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 March 31, 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>
<CAPTION>

                                                                ASSETS
                                                                           March 31,              December 31,
                                                                             1998                      1997
                                                                          (Unaudited)
<S>                                                                   <C>                      <C>    
Current assets:
         Cash                                                          $         730,204       $         539,626
         Deposits                                                                122,847                 107,913
         Rent receivable                                                          40,139                  48,903
         Accounts receivable                                                      22,728                  19,875
                                                                       -----------------       -----------------  
Total current assets                                                             915,918                 716,317

Aircraft under operating lease, net of
         accumulated depreciation of $911,869
         in 1998 and $761,600 in 1997                                         11,035,483              11,185,752
Debt issue costs, net of accumulated
         amortization of $384,988 in 1998
         and $327,833 in 1997                                                  1,276,464               1,333,619
Other, including deferred tax asset
         net of valuation allowance                                               65,000                  65,000
                                                                       -----------------       -----------------    
Total assets                                                           $      13,292,865       $      13,300,688
                                                                       =================       =================

                                                    LIABILITIES AND SHAREHOLDERS' EQUITY

Current liabilities:
         Accounts payable - trade                                      $           8,744       $          17,435
         Interest payable                                                        238,880                 238,880
         Prepaid rents                                                            81,840                  57,675
         Maintenance reserves                                                    146,511                 127,788
                                                                       -----------------       -----------------          
Total current liabilities                                                        475,975                 441,778

Medium-term secured bonds                                                     11,076,350              11,076,350
                                                                       -----------------       -----------------
Total liabilities                                                             11,552,325              11,518,128

Preferred stock, no par value,
         300,000 shares authorized, 195,465
         issued and outstanding                                                1,661,452               1,661,452
Common stock, no par value,
         1,000,000 shares authorized, 815,200
         issued and outstanding                                                  815,200                 815,200
Accumulated deficit                                                             (736,112)               (694,092)
                                                                       -----------------       ----------------- 
Total shareholders' equity                                                     1,740,540               1,782,560
                                                                       -----------------       -----------------
Total liabilities and shareholders' equity                              $     13,292,865       $      13,300,688
                                                                       =================       =================
See accompanying notes.
</TABLE>



<PAGE>
 
                                                            JETFLEET III
                                                       Statements of Operations
                                                              (Unaudited)

<TABLE>
<CAPTION>

                                                                     For the Three Months Ended March 31,
                                                                          1998                     1997
<S>                                                           <C>                       <C>        

Revenues:

         Rent income, net of finance charges                  $          569,310        $          385,544
         Interest income                                                  10,467                    40,650
                                                              ------------------        ------------------        
                                                                         579,777                   426,194
                                                              ------------------        ------------------

Expenses:

         Depreciation expense                                            150,269                    93,441
         Amortization expense                                             57,155                    46,100
         Interest expense                                                358,320                   317,257
         Professional fees                                                 1,875                     6,334
         Management fees                                                  48,866                    47,441
         General and administrative                                        5,312                       488
                                                             -------------------        ------------------ 
                                                                         621,797                   511,061
                                                             -------------------        ------------------
Net loss                                                     $           (42,020)       $         ( 84,867)
                                                             ===================        ==================
Weighted average common shares                                           815,200                   547,792
                                                             ===================        ==================
Net loss per common share                                    $            ( 0.05)       $           ( 0.15)
                                                             ===================        ==================



</TABLE>









See accompanying notes.
 


<PAGE>

                                                              JETFLEET III
                                                       Statements of Cash Flows
                                                              (Unaudited)

<TABLE>
<CAPTION>

                                                                        For the Three Months Ended March 31,
                                                                           1998                      1997
<S>                                                           <C>                       <C>    
Net cash provided by operating activities                     $          190,578        $           99,851

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

Financing activities:
         Proceeds from issuance of
            medium-term secured bonds                                          -                 1,625,200
         Debt issue costs                                                      -                  (162,520)
         Proceeds from issuance of preferred stock                             -                   286,800
         Offering costs                                                        -                   (28,680)
         Proceeds from issuance of common stock                                -                    95,600
                                                              ------------------        ------------------   
Net cash provided by financing activities                                      -                 1,816,400
                                                              ------------------        ------------------
Net increase in cash                                                     190,578                   924,701

Cash, beginning of period                                                539,626                   255,851
                                                              ------------------        ------------------
Cash, end of period                                           $          730,204        $        1,180,552
                                                              ==================        ==================

Supplemental schedule of noncash investing and financing activities:

During  the first  quarter of 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.

</TABLE>
















See accompanying notes.


<PAGE>

                                 JETFLEET III                                 
                          Notes to Financial Statements
                                 March 31, 1998
                                   (Unaudited)


1.   Basis of presentation

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

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

2.   Organization and Capitalization

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

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

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



<PAGE>


                                 JETFLEET III
                          Notes to Financial Statements
                                 March 31, 1998
                                   (Unaudited)


3.   Aircraft and Aircraft Engines Under Operating Leases

     Aircraft and aircraft engines

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

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

     Aircraft and aircraft engines leases

     S/N 13 is subject to a 120-month  lease with the  seller.  The S/N 13 lease
may be terminated by either party,  with at least 120 days prior written notice,
at the end of the first 36  months of the  lease.  The  seller  also has a fixed
purchase  option at the end of the first 36  months of the  lease,  which may be
exercised with at least 90 days prior written notice.

