<PAGE>

                                  UNITED STATES
                       SECURITIES AND EXCHANGE COMMISSION
                             WASHINGTON, D.C. 20549

                                   FORM 10-QSB

                  QUARTERLY REPORT UNDER SECTION 13 or 15(d) OF
                       THE SECURITIES EXCHANGE ACT OF 1934

                FOR THE QUARTERLY PERIOD ENDED SEPTEMBER 30, 2003
                                ____________________

                       Commission file number: 33-49261-D

                        TRANSITION AUTO FINANCE II, INC.
        (EXACT NAME OF SMALL BUSINESS ISSUER AS SPECIFIED IN ITS CHARTER)

               TEXAS                                  75-2753067
      (State of incorporation)           (I.R.S. employer identification number)

     8144 Walnut Hill Lane, SUITE 680,
               DALLAS, TEXAS                              75231
  (Address of principal executive offices)             (Zip code)

                   Issuer's telephone number, including area code: (214)360-9966

Check whether the registrant (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 [ ]

State the number of shares outstanding of each of the issuer's classes of Common
equity, as of the latest practicable date: As September 30, 2003, the issuer'
had 1,000 shares of common stock

    TRANSITIONAL SMALL BUSINESS DISCLOSURE FORMS (CHECK ONE): YES [ ] No [X]


<PAGE>

                        TRANSITION AUTO FINANCE II, INC.

                                   FORM 10-QSB

                    FOR THE QUARTER ENDED SEPTEMBER 30, 2003

<TABLE>
<CAPTION>
                                                                                                                   Page No.
                                                                                                                   --------
<S>                                                                                                                <C>
PART I.  FINANCIAL INFORMATION

         ITEM 1.  Financial Statements

                  Balance Sheets..................................................................................    3
                    September 30, 2003 (Unaudited) and December 31, 2002

                  Statements of Income (Unaudited)................................................................    5
                    Quarter and nine months ended September 30, 2003 and September 30, 2002

                  Statements of Cash Flows (Unaudited)............................................................    6
                    Nine Months ended September 30, 2003 and September 30, 2002

                  Notes to Financial Statements (Unaudited).......................................................    7

         ITEM 2.  Management's Discussion and Analysis of Financial Condition and Results of
                  Operations.....................................................................................    11

         ITEM 3.  Controls and Procedures........................................................................    13

PART II. OTHER INFORMATION

         ITEM 1.  Legal Proceedings..............................................................................    13

         ITEM 2.  Changes in Securities and Use of Proceeds......................................................    13

         ITEM 3.  Defaults Upon Senior Securities................................................................    14

         ITEM 4.  Submission of Matters to a Vote of Security Holders............................................    14

         ITEM 5.  Other Information..............................................................................    14

         ITEM 6.  Exhibits and Reports on Form 8-K...............................................................    14

         Signatures..............................................................................................    15
</TABLE>

         In the opinion of management, all adjustments necessary to fair
statement of the results for interim periods presented have been reflected in
these financial statements.

<PAGE>

                          PART I. FINANCIAL INFORMATION

                          ITEM 1. FINANCIAL STATEMENTS

                        TRANSITION AUTO FINANCE II, INC.

                                 BALANCE SHEETS

                                     ASSETS

<TABLE>
<CAPTION>
                                                       9 months ended           FYE
                                                          9/30/2003          12/31/2002
                                                         (unaudited)        (See Note 1)
                                                       --------------     ---------------
<S>                                                    <C>                <C>
CURRENT ASSETS
  Cash and cash equivalents                            $      282,774     $       573,137
  Accounts receivable, net of allowance for doubtful
    accounts of $354,803 and $354,803 respectively            346,835             345,134
  Vehicles held for sale                                      122,657              47,285
  Other Assets                                                  9,874              31,250
                                                       --------------     ---------------
      Total Current Assets                                    762,140             996,806
                                                       --------------     ---------------
PROPERTY, at cost
  Vehicles leased                                             603,309           1,542,247
  Less accumulated depreciation                              (465,559)           (824,131)
                                                       --------------     ---------------
      Net Property                                            137,750             718,116
                                                       --------------     ---------------
OTHER ASSETS
  Due from an affiliate                                           -0-               9,286
                                                       --------------     ---------------
      Total other assets                                          -0-               9,286
                                                       --------------     ---------------
TOTAL ASSETS                                           $      899,890     $     1,724,208
                                                       ==============     ===============
</TABLE>

                                       3

<PAGE>




                        TRANSITION AUTO FINANCE II, INC.

