each year, the Company also received sales and insurance
proceeds associated with the disposition of a second aircraft during the second
quarter of 2001. There were no cash flows from financing activities during 2002
or 2001 because the Offering terminated during June 1997.

Outlook

As discussed in "Capital Resources and Liquidity", the revenue generated from
the Income Producing Assets is used to fund interest payments on the Bonds and,
since November 2001, deposits to a sinking fund established to facilitate
repayment of principal on the Bonds on their maturity (or such earlier time if
the Company decides to make prepayments on the principal of the Bonds).
Currently, all but one of the Company's assets are on lease and generating
revenue. The Company has agreed to the terms for the lease of the one aircraft
which is off lease and expects to deliver the aircraft to the lessee during the
third quarter of 2002. The Company believes it will continue to have sufficient
cash flow to meet its interest obligations and make deposits into the sinking
fund.

The Company's ability to repay the principal due under the Bonds at maturity on
November 1, 2003 is dependent upon two factors. First, continued on-lease status
of its assets with no unexpected expenses as a result of lessee defaults or
early terminations must continue in order to permit significant contributions to
the sinking fund. Second, but a more significant factor, is the amount of
proceeds available from the ultimate sale or refinance of the Company's aircraft
portfolio.

The aircraft industry is currently in the midst of a downturn due to the global
economic situation exacerbated by the events of September 11, 2001. The downturn
increases the chances of a lessee default or early terminations of leases. A
lessee may experience less traffic and realize less revenue from operations, and
may be forced to return excess leased aircraft, or in the worst case, may be
driven out of business. The downturn also may make it more difficult for the
Company to re-lease assets to existing lessees or find replacement lessees upon
expiration of the current leases.

More importantly, the downturn has reduced demand for aircraft assets, with an
attendant decrease in aircraft valuations. Depressed valuations, if still
present at the time the Company begins disposition of its assets, may result in
less proceeds (either through sale or refinance) to the Company than it had
previously anticipated.

It is unclear how long it will take for the industry to recover. Because the
time period until maturity of the Bonds is less than two years from now, the
speed of the recovery of the industry has great importance as a factor in the
Company's ability to fully repay the Bond principal upon maturity.

Factors that May Affect Future Results

Recovery of the Air Travel Industry. As discussed in the "Outlook" section
above, the Company's ability to repay the Bonds at their maturity date will
depend upon its ability to refinance the debt obligation or sell its aircraft at
a price sufficient to retire the outstanding Bond principal. Since the maturity
of the Bonds is less than two years from now, and the industry is currently on
the downside of a business cycle, the speed of recovery of the industry will be
an important factor in the Company's ability to repay the Bonds. First and
foremost, a weak travel industry results in greater ownership risk because of
lower demand for aircraft and because of lower valuations for aircraft assets.
See "Ownership Risks," below. In addition, the weakness in the air travel
industry may also make lease extensions and re-leases more difficult. See
"Leasing Risks, " below. Significant off-lease periods for the Company's
aircraft could result in lower rental revenue received by the Company, and that
could affect its ability to repay interest, and eventually, the full principal
indebtedness under the Bonds.

Thus, the failure of the industry to move out of its current down cycle before
the Bond maturity date, or any further weakening of the air travel industry in
the short term, could have a negative impact on the Company's ability to repay
the Bonds at their maturity date. Since the holders of preferred stock are not
entitled to any redemption or dividend payments until the Bonds are paid in
full, the Company's ability to repay the Bonds directly determines whether the
holders of Preferred Stock will receive any amounts with respect to the
Preferred Stock.

