UNITED STATES
                       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, 2004

[ ] 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
      (Exact 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 16, 2004 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 16, 2004 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>



                                     PART I
                              Financial Information

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 belief that a sale of the aircraft is the only feasible
means to raise cash to repay the entire Bond indebtedness; the likelihood that
the sales proceeds for the aircraft will not be sufficient to fully repay the
Bonds; the generation of future taxable income sufficient to realize the
benefits of the remaining deferred tax asset on the balance sheet; the
anticipation that sales proceeds are likely to be insufficient to repay the
entire amount of the Bonds and that, therefore, there will be no distribution
with respect to the Preferred Stock; and that the Company does not intend to
seek additional capital; are forward looking statements. While the Company
believes that such statements are accurate, actual results may differ due to the
short-term market for used turboprop aircraft; the condition and marketability
of the aircraft in lessee's possession at the time of sale of such aircraft; the
costs for repair and maintenance of returned aircraft; 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. All forward-looking statements and risk factors included in this
document are made as of the date hereof, based on information available to the
Company as of the date hereof, and the Company assumes no obligation to update
any forward-looking statement or risk factor. You should consult the risk
factors listed from time to time in the Company's filings with the Securities
and Exchange Commission.


<PAGE>







                                  JETFLEET III
                                  Balance Sheet
                                  June 30, 2004
                                    Unaudited

                                     ASSETS
<TABLE>
<S>                                                                                          <C>

Cash $                                                                                       $         200
Taxes receivable                                                                                       300
                                                                                             -------------

Total assets                                                                                 $         500
                                                                                             =============

                      LIABILITIES AND SHAREHOLDERS' EQUITY

Total liabilities                                                                            $           -
                                                                                             -------------

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                                                                             (2,476,150)
                                                                                             -------------
Total shareholders' deficit                                                                            500
                                                                                             -------------

Total liabilities and shareholders' deficit                                                  $         500
                                                                                             =============

The accompanying notes are an integral part of this statement.

</TABLE>

<PAGE>





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

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

                                                  2004               2003            2004              2003
                                                  ----               ----            ----              ----
Revenues:

     Rent income                            $      567,350    $     706,970     $     217,610    $     340,990
     Gain on sale of aircraft                    1,377,620                -                 -                -
     Other income                                   17,530           17,860             6,760            8,430
                                            --------------    -------------     -------------    -------------

                                                 1,962,500          724,830           224,370          349,420
                                            --------------    -------------     -------------    -------------


Expenses:

     Depreciation                                        -          348,750                 -          174,380
     Amortization                                        -          114,310                 -           57,150
     Interest                                      370,150          456,350           141,970          228,170
     Management fees                                92,150           97,730            43,290           48,870
     Professional fees and
        general and administrative                  58,540           15,190            44,530            9,270
     Maintenance                                    57,460           50,010             5,970              760
     Insurance                                      35,950          104,880            13,730           60,050
                                            --------------    -------------     -------------    -------------

                                                   614,250        1,187,220           249,490          578,650
                                            --------------    -------------     -------------    -------------

Income/(loss) before taxes                       1,348,250         (462,390)          (25,120)        (229,230)

Tax provision/(benefit)                                800         (156,870)                -          (77,380)
                                            --------------    -------------     -------------    -------------

Income/(loss) before
  extraordinary item                             1,347,450         (305,520)          (25,120)        (151,850)
                                            --------------    -------------     -------------    -------------

Extraordinary item, less
  applicable income taxes of $0                  3,031,580                -         3,031,580                -
                                            --------------    -------------     -------------    -------------

Net income/(loss)                           $    4,379,030    $    (305,520)    $   3,006,460    $    (151,850)
                                            ==============    =============     =============    =============

Weighted average common
  shares outstanding                               815,200          815,200           815,200          815,200
                                            ==============    =============     =============    =============

Basic income/(loss) per common share:
Income/(loss) from continuing operations    $         1.65    $       (0.37)    $       (0.03)   $       (0.19)
Extraordinary item                                    3.72                -              3.72                -
                                            --------------    -------------     -------------    -------------
                                            $         5.37    $       (0.37)    $        3.69    $       (0.19)
                                            ==============    =============     =============    =============


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

<PAGE>


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


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

                                                                       2004                  2003
                                                                       ----                  ----

Net provided by operating activities                              $     (564,830)       $     159,510
                                                                  --------------        -------------

Investing activities:
     Purchase of interests in aircraft                                         -              (23,680)
     Proceeds from sale of aircraft                                    2,404,110                    -
                                                                  --------------        -------------
Net cash provided by investing activity                                2,404,110              (23,680)
                                                                  --------------        -------------