                           BALANCE SHEETS (Continued)

                 LIABILITIES AND STOCKHOLDERS' EQUITY (DEFICIT)

<TABLE>
<CAPTION>

                                                                                  9 Months Ended       FYE
                                                                                    9/30/2003       12/31/2002
                                                                                   (Unaudited)     (See Note 1)
                                                                                  -------------    -------------
<S>                                                                               <C>              <C>
CURRENT LIABILITIES
  Accrued liabilities                                                             $       1,204    $      24,576
  Investor notes payable                                                              5,243,800        5,966,000
  Deferred revenue                                                                       17,299           85,954
                                                                                  -------------    -------------
        Total Current Liabilities                                                     5,262,303        6,076,530
                                                                                  -------------    -------------

OTHER LIABILITIES
  Due to affiliate                                                                       63,349           47,301
                                                                                  -------------    -------------
      Total Other Liabilities                                                            63,349           47,301
                                                                                  -------------    -------------

TOTAL LIABILITIES                                                                     5,325,652        6,123,831
                                                                                  -------------    -------------
SUBORDINATED DEBT TO AFFILIATE                                                          371,330          371,330
                                                                                  -------------    -------------
STOCKHOLDERS' EQUITY (DEFICIT)
   Common stock, $.10 par value, 1,000 shares authorized,
      issued and outstanding                                                                100              100
   Additional paid-in capital                                                               900              900
   Retained earnings (deficit)                                                       (4,798,092)      (4,771,953)
                                                                                  -------------    -------------
       Total Stockholders' Equity (Deficit)                                          (4,797,092)      (4,770,953)
                                                                                  -------------    -------------
TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY
   (DEFICIT)                                                                      $     899,890    $   1,724,208
                                                                                  =============    =============
</TABLE>

Note 1: The balance sheet at December 31, 2002, as presented, is derived
from the audited financial statements at that date.

See accompanying notes to financial statements.

                                       4

<PAGE>

                        TRANSITION AUTO FINANCE II, INC.

                              STATEMENTS OF INCOME

                                   (Unaudited)

<TABLE>
<CAPTION>
                                                Quarter Ended       Nine Months Ended        Quarter Ended       Nine Months Ended
                                              September 30, 2003    September 30, 2003     September 30, 2002    September 30, 2002
                                              ------------------    ------------------     ------------------    ------------------
<S>                                           <C>                   <C>                    <C>                   <C>
REVENUES

  Vehicle monthly lease payments              $           46,685    $          200,613     $          156,439    $         604,035
  Amortization of down payments                            3,266                33,933                 33,797              184,060
                                              ------------------    ------------------     ------------------    -----------------

        Total Revenues                                    49,951               234,546                190,236              788,095
                                              ------------------    ------------------     ------------------    -----------------
OPERATING EXPENSES

  Operating costs                                          4,062                15,407                 22,349               55,833
  General and administrative                               1,425                49,959                 28,771               82,383
  Depreciation and amortization                           27,955               123,270                 97,838              531,967
                                              ------------------    ------------------     ------------------    -----------------
        Total Operating Expenses                          33,442               188,636                148,958              670,183
                                              ------------------    ------------------     ------------------    -----------------

Operating Income (Loss)                                   16,509                45,910                 41,278              117,912
                                              ------------------    ------------------     ------------------    -----------------
OTHER INCOME (EXPENSE)

Investment income                                            397                 1,683                  1,042                1,270
Other income (expense)                                         1                    18                     22                   87
Interest expense                                             -0-                   -0-                    -0-             (301,602)
Loss on sale of inventory                                (10,652)              (73,752)               (43,374)            (202,311)
                                              ------------------    ------------------     ------------------    -----------------
       Total Other Income (Expense)                      (10,254)              (72,051)               (42,310)            (502,556)
                                              ------------------    ------------------     ------------------    -----------------

Provision for Federal Income Taxes                           -0-                   -0-                    -0-                  -0-
                                              ------------------    ------------------     ------------------    -----------------

Net Profit (Loss)                             $            6,255    $          (26,141)    $           (1,032)   $        (384,644)
                                              ==================    ==================     ==================    =================

Profit (Loss) per share (basic and diluted)   $             6.26    $           (26.14)    $            (1.03)   $         (384.64)
                                              ==================    ==================     ==================    =================
</TABLE>

See accompanying notes to financial statements.

