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 September 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
<TABLE>

                                                                ASSETS
<CAPTION>

                                                                       September 30,           December 31,
                                                                           1998                    1997
                                                                       (Unaudited)
<S>                                                                    <C>                     <C>
Current assets:
         Cash                                                          $       1,046,370       $         539,630
         Deposits                                                                284,210                 107,910
         Rent receivable                                                          55,220                  48,900
         Accounts receivable                                                       2,650                  19,880
                                                                       -----------------       -----------------
Total current assets                                                           1,388,450                 716,320

Aircraft under operating lease, net of
         accumulated depreciation of $1,212,410
         in 1998 and $761,600 in 1997                                         10,734,950              11,185,750
Debt issue costs, net of accumulated
         amortization of $499,300 in 1998
         and $327,830 in 1997                                                  1,162,150               1,333,620
Other, including deferred tax asset
         net of valuation allowance                                               65,000                  65,000
                                                                       -----------------       -----------------    
Total assets                                                           $      13,350,550       $      13,300,690

                                                 LIABILITIES AND SHAREHOLDERS' EQUITY
Current liabilities:
         Accounts payable - trade                                      $           1,350       $          17,430
         Interest payable                                                        238,880                 238,880
         Prepaid rents                                                            81,840                  57,680
         Maintenance reserves                                                    286,530                 127,790
                                                                       -----------------       ----------------- 
Total current liabilities                                                        608,600                 441,780

Medium-term secured bonds                                                     11,076,350              11,076,350
                                                                       -----------------       ----------------- 
Total liabilities                                                             11,684,950              11,518,130

Preferred stock, no par value,
         300,000 shares authorized, 195,465
         issued and outstanding                                                1,661,450               1,661,450
Common stock, no par value,
         1,000,000 shares authorized, 815,200
         issued and outstanding                                                  815,200                 815,200
Accumulated deficit                                                             (811,050)               (694,090)
                                                                       -----------------       ----------------- 
Total shareholders' equity                                                     1,665,600               1,782,560
                                                                       -----------------       -----------------
Total liabilities and shareholders' equity                             $      13,350,550       $      13,300,690
                                                                       =================       =================

See accompanying notes.
</TABLE>


<PAGE>

                                                            JETFLEET III
                                                       Statements of Operations
                                                              (Unaudited)

<TABLE>
<CAPTION>

                                                  For the Nine Months                For the Three Months
                                                  Ended September 30,                 Ended September 30,
                                               1998                1997             1998            1997
<S>                                     <C>                 <C>                 <C>                <C>    
Revenues:

     Rent income                        $     1,707,930     $     1,427,510     $       569,310    $        569,310
     Interest income                             34,370              72,890              13,690              28,230
                                        ---------------     ---------------     ---------------    ----------------  
                                              1,742,300           1,500,400             583,000             597,540
                                        ---------------     ---------------     ---------------    ----------------

Expenses:

     Depreciation expense                       450,810             363,520             150,270             146,640
     Amortization expense                       171,470             150,830              57,160              54,870
     Interest expense                         1,074,960           1,033,460             358,320             358,320
     Management fees                            146,600             145,170              48,860              48,860
     General and administrative                  15,430              20,090               1,050               8,520
                                        ---------------     ---------------     ---------------    ----------------
                                              1,859,260           1,713,070             615,660             617,210
                                        ---------------     ---------------     ---------------    ----------------
Net loss                                $      (116,960)    $      (212,670)           $(32,660)   $        (19,670)
                                        ===============     ===============     ===============    ================

Weighted average common shares                  815,200             629,591             815,200             725,379
                                        ===============     ===============     ===============    ================

Net loss per common share               $        ( 0.14)    $        ( 0.34)             $(0.04)   $          (0.03)
                                        ===============     ===============     ===============    ================














See accompanying notes.
</TABLE>
 



<PAGE>

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


                                                                         For the Nine Months Ended
                                                                                September 30,
                                                                       1998                      1997
<S>                                                           <C>                       <C>       
Net cash provided by operating activities                     $          506,740        $          460,250

Investing activity -
         Purchase of interests in aircraft                                     -                (2,661,950)

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                                                     506,740                   296,900

Cash, beginning of period                                                539,630                   255,850
                                                              ------------------        ------------------
Cash, end of period                                           $        1,046,370        $          552,750
                                                              ==================        ==================

</TABLE>

     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.


<PAGE>

                                                             
                                  JETFLEET III
                          Notes to Financial Statements
                               September 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  Holding Corp.  ("JHC"),  a California  corporation  formed in
January 1994.  JetFleet  Management Corp.  ("JMC"),  a subsidiary of JHC, 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 JHC and JMC and owns a  significant  amount of the common stock of
both companies.

     The accompanying balance sheets at September 30, 1998 and December 31, 1997
and statements of operations and cash flows for the nine months and three months
ended  September 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.

     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 etimates.

     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 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 Company
also  issued  651,550  shares  of  common  stock  to  JHC  as  reimbursement  of
organization  and  offering  costs  JHC  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
                               September 30, 1998
                                   (Unaudited)


     3. Aircraft and Aircraft Engines Under Operating Leases

     Aircraft and aircraft engines

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

     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 nine 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  lessee  has  provided  notice to
terminate the lease on November 30, 1998.  Management  is currently  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.