Financing activity -
     Cash transferred to Trustee                                      (4,104,240)                   -
                                                                  --------------        -------------

Net (decrease)/increase in cash                                       (2,264,960)             135,830

Cash, beginning of period                                              2,265,160            2,065,830
                                                                  --------------        -------------

Cash, end of period                                               $          200        $   2,201,660
                                                                  ==============        =============

Supplemental disclosures of cash flow information:
Cash paid during the period for:                                       2004                  2003
                                                                       ----                  ----
     Interest (net of amount capitalized)                         $      456,350        $     456,350
     Income taxes paid                                                       800                    -

Assets transferred to Trustee:
     Rent receivable                                                      20,390                    -
     Accounts receivable                                                   2,030                    -
     Aircraft, at net book value                                       3,765,940                    -
     Prepaid expenses                                                    258,460

Indebtedness discharged:
     Interest payable                                                     65,920                    -
     Prepaid rent                                                         39,540                    -
     Security deposits                                                   272,490                    -
     Maintenance reserves                                              1,752,170                    -
     Medium-term secured notes                                        11,076,350                    -

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



<PAGE>



                                  JETFLEET III
                          Notes to Financial Statements
                                    Unaudited

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"). Under the trust indenture governing the Bonds, there was a
provision to extend the maturity date of the Bonds up to six months at the
Company's sole discretion. In August 2003, the Company sent a notice to the
indenture trustee extending the maturity date of the Bonds to April 30, 2004.

         All of the Company's outstanding common stock is owned by JetFleet
Holding Corp. ("JHC"), a California corporation formed in January 1994. JHC's
wholly owned subsidiary, JetFleet Management Corp. ("JMC") has a management
agreement with the Company. JMC also manages AeroCentury Corp., a Delaware
corporation, which has objectives similar to the Company's. JMC also acted as
manager for AeroCentury IV, Inc., a California corporation, which also had
objectives similar to the Company's. AeroCentury Corp. is an affiliate of JHC,
as was AeroCentury IV. 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.

         The Company did not have sufficient cash to fund the repayment of the
Bonds on the maturity date of April 30, 2004. The Company was, therefore, in
default under the Trust Indenture. In May 2004, the Trustee declared an "Event
of Default" under the Trust Indenture. Under the provisions of the Trust
Indenture, the Company and the Trustee agreed to execute a transfer of
collateral, including the Company's cash balances, which constituted all of the
Company's remaining assets.. The transfer was completed in May 2004, after which
management of the aircraft portfolio and repayment of the Company's Bond
liabilities from the proceeds became the responsibility of the Trustee.

         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. The Company's cash balances were transferred to the Trustee in May
2004.

         Aircraft and Aircraft Engines Under Operating Leases

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

         In preparation for the sale of its aircraft, the Company obtained an
appraisal of its aircraft portfolio. Based on the projected net sales values for
the Company's aircraft, in September 2003, the Company recorded a provision for
impairment in value for S/N 13, S/N 106, S/N 696 and S/N 24, totaling
$5,505,000, and ceased recognizing depreciation on all aircraft.




<PAGE>



                                  JETFLEET III
                          Notes to Financial Statements
                                    Unaudited

1.       Summary of Significant Accounting Policies (continued)

         Impairment of Long-lived Assets

         In accordance with 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 third party valuations. In the event such valuations are
less than the recorded value of the assets, the assets are written down to their
estimated realizable value. For those assets on which an impairment is realized,
accumulated depreciation and impairment loss are netted against the original
cost basis and a new cost basis for such assets is then recorded on the balance
sheet. As discussed in Notes 3 and 4, the Company wrote down four of its assets
in September 2003.

         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").

         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 amortized such costs
through the original maturity date of the Bonds on November 1, 2003. The
remainder of any of the Initial Contribution and Reimbursement was 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, the estimated amount and timing of cash flow associated with each
aircraft that are used to evaluate impairment, if any, and accrued maintenance
costs in excess of amounts received from lessees.

<PAGE>

                                  JETFLEET III
                          Notes to Financial Statements
                                    Unaudited

1.       Summary of Significant Accounting Policies (continued)

         Maintenance Deposits

         Maintenance costs under the Company's triple net leases are generally
the responsibility of the lessees. The Company periodically reviews maintenance
deposits for adequacy in light of the number of hours flown, airworthiness
directives issued by the manufacturer or government authority, and the return
conditions specified in the lease. As a result of such review, when it is
probable that the Company has incurred costs for maintenance in excess of
amounts received from lessees, the Company accrues its share of costs for work
to be performed.