                                       5

<PAGE>

                        TRANSITION AUTO FINANCE II, INC.

                            STATEMENTS OF CASH FLOWS

                                   (Unaudited)

<TABLE>
<CAPTION>
                                                               9 Months Ended        9 Months Ended
                                                              September 30, 2003   September 30, 2002
                                                              ------------------   ------------------
<S>                                                           <C>                  <C>
CASH FLOWS FROM OPERATING ACTIVITIES
Net loss                                                      ($         26,141)   ($        384,644)
Adjustments to reconcile net income to net cash provided by
  operating activities:
     Depreciation and amortization                                      123,270              531,967
     Amortization of down payments                                      (33,933)            (184,060)
     Impairment loss                                                        -0-                  -0-
     Provision for allowance for doubtful accounts                        2,579                  -0-
     (Gain) loss on sale of property                                     73,752              202,311
Net changes in operating assets and liabilities:
     Accounts receivable                                                 (1,701)            (182,833)
     Other Assets                                                        21,376               31,890
     Accrued liabilities                                                (23,372)             (47,657)
     Deferred revenue                                                   (34,722)              18,073
                                                              -----------------    -----------------
NET CASH PROVIDED (USED) BY OPERATING ACTIVITIES                        101,108              (14,953)

CASH FLOWS FROM INVESTING ACTIVITIES
   Purchase of fixed assets                                                 -0-                 (800)
   Cash proceeds from sale of property                                  305,393              814,571
                                                              -----------------    -----------------
NET CASH PROVIDED (USED) BY INVESTING ACTIVITIES                        305,393              813,771

CASH FLOWS FROM FINANCING ACTIVITIES
   Proceeds from issuance of common stock                                   -0-                  -0-
   Net advances (payments) to affiliates                                 25,336              (51,485)
   Debt issuance costs                                                      -0-                  -0-
   Proceeds from notes payable                                              -0-                  -0-
   Payments of Notes Payable                                           (722,200)            (456,000)
                                                              -----------------    -----------------
NET CASH PROVIDED BY FINANCING ACTIVITIES                              (696,864)            (507,485)
                                                              -----------------    -----------------
NET INCREASE (DECREASE) IN CASH                                        (290,363)             291,333

CASH AND CASH EQUIVALENTS, beginning of period                          573,137              263,633
                                                              -----------------    -----------------
CASH AND CASH EQUIVALENTS, end of period                      $         282,774    $         554,966
                                                              =================    =================
CASH PAID DURING THE YEAR FOR
   Interest                                                   $             -0-   $          363,348
                                                                                   =================
   Income taxes                                               $             -0-   $              -0-
                                                                                   =================
</TABLE>

NON-CASH INVESTING ACTIVITIES

Vehicle with a net book value of $52,382 were reclassified from vehicles held
for sale to vehicles leased as of September 30, 2003.

Vehicle purchases during the nine months ended September 30, 2002 with a net
book value of $97,144 were reclassified from vehicles leased to vehicles held
for sale.

See accompanying notes to financial statements.

                                        6

<PAGE>

                        TRANSITION AUTO FINANCE II, INC.

                          NOTES TO FINANCIAL STATEMENTS

NOTE 1:  BUSINESS ACTIVITY

         The Company was established to purchase motor vehicles and automobile
         lease contracts, collect and service automobile lease contracts and
         remarket motor vehicles upon termination of their leases. A summary of
         the significant accounting policies consistently applied in the
         preparation of the accompanying financial statements follows.
         Transition Leasing Management, Inc. (TLMI) owns 100% of the Company's
         common stock.

NOTE 2:  SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

         CASH AND CASH EQUIVALENTS

                  For purposes of the statement of cash flows, the Company
                  considers all highly liquid investments with a maturity of
                  three months or less when purchased to be cash equivalents.

