<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 JUNE 30, 2001

                                   ----------







                       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 [ ] No [X]

State the number of shares outstanding of each of the issuer's classes of Common
equity, as of the latest practicable date: As June 30, 2001, 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 JUNE 30, 2001


<Table>
<Caption>
                                                                                                           Page No.
                                                                                                           --------
<S>                                                                                                        <C>
PART I.  FINANCIAL INFORMATION

         ITEM 1.  Financial Statements

                  Balance Sheets..................................................................................3
                    June 30, 2001 (Unaudited) and December 31, 2000

                  Statements of Income (Unaudited)................................................................5
                    Quarter and six months ended June 30, 2001 and June 30, 2000

                  Statements of Cash Flows (Unaudited)............................................................6
                    Six Months ended June 30, 2001 and June 30, 2000

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

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

PART II. OTHER INFORMATION

         ITEM 1.  Legal Proceedings..............................................................................12

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

         ITEM 3.  Defaults Upon Senior Securities................................................................13

         ITEM 4.  Submission of Matters to a Vote of Security Holders............................................13

         ITEM 5.  Other Information..............................................................................13

         ITEM 6.  Exhibits and Reports on Form 8-K...............................................................13


         Signatures..............................................................................................14
</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.



                                       2
<PAGE>

                          PART I. FINANCIAL INFORMATION

                          ITEM 1. FINANCIAL STATEMENTS

                        TRANSITION AUTO FINANCE II, INC.

                                 BALANCE SHEETS

                                     ASSETS

<Table>
<Caption>
                                                                      6 months ended        FYE
                                                                        6/30/2001        12/31/2000
                                                                        (unaudited)     (See Note 1)
                                                                      --------------    ------------
<S>                                                                   <C>               <C>
CURRENT ASSETS
  Cash and cash equivalents                                           $      446,971    $    446,662
  Accounts receivable                                                        418,459         554,406
  Vehicles held for sale                                                     372,217         126,919
                                                                      --------------    ------------
      Total Current Assets                                                 1,237,647       1,127,987
                                                                      --------------    ------------

PROPERTY, at cost
  Vehicles leased                                                          5,794,931       8,457,696
  Less accumulated depreciation                                           (1,987,860)     (2,286,505)
                                                                      --------------    ------------
      Net Property                                                         3,807,071       6,171,191
                                                                      --------------    ------------

OTHER ASSETS
  Debt issuance costs, net of amortization of $805,374 and $648,595          313,558         470,337
                                                                      --------------    ------------



TOTAL ASSETS                                                          $    5,358,276    $  7,769,515
                                                                      ==============    ============
</Table>



                                       3
<PAGE>

                        TRANSITION AUTO FINANCE II, INC.

                           BALANCE SHEETS (Continued)

                 LIABILITIES AND STOCKHOLDERS' EQUITY (DEFICIT)



<Table>
<Caption>
                                                6 Months Ended        FYE
                                                  6/30/2001        12/31/2000
                                                 (Unaudited)      (See Note 1)
                                                --------------    ------------
<S>                                             <C>               <C>
CURRENT LIABILITIES
  Accrued liabilities                           $       97,557    $    176,736
  Current portion of deferred revenue                  223,116         440,256
                                                --------------    ------------
        Total Current Liabilities                      320,673         616,992
                                                --------------    ------------

OTHER LIABILITIES
  Due to affiliate                                     120,188         163,598
  Deferred revenue                                     272,698         519,368
  Investor notes payable                             7,783,000       9,482,000
                                                --------------    ------------
      Total Other Liabilities                        8,175,886      10,164,966
                                                --------------    ------------
                                                     8,496,559      10,781,958
                                                --------------    ------------

TOTAL LIABILITIES                                      371,330         371,330
                                                --------------    ------------
SUBORDINATED DEBT TO AFFILIATE

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)                      (3,510,613)     (3,384,773)
                                                --------------    ------------
       Total Stockholders' Equity (Deficit)         (3,509,613)     (3,383,773)
                                                --------------    ------------

TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY
   (DEFICIT)                                    $    5,358,276    $  7,769,515
                                                ==============    ============
</Table>

Note 1: The balance sheet at December 31, 2000, as presented, is derived from
the audited financial statements at that date.