         Recent Accounting Pronouncements

         In January 2003, the FASB issued interpretation FIN No. 46,
Consolidation of Variable Interest Entities ("FIN 46"), which was subsequently
revised in December 2003 ("FIN 46R"). FIN 46R requires a variable interest
entity to be consolidated by a company if that company is the primary
beneficiary of the entity. A company is a primary beneficiary if it is subject
to a majority of the risk of loss from the variable interest entity's activities
or entitled to receive a majority of the entity's residual returns or both.
 FIN 46R also requires disclosures about variable interest entities that a
company is not required to consolidate but in which it has a significant
variable interest. FIN 46R was applicable immediately to variable interest
entities created after January 31, 2003, and will be effective for all other
existing entities in financial statements for periods ending after December 15,
2004. Certain of the disclosure requirements apply in all financial statements
issued after December 31, 2003, regardless of when the variable interest entity
was established. The Company has no interest in any variable interest entity
and, therefore, the full adoption of FIN 46R had no effect on the Company's
consolidated financial condition or results of operations.

         SFAS 146, Accounting for Costs Associated with Exit or Disposal
Activities, was effective for exit or disposal activities that were initiated
after December 31, 2002. SFAS 146 addresses significant issues regarding the
recognition, measurement and reporting of costs that are associated with exit
and disposal activities, including restructuring activities that are currently
accounted for under EITF No. 94-3, Liability Recognition for Certain Employee
Termination Benefits and Other Costs to Exit an Activity (including Certain
Costs Incurred in a Restructuring). The provisions of EITF No. 94-3 shall
continue to apply for an exit activity initiated under an exit plan that meets
the criteria of EITF No. 94-3 prior to the adoption of SFAS 146. The effect of
adoption of SFAS 146 will change, on a prospective basis, the timing of when
restructuring charges are recorded from a commitment date approach to when the
liability is incurred. The adoption of this pronouncement had no effect on the
Company's financial statements.

         SFAS 150, Accounting for Certain Financial Instruments with
Characteristics of Both Liabilities and Equities, addresses how to classify and
measure certain financial instruments with characteristics of both liabilities
(or an asset in some circumstances) and equity. SFAS 150 requirements apply to
issuers classification and measurement of freestanding financial instruments,
including those that comprise more than one option or forward contract. It
requires that all instruments with characteristics of both liabilities and
equity be classified as a liability and remeasured at fair value on each
reporting date. SFAS 150 was effective immediately for all financial instruments
entered into or modified after May 31, 2003, and for the first interim period
beginning after June 15, 2003 for all other instruments. The adoption of SFAS
150 had no impact on the Company's financial statements.




<PAGE>



                                  JETFLEET III
                          Notes to Financial Statements
                                    Unaudited

2.       Going Concern

The Company's Medium Term Secured Bonds in the aggregate amount of $11,076,350
were due on April 30, 2004. The Company did not have enough current resources to
pay the principal and interest on these Bonds by the due date, and did not have
any other viable refinancing plan in place. Therefore management believed that a
sale of the Company's aircraft portfolio was the only feasible means to raise
cash to apply towards the Bond obligations. This matter raises substantial doubt
as to the Company's ability to continue as a going concern. In October 2003,
management obtained an appraisal of the value of each aircraft and began
soliciting buyers for the aircraft. Since the Company's aircraft portfolio
served as collateral for the Bond obligations, the Company and the Trustee
agreed to execute a transfer of collateral, including the Company's cash
balances, which constituted all of the Company's remaining assets. The transfer
was completed in May 2004, after which management of the aircraft portfolio and
repayment of the Company's Bond liabilities from the proceeds became the
responsibility of the Trustee. It is likely that even if the aircraft are sold
quickly by the Trustee, the total amount of sales proceeds received, when
combined with the Company's cash holdings, will not be sufficient to repay the
entire amount of the Bonds. In connection with the transfer of the Company's
assets to the Trustee, the Company removed the Bonds obligation from its books
during May 2004 and recorded an extraordinary gain of $3,031,580, net of taxes
of $0.

3.       Aircraft and Aircraft Engines Under Operating Leases

         In April 2004, the lease for S/N 696 was extended for two years,
through April 30, 2006.

         In May 2004, the Company and the Trustee executed a transfer of
collateral as a result of an Event of Default under the Trust Indenture. As a
result, the Company owned no aircraft as of June 30, 2004. The Trustee has
assumed ownership of the aircraft which the Company had owned and responsibility
for administering the terms of the leases.

         As of June 30, 2004, minimum future lease rent payments receivable
under noncancelable leases transferred to the Trustee were as follows:

         Year                          Amount

         2004                       $     567,000
         2005                             391,500
         2006                              78,000
                                    -------------
                                    $   1,036,500

4.       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,
2002. The rate remained at 8.24% through April 30, 2004.