                  The Company maintains cash balances at financial institutions
                  in Dallas, Texas. Accounts at the institutions are insured by
                  the Federal Deposit Insurance Corporation up to $100,000. The
                  Company has not experienced any losses in such accounts and
                  believes it is not exposed to any significant credit risk on
                  cash and cash equivalents.

                  As of June 30, 2003, all cash balances are restricted in
                  nature and managed by Trust Management due to Company in
                  default of their Indenture Agreement. All cash distributions
                  from these accounts must be authorized by the Trust Management
                  and are for the sole purpose of repaying investor notes
                  payable after any authorized expenses have been paid.

         REVENUE

                  The vehicles are leased to individuals under leases with terms
                  ranging from thirty-six to forty-two months. The leases are
                  considered to be operating leases. At the end of the lease
                  period, the lessee may purchase the equipment at the
                  contractual residual value plus any other outstanding items
                  due. Monthly lease payments are recognized as revenue in the
                  month that the payments are due. The vehicle leases require a
                  down payment from the lessee at the inception of the lease.

                  The down payments are initially recorded as deferred revenue
                  and then recognized as income over the term of the leases on a
                  straight-line basis.

                                        7

<PAGE>

                        TRANSITION AUTO FINANCE II, INC.

                          NOTES TO FINANCIAL STATEMENTS
                                   (Continued)

NOTE 2:  SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
         (CONTINUED)

         ACCOUNTS RECEIVABLE

                  The Company provides for uncollectible accounts receivable
                  using the allowance method of accounting for bad debts. Under
                  this method of accounting, a provision for uncollectible
                  accounts is charged to earnings. The allowance account is
                  increased or decreased based on past collection history and
                  management's evaluation of accounts receivable. All amounts
                  considered uncollectible are charged against the allowance
                  account and recoveries of previously charged-off accounts are
                  added to the allowance.

         VEHICLES HELD FOR SALE

                  Vehicles held for sale are leased vehicles in which the lease
                  term has expired or that have been repossessed. Vehicles held
                  for sale are valued at the lower of cost or fair value. Cost
                  of these vehicles is the net book value of the vehicle after
                  it has been returned to the Company either through
                  repossession or early termination of the lease. Generally the
                  Company will sell these vehicles at auction.

         PROPERTY

                  Property consists of leased vehicles, which are stated at cost
                  less accumulated depreciation. Depreciation is provided in
                  amounts sufficient to relate the cost of depreciable assets to
                  operations over their estimated service lives using the
                  straight-line-method. Leased vehicle depreciation is
                  calculated over the term of the vehicle lease, using the cost
                  of the vehicle less the estimated residual value of the
                  vehicle at the end of the lease. Present leases have terms
                  ranging from thirty-six to forty-two months.

         OTHER ASSETS

                  Other assets include debt issuance costs incurred in
                  connection with the Company's offering of securities filed
                  with the Securities and Exchange Commission. These costs are
                  being amortized, on a straight-line basis, over the term of
                  the debt securities which matured on June 30, 2002. These were
                  fully amortized as of September 30, 2003.

         DEFERRED REVENUE

                  Deferred revenue consists of down payments made by lessees at
                  the inception of the lease. The down payments are amortized
                  over the lease term. Lease terms range from thirty-six to
                  forty-two months.

                                        8

<PAGE>

                        TRANSITION AUTO FINANCE II, INC.

                          NOTES TO FINANCIAL STATEMENTS
                                   (Continued)

NOTE 2:  SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
         (CONTINUED)

         FAIR VALUE OF FINANCIAL INSTRUMENTS

                  Fair values of financial instruments are estimated to
                  approximate the related book value, unless otherwise
                  indicated, based on market information available to the
                  Company.

         USE OF ESTIMATES

                  In preparing the Company's financial statements, management is
                  required to make estimates and assumptions that affect the
                  reported amounts of assets and liabilities, the disclosure of
                  contingent assets and liabilities at the date of the financial
                  statements, and the reported amounts of revenues and expenses
                  during the reporting period. Actual results could differ from
                  these estimates.

         CONCENTRATION OF CREDIT RISK

                  A majority of the lessees are residents of the Dallas/Fort
                  Worth Metroplex. Vehicles are used as collateral for leases.