Ownership Risks. All of the Company's portfolio is leased under operating
leases, where the terms of the leases do not take up the entire life of the
asset. As the Bond maturity date is less than two years from now, factors that
could affect the short-to-medium term value of the aircraft have become
increasingly important to the ability of the Company to repay the Bond
indebtedness. As discussed above, industry conditions will be an important
determining factor in the valuation of the aircraft and potential proceeds
realizable from their sale at Bond maturity. In addition, the condition of the
aircraft assets at the time of maturity will also have an effect on their value.
Therefore, continued lessee compliance with maintenance obligations and with
return conditions if an aircraft is returned (particularly with respect to those
aircraft whose leases expire prior to the maturity date of the Bonds), will be a
significant factor in what proceeds could be realized from the aircraft assets
at the maturity date of the Bonds (either through sale or refinance). While the
leases require lessees to be responsible for maintenance and return conditions,
a lessee default in those obligations could result in a reduced value of the
subject aircraft or an expenditure by the Company of funds to optimize the value
of the aircraft. Finally, those aircraft with leases that expire in the coming
months will need to be re-leased, and the lease rates obtained for the aircraft
may affect aircraft values, if the aircraft is sold subject to the lease. If the
leases are negotiated during this period of industry weakness, the lease rates
are likely to be lower than they otherwise would be, and this may adversely
affect the sale or refinance proceeds obtainable with respect to the aircraft at
the maturity date of the Bonds.

Leasing Risks. The Company's successful negotiation of lease extensions,
re-leases and sales may be critical to its ability to repay the Bonds,
particularly as the maturity date nears, and will involve a number of
substantial risks. Demand for lease or purchase of the assets depends on the
economic condition of the airline industry which is in turn highly sensitive to
general economic conditions. Ability to remarket equipment at acceptable rates
may depend on the demand and market values at the time of remarketing. The
market for used aircraft is cyclical, and generally, but not always, reflects
economic conditions and the strength of the travel and transportation industry.
The demand for and value of many types of older aircraft in the recent past has
been depressed by such factors as airline financial difficulties, increased fuel
costs, the number of new aircraft on order and the number of older aircraft
coming off lease. The Company's concentration in a limited number of airframe
and aircraft engine types (generally, turboprop equipment) subjects the Company
to economic risks if those airframe or engine types should decline in value. The
recent introduction of "regional jets" to serve on short routes previously
thought to be economical only for turboprop aircraft operation could decrease
the demand for turboprop aircraft, while at the same time increasing the supply
of used turboprop aircraft. This could result in lower lease rates and values
for the Company's turboprop aircraft.

Risks Related to Regional Air Carriers. Because the Company's leases are all
with regional air carriers, it will be subject to certain risks. First, lessees
in the regional air carrier market include a number of companies that are
start-up, low capital, low margin operations. Often, the success of such
carriers is dependent upon arrangements with major trunk carriers, which may be
subject to termination or cancellation by such major carrier. This market
segment is also characterized by low entry costs, and thus, there is strong
competition in this industry segment from start-ups as well as major airlines.
Thus, leasing transactions with these types of lessees result in a generally
higher lease rate on aircraft, but may entail higher risk of default or lessee
bankruptcy.

General Economic Conditions. The market for used aircraft has been cyclical, and
usually reflects economic conditions and the strength of the travel and
transportation industry. At any time, the market for used aircraft may be
adversely affected by such factors as airline financial difficulties, higher
fuel costs, and improved availability and economics of new replacement aircraft.

An adverse change in the global air travel industry, however, could result in
reduced carrier revenue and excess capacity and increase the risk of failure of
some weaker regional air carriers.

Reliance on JMC. All management of the Company is performed by JMC pursuant to a
management agreement between JMC and the Company. The Board of Directors does,
however, have ultimate control and supervisory responsibility over all aspects
of the Company and does owe fiduciary duties to the Company and its
stockholders. In addition, while JMC may not owe any fiduciary duties to the
Company by virtue of the management agreement, the officers of the Company are
also officers or employees of JMC, and in that capacity owe fiduciary duties to
the Company and the stockholders by virtue of holding such offices. Although the
Company has taken steps to prevent such conflicts, such conflicts of interest
arising from such dual roles may still occur. JMC is also management company for
two other aircraft portfolio owners, AeroCentury Corp. and AeroCentury IV, Inc.
("AeroCentury IV"). AeroCentury IV is in the liquidation or wrap-up phase.
AeroCentury IV has been selling assets and recently defaulted on certain
obligations to noteholders. The indenture trustee for AeroCentury IV's
noteholders has foreclosed and will sell the remaining two assets.