         The revenue generated from the Income Producing Assets was used to fund
interest payments on the Bonds and, after November 2001, deposits to a sinking
fund established to facilitate repayment of principal on the Bonds on their
maturity. In accordance with the trust indenture, in March 2004, the Company
deposited $3,500,000 to the sinking fund account.



<PAGE>



                                  JETFLEET III
                          Notes to Financial Statements
                                    Unaudited

4.       Medium Term Secured Bonds (continued)

         The Company did not have sufficient cash to fund the repayment of the
Bonds on the maturity date of April 30, 2004. The Company was, therefore, in
default under the Trust Indenture. In May 2004, the Trustee declared an "Event
of Default" under the Trust Indenture. Under the provisions of the Trust
Indenture, the Company and the Trustee agreed to execute a transfer of
collateral, including the Company's cash balances, which constituted all of the
Company's remaining assets. The transfer was completed in May 2004, after which
management of the aircraft portfolio and repayment of the Company's Bond
liabilities from the proceeds became the responsibility of the Trustee.

5.       Income Taxes
<TABLE>

         The items comprising income tax expense are as follows:
<CAPTION>

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

                                                                                          2004             2003
                                                                                          ----             ----
         Current tax provision
              Federal                                                               $           -    $            -
              State                                                                           800            (3,920)
                                                                                    -------------    --------------
              Current provision                                                               800            (3,920)
                                                                                    -------------    --------------

         Deferred tax provision/(benefit)
              Federal                                                                   2,182,900          (156,430)
              State                                                                         4,260             3,480
                                                                                    -------------    --------------
              Deferred tax provision/(benefit)                                          2,187,160          (152,950)
              Valuation allowance                                                      (2,187,160)                -
                                                                                    -------------    --------------

         Total provision/(benefit) for income taxes                                 $         800    $     (156,870)
                                                                                    =============    ==============
</TABLE>

         The total provision/(benefit) 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:
<TABLE>
<CAPTION>

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

                                                                                          2004             2003
                                                                                          ----             ----

         Income tax expense/(benefit) at statutory federal income tax rate          $   1,489,140    $     (157,210)
         State tax expense/(benefit) net of federal benefit                                 2,100              (370)
         Discharge of indebtedness excluded from taxable income                           (87,480)                -
         Maintenance reserves deducted from taxable income                                582,940                 -
         Current year tax depreciation deducted from taxable income                       201,850                 -
         Unearned income included in taxable income                                        (1,570)                -
         Tax refunds                                                                            -            (4,720)
         Tax rate differences                                                                 980             5,430
         Valuation allowance                                                           (2,187,160)                -
                                                                                    -------------    --------------
         Total provision/(benefit) for income taxes                                 $         800    $     (156,870)
                                                                                    =============    ==============
</TABLE>



<PAGE>



                                  JETFLEET III
                          Notes to Financial Statements
                                    Unaudited

5.       Income Taxes (continued)

         Temporary differences and carryforwards which gave rise to a
significant portion of deferred tax assets and liabilities as of June 30, 2004
are as follows:
<TABLE>
<S>                                                                                 <C>

         Deferred tax assets:
              Net operating loss                                                    $     149,470
              State franchise taxes                                                           270
                                                                                    -------------
                  Subtotal                                                                149,740
                  Valuation allowance                                                    (149,740)
                                                                                    -------------
                  Net deferred tax assets                                           $           0
                                                                                    =============
</TABLE>

         The Company does not expect to generate adequate future taxable income
to realize the benefits of the remaining deferred tax assets on the balance
sheet. Therefore, the Company has recognized a valuation allowance equal to the
net deferred tax asset. The Company's net operating losses of $439,600 may be
carried forward for twenty years and begin to expire in 2021.

6.       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, 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 2004 and 2003, the Company accrued a total
of $78,820 and $97,730, respectively, in management fees.

         JMC may receive a remarketing fee in connection with the sale of the
Company's assets, provided that such fee is not more than the customary and
usual fee that would be paid to an unaffiliated party for such a transaction.
JMC may also receive reimbursement of Chargeable Acquisition Expenses incurred
in connection with a transaction which are payable to third parties. The Company
paid a remarketing fee of $153,450 to JMC in January 2004 in connection with the
sale of an aircraft and $13,330 in April 2004 in connection with the re-lease of
S/N 696. No such fees were paid in the first six months of 2003.

         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 the first six months of 2004 or 2003.



<PAGE>



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

Overview

The Company is a lessor of turboprop aircraft and engines which are used by
customers pursuant to triple net operating leases. The Company's profitability
and cash flow are dependent in large part upon its ability to acquire equipment,
obtain and maintain favorable lease rates on such equipment, and re-lease owned
equipment that comes off lease. The Company is subject to the credit risk of its
lessees, both as to collection of rent and to performance by the lessees of
obligations for maintaining the aircraft.