NOTE 3:  INVESTOR NOTES PAYABLE

         The Company has issued fixed rate redeemable asset-backed notes
         (Investor Notes). During the third Quarter ended September 30, 2003,
         approximately $219,800 was repaid to investors. The remaining balance
         as of September 30, 2003 was $5,243,800.

         These Investor Notes were issued pursuant to a public offering on Form
         SB-2 under the Securities Act of 1933. The Investor Notes bear interest
         at the rate of 11%. Interest is payable monthly on the 15th day of each
         month.

         The Investor Notes were issued at various times during 1999 and 1998,
         however the maturity date for all of the Investor Notes is June 30,
         2002. The Investor Notes are collateralized by the following:

                  1.       Automobile contracts for the leasing of new or late
                           model automobiles.

                  2.       The leased vehicles.

         The Investors Notes matured on June 30, 2002 and the Company was unable
         to pay the remaining debt. The Company is in default on the investor
         notes payable as of September 30, 2003. As of that date all income from
         leasing activities is used to repay Investor Notes. All Company
         disbursements require approval of Trust Management.

                                       9

<PAGE>

                        TRANSITION AUTO FINANCE II, INC.

                          NOTES TO FINANCIAL STATEMENTS
                                   (Continued)

NOTE 4:  INCOME TAX

         The Company is a corporation subject to federal and state income taxes.
         The Company and its parent intend to file a consolidated tax return.
         Each company in the consolidated group determines its taxable income or
         loss, on a separate company basis, and the consolidated tax liability
         is allocated to each company with taxable income in proportion to the
         total of the taxable income amounts.

         The Company has a deferred tax asset as of $413,000 and $1,472,000 as
         of December 31, 2002 and 2001 (primarily from net operating loss
         carry-forward), which has been completely offset by recognition of a
         valuation allowance.

         The Company has a net operating loss (NOL) carry-forward of
         approximately $2,000,000 and $1,264,000 for the year ended December 31,
         2002 and the year ended December 31, 2001, respectively. The Company's
         NOL carry-forward expires between December 31, 2012 and December 31,
         2022.

NOTE 5:  SUBORDINATED DEBT TO AFFILIATE

         The Company assumed a liability of $371,330 due to TLMI. This debt is
         subordinated to all other Company liabilities and cannot be repaid
         before any other creditors or investors.

NOTE 6:  GOING CONCERN

         The accompanying financial statements have been prepared in conformity
         with U.S. generally accepted accounting principles, which contemplates
         continuation of the Company as a going concern. The Company has
         sustained recurring losses from operations, negative working capital, a
         negative equity position and has defaulted on investor notes payable
         that were due in 2002. Management intends to service existing leases
         and attempt to raise additional capital and or secure additional
         financing in order to continue repayment of the investor notes payable.
         Management recognizes that full payment may take several years to
         complete and that full repayment may not occur. This situation raises
         substantial doubt about the Company's ability to continue as a going
         concern.

                                       10

<PAGE>


ITEM 2.  MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
         OF OPERATIONS

         The following discussions and analysis relates to factors that have
affected the operating results of the Company for the quarter ended and
nine-month period ended September 30, 2003. The balance sheet at December 31,
2002, as presented, is derived from the audited financial statements at that
date.

General.

         As of December 31, 1999, the Company had sold $10,000,000 of its 11%
Redeemable Secured Notes. In February of 1999 the Company also purchased 116
lease contracts from Transition Auto Finance, Inc. for $2,883,000.

Results of Operations: Three months ended September 30, 2003, compared to three
months ended September 30,2002

         For the three months ended September 30, 2003 the company had received
monthly contract lease payments of $46,685 and amortization of down payments of
$3,266. For the same period in 2002, the Company had contract lease income of
$156,439 and amortization of down payments of $33,797. The drop in monthly
contract lease payments for the three month period ended September, 30, 2003,
compared to the same period in 2002, was the result of a decline in the number
of active leases due to increased repossessions, early terminations and matured
leases.

         Operating costs including general and administrative expenses were
$5,487 for the third quarter of 2003 compared to $51,120 for the same period in
2002. The decline in expenses for the 2003 period was a result of lower
marketing fees and the reduced cost of servicing a smaller lease portfolio.
Although TLMI has deferred its service fees, it has accrued such fees and they
are included in the total expenses for the 2003 period.