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

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

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

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

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

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

4.   Medium-term secured bonds

     Each $1,000 Unit  subscribed in the Offering  included an $850  medium-term
secured bond  maturing on November 1, 2003.  During 1997,  the Company  accepted
subscriptions for 2,310 Units aggregating $2,310,000 in Gross Offering Proceeds.
Pursuant to the Prospectus,  the Company subsequently issued $1,963,500 in Bonds
and 40,050 shares of Preferred  Stock. The Bonds bear interest at an annual rate
of 12.94%  which is due and payable on a  quarterly  basis,  in arrears,  on the
first business day of November, February, May and August. The carrying amount of
the notes payable approximates fair value.


<PAGE>

                                  JETFLEET III
                          Notes to Financial Statements
                                 March 31, 1998
                                   (Unaudited)


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  quarters of 1998 and 1997,  the Company
paid a total of $48,866 and $47,441, 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 quarter of 1998, it did not pay any brokerage fees or
Chargeable  Acquisition Expenses to JMC. The Company paid JMC $77,622 and $3,350
for brokerage fees and Chargeable Acquisition Expenses, respectively, during the
first quarter of 1997.

     As  discussed  in Note 1, the  Company  reimburses  JMC for  certain  costs
incurred in connection  with the  organization  of the Company and the Offering.
Because the  Offering  was closed to new  subscriptions  during  June 1997,  the
Company did not reimburse JMC for any organization and offering  expenses during
the first quarter of 1998.  The Company  reimbursed JMC $38,240 during the first
quarter of 1997.

<PAGE>



 

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

     Capital Resources and Liquidity
 
     On March 31,  1998,  the Company had cash  balances  of  $853,051.  Of this
amount,  $122,847 was deposits which represent  maintenance  reserves  collected
from lessees and interest earned on those funds, as applicable. The remainder of
the Company's cash balance was held  primarily for the interest  payment made to
the Unitholders in May 1998 and for normally recurring expenses.
 
     Since  Inception,  the Company's  funds have come in the form of an initial
contribution from JMC, proceeds from the Offering and rental revenue from
the Income Producing  Assets purchased using those proceeds.  The Company's
liquidity will vary in the future, increasing to the extent cash flows from
operations exceed expenses, and decreasing as interest payments are made to
the Unitholders and to the extent expenses exceed cash flows from leases.
 
     The Company's primary use of its operating cash flow is interest payments
to its Unitholders. Excess cash flow, after payment of interest and operating 
expenses is held for investment in additional Income Producing Assets. Since the
Company has acquired Income Producing Assets which are subject to triple net
leases (the lessee pays operating and maintenance expenses, insurance and
taxes), the Company does not anticipate that it will incur significant operating
expenses in connection with ownershipof its Income Producing Assets as long as
they remain on lease.
 
     The Company currently has available adequate reserves to meet its immediate
cash requirements. The leases for the Company's aircraft expire at varying times
between  November  1998 and  November  2001.  Although  S/N 13 is  subject  to a
120-month  lease,  the lease may be terminated by either the lessor or lessee at
the end of the first 36 months with at least 120 days prior written notice.  The
seller also has a fixed purchase option at the end of the first 36 months of the
lease, which may exercised with at least 90 days prior written notice.
 
     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 quarter 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  ($42,020)  or  ($0.05)  per share and
($84,867)  or ($0.15)  per share for the three  months  ended March 31, 1998 and
1997, respectively.

     1998 versus 1997

     Rental income  increased as a result of the  additional  rent received from
aircraft  purchased during 1997.  Interest income decreased in 1998 because,  at
the end of January 1997,  the Company  exercised its purchase  options for three
aircraft which  previously  served as collateral  for three secured loans.  As a
result,  the Company  recognized  no interest  income for the loans during 1998,
compared to one month of interest income during 1997.

     Amortization  and  depreciation  increased from year to year as a result of
the additional funds raised during 1997 and the depreciable  aircraft  purchased
with those funds. Interest expense and management fees also increased in 1998 as
a result of the additional proceeds raised.

     Factors that May Affect Future Results 

     Year  2000  Considerations.   The  Company's  internal  and  administrative
operations are not highly dependent on advanced  technological computer or other
electronic systems,  and,  consequently,  management believes that the Company's
exposure  to loss as a result of Year 2000 issues is not  significant.  Further,
management  believes that the electronic systems used in the equipment leased by
the  Company  to  lessees  will not be  affected  by the Year 2000  issue,  and,
therefore,  this  issue  should not  directly  affect  the  Company's  financial
performance  or the  lessees'  ability  to comply  with their  respective  lease
obligations.  Of course, to the extent that a lessee has Year 2000 problems that
significantly  adversely  affect its overall  financial  status,  such  material
problems may affect the lessee's  operations and increase the risk of default by
a lessee  under its lease with the  Company.  Furthermore,  Year 2000 issues may
have a material  impact on FAA  operations  and the  operations  of certain  air
carriers,  which in turn  would  negatively  affect  the  aircraft  industry  in
general.

Part II.  Other Information

Item 1.  Legal Proceedings

         None.

Item 2.  Changes in Securities

         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

         a.    Exhibits

          Exhibit 27.      Financial Data Schedule

         b.    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

May 14, 1998                         By: /s/ Neal D. Crispin
Date                                    ---------------------------------------
                                        Neal D. Crispin, President and Chairman 
                                        of the Board of Directors of the
                                        Registrant, Chief Financial Officer