The Company's principal expenditures are for interest costs on its Bonds,
management fees, and maintenance of its aircraft assets. The most significant
non-cash expenses include accruals of maintenance costs in advance of their
payment and depreciation of aircraft.

Reported financial results are the result of significant estimates. Maintenance
expenses are estimated and accrued based upon utilization of the aircraft.
Depreciation is recognized based upon the estimated residual value of the
aircraft at the end of their estimated lives. Deviation from these estimates
could have substantial effect on the Company's cash flow and profitability.

The Company did not have sufficient cash to fund the repayment of the Bonds on
the maturity date of April 30, 2004. The Company was, therefore, in default
under the Trust Indenture. In May 2004, the Trustee declared an "Event of
Default" under the Trust Indenture. Under the provisions of the Trust Indenture,
the Company and the Trustee agreed to execute a transfer of collateral,
including the Company's cash balances, which constituted all of the Company's
remaining assets. The transfer was completed in May 2004. Management of the
aircraft portfolio and repayment of the Company's Bond liabilities from the
proceeds is now the responsibility of the Trustee.

The Company has effectively ceased operations, with no cash, revenues or sources
of capital available.

Results of Operations

The Company recorded net income of $4,379,030 or $5.37 per share, including an
extraordinary gain of $3,031,580 or $3.72 per share, and net loss of ($305,520)
or ($0.37) per share for the six months ended June 30, 2004 and 2003,
respectively, and net income of $3,006,460 or $3.69, including an extraordinary
gain of $3,031,580 or $3.72 per share, and net loss of ($151,850) or ($0.19) per
share for the three months ended June 30, 2004 and 2003, respectively.

Rent income was approximately $140,000 and $123,000 lower in the six months and
three months ended June 30, 2004, respectively, versus the same periods in 2003,
primarily as a result of the transfer of collateral to the Trustee, discussed
above. Other income was approximately the same in the six months and three
months ended June 30 of both years. Gain on sale of aircraft was approximately
$1,378,000 higher in the six months ended June 30, 2004 than in the same period
of 2003 due to the sale of S/N 13 in January 2004.

Depreciation was approximately $349,000 and $174,000 lower in the six months and
three months ended June 30, 2004, respectively, versus the same periods in 2003,
because, at September 30, 2003, the Company classified its aircraft as held for
re-sale and, therefore, did not record depreciation after that date.
Amortization was approximately $114,000 and $57,000 lower in the six-month and
three-month periods of 2004, respectively, because the Company's debt issue
costs were fully amortized as of the original maturity date of the Bonds, on
November 1, 2003.

Interest expense was approximately $86,000 lower in both the six months and
three months ended June 30, 2004 compared to the same periods in 2003 as a
result of the transfer of collateral to the Trustee in May 2004. Management fees
were approximately the same in the six-month and three-month periods of both
years because, although the Company paid lower management fees to JMC in 2004
than in 2003 as a result of the transfer of assets to the Trustee in May 2004,
it paid a remarketing fee of $13,330 to JMC in 2004 in connection with the
re-lease of S/N 696.

Professional fees and general and administrative expenses were approximately
$43,000 and $35,000 higher in the six months and three months ended June 30,
2004, respectively, versus the same periods of 2003, primarily due to trustee
fees associated with the transfer of assets to the Trustee.

Maintenance expense was approximately the same in the six months and three
months ended June 30, 2004 compared to the same periods in 2003.

Insurance expense was approximately $69,000 and $46,000 lower in the six months
and three months ended June 30, 2004, respectively, compared to the same periods
in 2003 because S/N 13, which was sold in January 2004, was off lease and
insured for most of the first six months of 2003.

Capital Resources and Liquidity

The Company has  negligible  operating  cash.  The Company's  current  financial
condition  is a result  of the  foreclosure  of all of the  Company's  assets in
partial repayment of the Company's  obligations under the Bonds. The Company has
no remaining sources of capital and does not intend to seek additional  capital,
as such is unlikely to be available given the Company's financial situation.

The Company did not have sufficient cash to fund the repayment of the Bonds on
the maturity date of April 30, 2004. The Company was, therefore, in default
under the Trust Indenture. In May 2004, the Trustee declared an "Event of
Default" under the Trust Indenture. Under the provisions of the Trust Indenture,
the Company and the Trustee agreed to execute a transfer of collateral,
including the Company's cash balances. The transfer was completed in May 2004.
Management of the aircraft portfolio and repayment of the Company's Bond
liabilities from the proceeds is now the responsibility of the Trustee.