         Depreciation and amortization was $27,955 for the three months ended
September 30, 2003, compared to $97,838 for the same period in 2002. The decline
of $69,883, for the third quarter of 2003 was due to fewer active leases, the
result of repossessions, early terminations and matured leases.

         Interest expense for the three months ended September 30, 2003, was
$-0- compared to $-0- for the same period in 2002. As a result of the Company's
default on June 30, 2002, all funds received, after allowed expenses, are paid
to the Trustee, and interest is no longer accrued or paid.

         Loss on sale of inventory for the third quarter of 2003 was $10,652
compared to a loss of $43,374 for the same period in 2002. Loss on sale of
inventory occurs when the book value of the asset exceeds the market value of
the repossessed vehicle. The reduced loss for the 2003 period was the result of
fewer vehicles being sold for the period.

         The net profit for the third quarter ended September 30, 2003 was
$6,255 compared to a loss of $1,032 for the same period in 2002. The profit in
the 2003 period is primarily the results of a decrease in operating costs and
depreciation for that period.

Results of Operations: Nine- month period ended September 30, 2003 compared to
the nine months ended September 30, 2002

         Total revenue for the nine months ended September 30, 2003 was $234,546
compared to $788,095 for the same period in 2002. The decrease in revenue for
the 2003 period was the result of fewer leases on the books resulting in lower
monthly payments and amortization of down payments.

         Operating costs and expenses were $65,366 for the nine-month period
ended September 30, 2003 compared to $138,216 for the same period in 2002. The
decrease in operating costs in 2003 was primarily the result of fewer active
leases in the 2003 period and the lower costs of servicing those leases.

         Depreciation and amortization for the nine months ended September 30,
2003 was $123,270 compared to $531,967 for the same period in 2002. The decrease
in depreciation for the 2003 period was due to a smaller portfolio of leases.

                                       11

<PAGE>

         Interest expense for the nine months ended September 30, 2003 was $-0-
compared to $301,602 for the same period in 2002. As a result of the Company's
default on June 30, 2003 interest is no longer paid or accrued.

         Loss on sale of inventory for the nine month ended September 30, 2003
was $73,752 compared to $202,311 loss for the same period in 2002. The decrease
of $128,559 for the 2003 period was the result of a smaller portfolio of leases
and consequently a fewer number of repossessions.

         The Company had a loss of $26,141 for the nine months ended September
30, 2003 compared to a loss of $384,644 for the same period in 2002. The
decreased loss for the 2003 period was primarily the reduction in expenses and
depreciation for 2003 which was brought about by the smaller portfolio in the
2003 period.

         On June 30, 2002, TAF II, Inc. defaulted on its $10,000,000 11%
Redeemable Secured Notes. At the time of the default the company had paid to
investors a total of $7,058,413. This figure is comprised of $3,338,413 in
interest and $3,720,000 of principal. As of September 30, 2003 the total amount
paid to note-holders was $8,446,613. The Company estimates that its remaining
lease portfolio will generate approximately $200,000 in additional funds. The
exact amount of additional funds is indeterminable since the number of leases
that will go to term is unknown at this time. The trustee currently holds
$254,311 in note-holder funds.

         The adverse economic effects of the current recession and events of
September 11, resulted in an unusually high number of early lease payoffs and
automobile repossessions. The major reasons for the excessive early payoffs and
repossessions appear to have been (1) the weak economy, and (2) low-cost
incentive financing (such as "zero financing") offered by new car manufacturers.
The weak economy hurt the personal finances of many customers causing an
increased number of repossessions, while low-cost incentive financing enticed
many other customers to purchase new cars, which resulted in these customers
paying off their leases early. Additionally, low-cost financing negatively
impacted used car prices by flooding the market with late model cars.

         The early payoffs and repossessions were not, by themselves,
extraordinary. What was extraordinary - and unprecedented - was the pace and
rate at which these early payoffs and repossessions occurred. Most damaging,
however, was the timing of the excessive early payoffs and repossessions, which
began to accelerate in September 2000. Under the terms of the indenture that
governs the notes, all payments after August 2000, from early payoffs and
repossessions had to be returned to the note-holders rather than retained by the
company for further investment. This "sinking fund" provision in the indenture
had a devastating effect on the company's capital, and stripped the company of
its ability to generate sufficient cash flow to repay the notes.