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




<PAGE>

                                                            

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


     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 the year ended 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 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 nine months of 1998 and 1997, the Company
paid a total of $146,600 and $145,170, 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 nine months of 1998, it did not pay any brokerage fees
or  Chargeable  Acquisition  Expenses to JMC.  The Company paid JMC $276,200 and
$20,750 for brokerage fees and Chargeable  Acquisition  Expenses,  respectively,
during the first nine months of 1997.

     As  discussed  in Note 1, the  Company  reimburses  JHC 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 JHC for any organization and offering  expenses during
the first nine months of 1998.  The Company  reimbursed  JHC $53,400  during the
first nine months of 1997.

<PAGE>


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

     Capital Resources and Liquidity
 
     On September 30, 1998, the Company had cash balances of $1,330,580. Of this
amount,  $284,210 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  for the  interest  payment  made to the
Unitholders in November 1998, for normally recurring expenses and for investment
in additional  aircraft.  At September 30, 1998,  the Company had  approximately
$500,000 available for investment.
 
     Since  Inception,  the Company's  funds have come in the form of an initial
contribution  from JHC,  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.  The lessee for S/N 13 has provided
notice to terminate the lease on November 30, 1998 and, therefore  management is
negotiating with the sub-lessee, an Australian carrier,  regarding its continued
use of S/N 13.  Management  believes  that,  even  if the  sub-lessee  does  not
continue to lease S/N 13, the Company will continue to have  sufficient  cash to
meet its immediate requirements.
 
     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 nine 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  ($116,960)  or ($0.14)  per share and
($212,670) or ($0.34) per share for the nine months ended September 30, 1998 and
1997,  respectively  and ($32,660) or ($0.04) and ($19,670) or ($0.03) per share
for the three months ended September 30, 1998 and 1997, respectively.
 
     1998 versus 1997
 
     Rental  income for the nine month  period of 1998  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 the
first nine months of 1998 as a result of the additional proceeds raised.
 
     Factors that May Affect Future Results
 
     Year 2000  Considerations.  Management  of the  Company  has  directed  its
information  technology  ("IT")  manager to require  any  software  or  hardware
purchased for use by the Company to have a warranty of Year 2000 compliance.  It
has also directed its IT manager to study any systems that may require Year 2000
remediation. The IT manager has determined that, because the Company's IT system
is based on a "MacOS"  system,  the Company's  internal  technology  systems are
ready for Year 2000, and there should not be any material costs  associated with
such  remediation.  Furthermore,  the  phone  and  internet  systems  have  been
warranted by their vendors for Year 2000 compliance.  The Company's internal and
administrative  operations  are  not  highly  dependent  on any  other  advanced
technology system,  and,  consequently,  management  believes that the Company's
exposure  to  loss  as a  result  of  Year  2000  issues  in  its  internal  and
administrative operations is not significant.
 
     Management  believes  that the  electronic  systems  used in the  equipment
leased by the  Company to lessees  will not be  materially  affected by the Year
2000 and that any remediation of the technology systems embedded in the aircraft
that it leases will not be a material expense to the Company;  however, a formal
study has not yet been  undertaken  of the  aircraft  equipment  on  lease.  The
Company will be consulting with all the manufacturers of its leased equipment to
confirm Year 2000  compliance.  Since the Company's  leases  generally place all
maintenance  and repair  obligations  on the  lessees,  to the  extent  that the
aircraft  are on lease  when the  Year  2000  problem  is  identified,  it would
generally be the lessee's and not the Company's  responsibility to remediate any
Year 2000 problem with the leased aircraft
 
     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.
 
     The Company's  essential  functions  are not  dependent  upon any key third
party vendors or service  providers  related to the leasing or finance business,
and  consequently,  the  interruption  of  goods  and  services  from  any  such
industry-specific  third party vendor or service  provider to the Company is not
likely to cause a material loss to the Company. Of course, the Company' ordinary
business  operation is dependent  upon  vendors that provide  basic  services to
businesses  generally,  such as  utility  companies,  phone  and  long  distance
companies,  courier  services,  banking  institutions.  The  state of Year  2000
readiness of these third  parties  cannot be assessed by the  Company;  however,
management believes that a temporary interrruption in services to the Company by
these types of service  providers  caused by Year 2000 problems  would not cause
material  losses to the Company.  An extended loss of these  services,  however,
could adversely  affect the Company's  business and financial  performance.  The
Company has not yet made any  contingency  plans for the extended  loss of these
basic services.
 

<PAGE>

Part II.  Other Information

Item 1.  Legal Proceedings

         No disclosure required.

Item 2.  Changes in Securities

         No disclosure required.

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

2.    Reports on Form 8-K
 
         None
                                                         
<PAGE>


                                   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

November 5, 1998                     By:/s/ Neal D. Crispin
-----------------                       ---------------------------------------
Date                                     Neal D. Crispin, President and Chairman
                                         of the Board of Directors of the
                                         Registrant, Chief Financial Officer