Prior to the transfer of assets to the Trustee in May 2004, the Company had
Bonds outstanding with an aggregate principal face value of $11,076,350. The
fair value of the collateral securing the Bonds, based upon the net book values
of the aircraft and the net working capital of the Company as of that date, was
estimated to be approximately $8,045,000, which was approximately 73% of the
outstanding principal of the Bonds.

The Company's cash flow from operations for the six months ended June 30, 2004
versus the same period in 2003 decreased by approximately $724,000. The change
in cash flow was a result of changes in several cash flow items during the year,
including principally the following:

Lease rents

Operating lease collections were approximately $290,000 lower in 2003 than in
2002, primarily due to the transfer of assets to the Trustee in May 2004 and
because, in June 2003, the lessee for S/N 13 prepaid three months of rent.

Expenditures for maintenance and aircraft equipment

Expenditures for maintenance were approximately $440,000 more in the first six
months of 2004 versus the same period in 2003, primarily because of maintenance
performed to prepare S/N 24 for re-lease or sale and payment for the Company's
share, under the lease, of maintenance work to be performed on S/N 751.

Insurance premiums

Expenditures for aircraft insurance for off-lease aircraft were approximately
$50,000 lower during the first six months of 2004 as compared to the same period
in 2003, because S/N 13, which had been off lease for most of the 2003 period,
was sold in January 2004.

Cash flow provided by investing activities was higher in the first six months of
2004 versus the first six months of 2003 because the Company sold S/N 13 in
January 2004 versus no such sales in 2003. There were no cash flows from
financing activities during the first six months of 2003. Cash flow used by
financing activities in 2004 consisted of the Company's cash transferred to the
Trustee in May 2004.

Outlook

As a result of its default under the indenture securing the Bonds, the Company
agreed to transfer title to the Company's unsold aircraft and all of its
remaining cash to the Trustee. The transfer was completed in May 2004.
Management of the aircraft portfolio and repayment of the Company's Bond
liabilities from the proceeds is now the responsibility of the Trustee. The
Company has been informed by the Trustee that the Trustee has sold three of the
aircraft. Two aircraft, one of which is on lease through November 2004, are
being marketed for sale. The Trustee may not be able to sell these aircraft in
the short term, and therefore, the only proceeds distributable until a purchaser
is found with respect to unsold aircraft may be monthly net lease rentals. The
Trustee may also experience expenses in order to effectively remarket the
aircraft, which would reduce net proceeds to the Bondholders.

It is likely that the total amount of sales proceeds received, when combined
with the Company's cash holdings of approximately $4,104,430 at the time of the
transfer of assets to the Trustee in May 2004, will not be sufficient to repay
the entire amount of the Bonds. Because the Bond indebtedness must be repaid
before any distributions can be made to the Preferred Shareholders, and there
are no other assets of the Company left to distribute to the Preferred
Shareholders, it is likely that the Preferred Shareholders will receive no
distributions or dividends with respect to their shares upon dissolution of the
Company, which is likely to occur later this year.

Since the Company has negligible assets and no additional sources of capital, it
has ceased  operations.  It does not intend to seek additional  capital to repay
remaining Bond indebtedness and resume  operations,  as such capital is unlikely
to be available.

Factors that May Affect Future Results

Event of Default; Ability to Maximize Returns. As discussed above, in "Outlook,"
shortly  after the maturity  date of the Bonds,  the  Trustee,  Wells Fargo Bank
Northwest,  National  Association,  declared an Event of Default under the Trust
Indenture. The Company,  pursuant to an agreement with the Trustee,  transferred
all of its assets to the Trustee,  which were collateral for the Bonds,  for the
benefit of the Bondholders in lieu of a judicial  repossession  proceeding.  The
Company's  assets securing the Indenture  consist of the aircraft  portfolio and
leases and all  remaining  cash held by the  Company.  The  Trustee  now has the
responsibility  to direct the  disposition  of the  collateral  with the goal of
maximizing  value to the  Bondholders.  While the Trustee is unlikely to realize
sufficient  proceeds to enable  repayment of the entire Note  Indebtedness,  its
ability to maximize  repayment  to  Bondholders  will depend on the risk factors
described  below,  particularly  those that affect asset values of the Company's
portfolio  or reduce  the cash  proceeds  that can be  applied  toward  the Bond
indebtedness.

Further Deterioration of the Air Travel Industry. The Trustee's ability to make
a substantial repayment on the Bonds will depend upon its ability to locate
buyers and consummate sales transactions. It appears likely that the Trustee
will be unable to repay the entire Bond indebtedness out of the aircraft
portfolio proceeds. Moreover, any further weakening of the industry could cause
the proceeds realized from the sale of aircraft to be even less than suggested
by the Company's recent appraisal.