         The company worked on a plan that would have extended the maturity of
the notes and the reinvestment period, and lowered the interest rate. The effect
of these changes should have increased the ultimate amount of funds available
for note repayment but since these modifications would require 100% approval of
the note-holders, the plan was never submitted to the note-holders.

Liquidity and Capital Resources

         During the nine months ended September 30, 2003 the Company provided
cash of $305,393 in its investing activities from the sale of property and used
$696,864 in its financing activities.  For the same period in 2002, the Company
utilized cash of  $813,771 in its investing activities and used $507,485 in its
financing activities.

                The Company's portfolio, which consisted of 481 leases, included
381 leases which resulted in early terminations and 22 leases that are currently
active. The Company has had 78 leases which have gone to term.  The information
on the Company's experience with respect to early terminations is set forth
below

<TABLE>
<CAPTION>
                                                                                 Vehicle
                 # of      Gross Cost    Misc.        Total          Down          Sale
              Contracts    Of Vehicle   Expenses     Payments      Payment        Amount
<S>           <C>          <C>          <C>         <C>           <C>           <C>
Repossession        232    $5,542,673   $147,237    $2,732,647    $1,094,080    $2,449,836
Early Payoff        149    $3,248,998   $  6,106    $1,763,678    $  688,322    $2,069,249
              ---------    ----------   --------    ----------    ----------    ----------
Total               381    $8,791,671   $153,343    $4,496,325    $1,782,402    $4,519,085

<CAPTION>
                                                     Total
              Sales Tax   Warranty    Marketing     Amount        Profit
                Credit     Rebate     Fee Paid     Received       (Loss)
<S>           <C>         <C>         <C>          <C>          <C>
Repossession    $109,968    $59,348    $609,156   $ 5,836,723   $  146,813
Early Payoff    $ 99,242    $15,805    $378,555   $ 4,257,741   $1,002,637
                --------    -------    --------   -----------   ----------
Total           $209,210    $75,153    $987,711   $10,094,464   $1,149,450
</TABLE>

                                       12

<PAGE>

Note:    The above results on early termination does not include any allowance
         for interest expense

         At September 30, 2003 the company had 22 active leases remaining on its
books. If all of the 22 leases go to term, they would generate approximately
$269,854. It is impossible to determine how many, if any, will go to term.

         This report contains various forward looking statements and information
that are based on management's belief as well as assumptions made by and
information currently available to management. Although the Company believes
that the expectations reflected in such forward-looking statements are
reasonable, it can give no assurance that such expectations will prove to have
been correct. Such statements are subject to certain risks, uncertainties and
assumptions. Should one or more of these risks or uncertainties materialize, or
should underlying assumptions prove incorrect, actual results may vary
materially from those expected. Among the key factors that may have a direct
bearing on the Company's operating results are fluctuations in the economy and
in the level of activity in the automobile and consumer finance industry, demand
for the Company's products, the impact of competition and interest rate
fluctuations.

ITEM 3.  CONTROLS AND PROCEDURES

         Under the supervision and with the participation of our management,
including our principal executive officer and principal financial officer, we
conducted an evaluation of the effectiveness of the design and operation of our
disclosure controls and procedures, as defined in Rules 13a-14(C) and 15d under
the Securities Exchange Act of 1934, within 90 days of the filing date of this
report (the "Evaluation Date"). Based upon this evaluation, our principal
executive and principal financial officers concluded as of the Evaluation Date
that our disclosure controls and procedures were effective such that the
material information required to be included in our Securities and Exchange
Commission ("SEC") reports is recorded, processed, summarized and reported
within the time periods specified in SEC rules and forms relating to the
Company.

         In addition, there were no significant changes in our internal controls
or in other factors that could significantly affect these controls subsequent to
the Evaluation Date. We have not identified any significant deficiencies or
material weaknesses in our internal controls and therefore, there were no
corrective actions taken.

PART II. OTHER INFORMATION

ITEM 1. LEGAL PROCEEDINGS

         Although the Company is not a party to any material legal proceedings,
it is possible that one or more note-holders may institute legal action against
the company in light of the default of the company's notes.