Lessee Credit Risk. If a lessee defaults upon its obligations under a lease, the
Company may be limited in its ability to enforce remedies. Most of the Company's
lessees are small domestic and foreign regional passenger airlines, which may be
even more sensitive to airline industry market conditions than the major
airlines. As a result, the Company's inability to collect rent under a
significant lease or to repossess equipment in the event of a default by a
lessee could have a material adverse effect on the Company's revenue. If a
lessee that is a certified U.S. airline is in default under the lease and seeks
protection under Chapter 11 of the United States Bankruptcy Code, under Section
1110 of the Bankruptcy Code, the Company would be automatically prevented from
exercising any remedies for a period of 60 days. By the end of the 60 day
period, the lessee must agree to perform the obligations and cure any defaults,
or the Company would have the right to repossess the equipment. This procedure
under the Bankruptcy Code has been subject to significant litigation, however,
and it is possible that the Company's enforcement rights may still be further
adversely affected by a declaration of bankruptcy by a defaulting lessee. Even
if an aircraft can be repossessed, the Company may be unable to recover damages
from the lessee if the condition of the aircraft when repossessed was worse than
that required by the lease.

International Risks. The Company's portfolio includes leases with foreign air
carriers. Leases with foreign lessees may present somewhat different credit
risks than those with domestic lessees.

Foreign laws, regulations and judicial procedures may be more or less protective
of lessor rights as those which apply in the United States. The Company could
experience collection problems related to the enforcement of its lease
agreements under foreign local laws and the remedies in foreign jurisdictions.
The protections potentially offered by Section 1110 of the Bankruptcy Code would
not apply to non-U.S. carriers, and applicable local law may not offer similar
protections. Certain countries do not have a central registration or recording
system with which to locally establish the Company's interest in equipment and
related leases. This could add difficulty in recovering an aircraft in the event
that a foreign lessee defaults.

Leases with foreign lessees are subject to risks related to the economy of the
country or region in which such lessee is located even if the U.S. economy is
strong. On the other hand, a foreign economy may remain strong even though the
domestic U.S. economy does not. A foreign economic downturn may occur and impact
a foreign lessee's ability to make lease payments, even though the U.S. and
other economies remain stable. Furthermore, foreign lessees are subject to risks
related to currency conversion fluctuations. Although the Company's current
leases are all payable in U.S. dollars, in the future, the Company may agree to
leases that permit payment in foreign currency, which would subject such lease
revenue to monetary risk due to currency fluctuations. Even with
dollar-denominated lease payment provisions, the Company could still be affected
by a devaluation of the lessee's local currency which would make it more
difficult for a lessee to meet its dollar-denominated lease payments, increasing
the risk of default of that lessee, particularly if that carrier's revenue is
primarily derived in the local currency.

Competition. The Company has many competitors in the aircraft leasing industry,
including leasing companies, banks and other financial institutions and aircraft
leasing partnerships. The market is highly competitive. Most of the Company's
competitors have substantially greater financial and other resources than the
Company.

Casualties, Insurance Coverage. The Company, as owner of transportation
equipment, may be named in a suit claiming damages for injuries or damage to
property caused by its assets. As a triple net lessor, the Company is generally
protected against such claims, since the lessee would be responsible for, insure
against and indemnify the Company for such claims. Further, some protection may
be provided by the United States Aviation Act with respect to its aircraft
assets. It is, however, not clear to what extent such statutory protection would
be available to the Company and such act may not apply to aircraft operated in
foreign countries. Also, although the Company may require a lessee to insure
against a risk, there may be certain cases where the loss is not entirely
covered by the lessee or its insurance. Though this is a remote possibility, an
uninsured loss with respect to the equipment or an insured loss for which
insurance proceeds are inadequate would result in a possible loss of invested
capital in and any profits anticipated from such equipment.



<PAGE>



                                   SIGNATURES

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

                                  JETFLEET III


Date:    August 13, 2002     By:    /s/ Neal D. Crispin
                                    -------------------------------
                                    Neal D. Crispin

                             Title: President, Chief Financial Officer