Unexpected Expenses. Unanticipated events such as changes in governmental
regulations or casualties could create obligations for the Trustee as lessor or
owner of the aircraft and require the Trustee to immediately use funds in order
to comply with such obligations and reduce amounts available to repay the Bonds.
If there is an unanticipated expense with respect to the operations or any of
the remaining aircraft that is not covered by the lessee under its lease or by
appropriate insurance, the Trustee may be required to use cash reserves in order
to comply with its lease or other contractual obligations to lessees or other
obligations. Any significant unexpected expense may result in a decrease in
funds available to repay the Bondholder indebtedness at maturity.

Ownership Risks. Factors that could affect the short term value of the aircraft
are crucial to the ability of the Trustee to maximize its repayment to the
Bondholders. As discussed above, industry conditions will be an important
determining factor in the potential proceeds realizable from their sale. 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,
will be a significant factor in what proceeds could be realized from the
aircraft assets upon sale.

Inability to Sell Asset; Delay in Receiving Sale Proceeds. There is no assurance
that the Trustee will locate a willing buyer, or if one is located, that the
buyer will pay a price for the asset at least equal to the appraised value. The
Trustee could also determine that it is in the Bondholder's interest to retain
title to leased assets and collect rentals for distribution of proceeds, net of
Trustee expenses and aircraft operating and maintenance expenses not covered by
the lessee, to the Bondholders. In this case, the Bondholders could experience a
delay in receiving the full asset value of such retained asset until such time
as the Trustee deems it practicable and advisable to liquidate such on-lease
assets.

Lessee Credit Risk. If a lessee defaults upon its obligations under a lease, the
Trustee may be limited in its ability to enforce remedies. The Trustee's lessees
are small foreign regional passenger airlines, which may be even more sensitive
to airline industry market conditions than the major airlines. 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 Trustee 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
Trustee 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 Trustee'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 Trustee 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.

Leasing Risks. Demand for 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 prices 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 used aircraft in the recent past has been
and remains 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.

International Risks. The aircraft 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 Trustee 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 Trustee'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. Even with dollar-denominated lease
payment provisions, the Trustee 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.



<PAGE>



Item 3. Controls and Procedures

Quarterly evaluation of the Company's Disclosure Controls and Internal Controls.
As of the end of the period covered by this report, the Company evaluated the
effectiveness of the design and operation of its "disclosure controls and
procedures" ("Disclosure Controls"), and its "internal control over financial
reporting" ("Internal Controls"). This evaluation (the "Controls Evaluation")
was done under the supervision and with the participation of management,
including the Company's Chief Executive Officer ("CEO") and Chief Financial
Officer ("CFO"). Rules adopted by the SEC require that in this section of the
Report the Company present the conclusions of the CEO and the CFO about the
effectiveness of our Disclosure Controls and Internal Controls based on and as
of the date of the Controls Evaluation.

CEO and CFO Certifications. Attached as exhibits to this report are two separate
forms of "Certifications" of the CEO and the CFO. The first form of
Certification is required in accordance with Section 302 of the Sarbanes-Oxley
Act of 2002 (the "Section 302 Certification"). This section of the report which
you are currently reading is the information concerning the Controls Evaluation
referred to in the Section 302 Certifications and this information should be
read in conjunction with the Section 302 Certifications for a more complete
understanding of the topics presented.

Disclosure Controls and Internal Controls. Disclosure Controls are procedures
that are designed with the objective of ensuring that information required to be
disclosed in the Company's reports filed under the Securities Exchange Act of
1934 (the "Exchange Act"), such as this report, is recorded, processed,
summarized and reported within the time periods specified in the Securities and
Exchange Commission's ("SEC") rules and forms. Disclosure Controls are also
designed with the objective of ensuring that such information is accumulated and
communicated to the Company's management, including the CEO and CFO, as
appropriate to allow timely decisions regarding required disclosure. Internal
Controls are procedures which are designed with the objective of providing
reasonable assurance that (1) the Company's transactions are properly
authorized; (2) the Company's assets are safeguarded against unauthorized or
improper use; and (3) the Company's transactions are properly recorded and
reported, all to permit the preparation of the Company's consolidated financial
statements in conformity with generally accepted accounting principles.