ITEM 2. CHANGES IN SECURITIES AND USE OF PROCEEDS

         (a) Not Applicable

         (b) Not Applicable

         (c) Not Applicable

         (d) The company applied 90% of the gross proceeds from the sale of the
         Notes to the purchase or acquisition of the Leased Vehicles and the
         contracts. The Company paid to the Underwriter sales commissions of 6%
         of the principal amount of the Notes sold by the Underwriter.
         Additionally, the Company reimbursed the Underwriter for certain
         expenses incurred in connection with its due diligence activities with
         regard to the Offering of 2.5% of the aggregate principal amount of the
         Notes sold. The Company also used 1.5% of the gross proceeds from the
         sale of the Notes to pay offering and organizational expenses,
         including filing and registration fees, legal fees of the Company's
         counsel, accounting fees, trustee's fees, escrow agent's fees, "blue
         sky" expenses and printing expenses.

                                       13

<PAGE>

ITEM 3.  DEFAULTS UPON SENIOR SECURITIES

         On June 30, 2002, the Company defaulted on its $10,000,000 11%
Redeemable Secured Notes.

ITEM 4.  SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS

         No matters were submitted to a vote of the Company's sole stockholder
during the third quarter of 2003.

ITEM 5.  OTHER INFORMATION

         None

ITEM 6.  EXHIBITS AND REPORTS ON FORM 8-K

(a)      Financial Statements

         The following financial statements are filed as a part of this Form
10-QSB:

                   Exhibits

         The following exhibits are filed as exhibits to this report on Form
10-QSB:

             The information required is set forth in the Index to Exhibits
accompanying this Form 10-QSB.

(b)      Reports on Form 8-K

         No reports on Form 8-K were filed during the nine months ended
September 30, 2003.

                                       14

<PAGE>


                                   SIGNATURES

         In accordance with section 13 or 15(d) of the Exchange Act, the
registrant has duly caused this report to be signed on its behalf by the
undersigned, thereunto duly authorized.

                                                TRANSITION AUTO FINANCE II, INC.
                                                --------------------------------
                                                          (Registrant)

Date: October 31, 2003                                /s/ Kenneth C. Lowe
                                                 -------------------------------
                                                   Kenneth C. Lowe, President/
                                                   Chief Executive Officer

Date: October 31, 2003                                /s/ Kenneth C. Lowe
                                                 -------------------------------
                                                   Kenneth C. Lowe, President/
                                                   Chief Operating Officer

Date: October 31, 2003                                /s/ Kenneth C. Lowe
                                                 -------------------------------
                                                   Kenneth C. Lowe, President/
                                                   Chief Financial Officer

                                       15

<PAGE>

                                INDEX TO EXHIBITS

<TABLE>
<CAPTION>
EXHIBIT
 NUMBER                         DESCRIPTION
<S>      <C>
 3.1     Articles of Incorporation of Transition Auto Finance II, Inc. *

 3.2     Bylaws of Transition Auto Finance II, Inc. *

 4.1     Form of Indenture between Transition Auto Finance II, Inc. and Trust
         Management, Inc., as Trustee ***

 4.2     Form of Secured Note Due June 30, 2002 (included in Article Two of
         Indenture filed as Exhibit 4.1)

 10.1    Form of Master Contract Purchase Agreement between Transition Auto
         Finance II, Inc. and Transition Leasing Management, Inc.**

 10.2    Form of Servicing Agreement between Transition Leasing Management, Inc.
         and Transition Auto Finance II, Inc. **

 31      Certification of Reporting Officer Pursuant to Section 302 of the
         Sarbanes-Oxley Act of 2002

 32      Certification of Reporting Officer pursuant to Section 906 of the
         Sarbanes-Oxley Act of 2002
</TABLE>

 *   Incorporated by reference from Registration Statement on Form SB-2 of
     Transition Auto Finance II, Inc. Registration No. 33-49261-D, filed April
     2, 1998.

 **  Incorporated by reference from Amendment No. 1 to Registration Statement on
     Form SB-2 of Transition Auto Finance II, Inc., Registration No. 33-49261-D,
     filed June 19, 1998.

 *** Incorporated by reference from Amendment No. 2 to Registration Statement on
     Form SB-2 of Transition Auto Finance II, Inc., Registration No. 33-49261-D,
     filed July 9, 1998.

                                       16