Limitations on the Effectiveness of Controls. The Company's management,
including the CEO and CFO, does not expect that its Disclosure Controls or its
Internal Controls will prevent all errors and all fraud. A control system, no
matter how well conceived and operated, can provide only reasonable, not
absolute, assurance that the objectives of the control system are met. Further,
the design of a control system must reflect the fact that there are resource
constraints, and the benefits of controls must be considered relative to their
costs. Because of the inherent limitations in all control systems, no evaluation
of controls can provide absolute assurance that all control issues and instances
of fraud, if any, within the Company have been detected. These inherent
limitations include the realities that judgments in decision-making can be
faulty, and that breakdowns can occur because of simple error or mistake.
Additionally, controls can be circumvented by the individual acts of some
persons, by collusion of two or more people, or by management override of the
control. The design of any system of controls also is based in part upon certain
assumptions about the likelihood of future events, and there can be no assurance
that any design will succeed in achieving its stated goals under all potential
future conditions; over time, control may become inadequate because of changes
in conditions, or the degree of compliance with the policies or procedures may
deteriorate. Because of the inherent limitations in a cost-effective control
system, misstatements due to error or fraud may occur and not be detected.

Scope of the Controls Evaluation. The CEO/CFO evaluation of the Company's
Disclosure Controls and the Company's Internal Controls included a review of the
controls objectives and design, the controls implementation by the company and
the effect of the controls on the information generated for use in this report.
In the course of the Controls Evaluation, we sought to identify data errors,
controls problems or acts of fraud and to confirm that appropriate corrective
action, including process improvements, were being undertaken. This type of
evaluation will be done on a quarterly basis so that the conclusions concerning
controls effectiveness can be reported in the Company's quarterly reports on
Form 10-QSB and annual report on Form 10-KSB. The Company's Internal Controls
are also evaluated on an ongoing basis by other personnel in the Company's
finance organization and by the Company's independent auditors in connection
with their audit and review activities. The overall goals of these various
evaluation activities are to monitor the Company's Disclosure Controls and the
Company's Internal Controls and to make modifications as necessary; the
Company's intent in this regard is that the Disclosure Controls and the Internal
Controls will be maintained as dynamic systems that change (including with
improvements and corrections) as conditions warrant.

Among other matters, the Company sought in its evaluation to determine whether
there were any "significant deficiencies" or "material weaknesses" in the
Company's Internal Controls, or whether the Company had identified any acts of
fraud involving personnel who have a significant role in the Company's Internal
Controls. This information was important both for the Controls Evaluation
generally and because item 5 in the Section 302 Certifications of the CEO and
CFO require that the CEO and CFO disclose that information to the Audit
Committee of the Company's Board and to the Company's independent auditors and
to report on related matters in this section of the report. In the professional
auditing literature, "significant deficiencies" are referred to as "reportable
conditions"; these are control issues that could have a significant adverse
effect on the ability to record, process, summarize and report financial data in
the financial statements. A "material weakness" is defined in the auditing
literature as a particularly serious reportable condition where the internal
control does not reduce to a relatively low level the risk that misstatements
caused by error or fraud may occur in amounts that would be material in relation
to the financial statements and not be detected within a timely period by
employees in the normal course of performing their assigned functions. The
Company also sought to deal with other controls matters in the Controls
Evaluation, and in each case if a problem was identified, the Company considered
what revision, improvement and/or correction to make in accordance with our
on-going procedures.

In accordance with SEC requirements, the CEO and CFO note that, there has been
no significant change in Internal Controls that occurred during our most recent
fiscal quarter that has materially affected or is reasonably likely to
materially affect our Internal Controls.

Conclusions. Based upon the Controls Evaluation, the Company's CEO and CFO have
concluded that, subject to the limitations noted above, the Company's Disclosure
Controls are effective to ensure that material information relating to the
Company and its consolidated subsidiaries is made known to management, including
the CEO and CFO, particularly during the period when periodic reports are being
prepared, and that the Company's Internal Controls are effective to provide
reasonable assurance that the Company's consolidated financial statements are
fairly presented in conformity with generally accepted accounting principles.



<PAGE>



                                     PART II

                                OTHER INFORMATION

Item 6.  Exhibits and Reports on Form 8-K.

(a)      Exhibits
<TABLE>
<CAPTION>


                          Exhibit
                          Number                                       Description
<S>                        <C>           <C>

                           10.1          Letter Agreement between JetFleet III and Wells Fargo Bank, Northwest,
                                         as Indenture Trustee, dated April 8, 2004

                           31.1          Certification of Neal D. Crispin, President, Chief Financial Officer,
                                         pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.

                           32.1*         Certification of Neal D. Crispin, President, Chief Financial Officer,
                                         pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.

</TABLE>

* This certificate is furnished to, but shall not be deemed to be filed with,
the Securities and Exchange Commission.



 (b) Reports on Form 8-K

On June 2, 2004, the Company filed a Report on Form 8-K disclosing the
agreements whereby the Company transferred title to its five remaining aircraft
to Wells Fargo Bank, Northwest, NA as Indenture Trustee.




<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 16, 2004             By:     /s/ Neal D. Crispin
                                             -------------------------------
                                             Neal D. Crispin

                                     Title: President, Chief Financial Officer