                                       4
<PAGE>

                        TRANSITION AUTO FINANCE II, INC.

                              STATEMENTS OF INCOME

                                   (Unaudited)


<Table>
<Caption>
                                              Quarter Ended    Six Months Ended    Quarter Ended    Six Months Ended
                                              June 30, 2001     June 30, 2001      June 30, 2000     June 30, 2000
                                              -------------    ----------------    -------------    ----------------
<S>                                           <C>              <C>                 <C>              <C>
REVENUES

  Vehicle monthly lease payments              $     401,607    $        939,290    $     732,218    $      1,207,608
  Amortization of down payments                     189,390             422,761          148,062             259,316
                                              -------------    ----------------    -------------    ----------------

        Total Revenues                              590,997           1,362,051          880,280           1,466,924
                                              -------------    ----------------    -------------    ----------------

OPERATING EXPENSES

  Operating costs                                   (17,413)             (8,287)          70,137             415,306
  General and administrative                         34,619              48,170              294              15,346
  Depreciation and amortization                     343,214             727,619          421,542             796,182
  Impairment loss                                       -0-                 -0-              -0-                 -0-
                                              -------------    ----------------    -------------    ----------------

        Total Operating Expenses                    360,420             767,502          491,973           1,226,834
                                              -------------    ----------------    -------------    ----------------

Operating Income (Loss)                             230,577             594,549          388,307             240,090
                                              -------------    ----------------    -------------    ----------------

OTHER INCOME (EXPENSE)

Investment income                                     1,334               2,801            1,816              27,516
Other income (expense)                                   43                  95              -0-              17,684
Interest expense                                   (223,410)           (475,883)        (275,100)           (550,230)
Loss on sale of inventory                          (126,837)           (247,402)          14,469              (2,845)
                                              -------------    ----------------    -------------    ----------------
        Total Other Income (Expense)               (348,870)           (720,389)        (258,815)           (507,875)
                                              -------------    ----------------    -------------    ----------------
Provision for Federal Income Taxes                      -0-                 -0-              -0-                 -0-
                                              -------------    ----------------    -------------    ----------------

Net Loss                                      $    (118,293)   $       (125,840)   $     129,492    $       (267,785)
                                              =============    ================    =============    ================

Profit (Loss) per share (basic and diluted)   $     (118.29)   $        (125.84)   $      129.49    $        (267.79)
</Table>



                                       5
<PAGE>

                        TRANSITION AUTO FINANCE II, INC.

                            STATEMENTS OF CASH FLOWS

                                   (Unaudited)


<Table>
<Caption>
                                                              6 Months Ended    6 Months Ended
                                                              June 30, 2001     June 30, 2000
                                                              --------------    --------------
<S>                                                           <C>               <C>
CASH FLOWS FROM OPERATING ACTIVITIES
Net Income (loss)                                             $     (125,840)   $     (267,785)
Adjustments to reconcile net income to net cash provided by
  operating activities:
     Depreciation and amortization                                   727,619           796,182
     Amortization of down payments                                  (422,761)         (259,316)
     Impairment loss                                                     -0-               -0-
     Provision for allowance for doubtful accounts                       -0-               -0-
     (Gain) loss on sale of property                                 247,402             2,845
Net changes in operating assets and liabilities:
     Accounts receivable                                             135,947           (47,063)
     Accrued liabilities                                             (79,179)         (287,842)
     Deferred revenue                                                (41,049)          773,525
                                                              --------------    --------------
NET CASH PROVIDED (USED) BY OPERATING ACTIVITIES                     442,139           710,546
                                                              --------------    --------------

CASH FLOWS FROM INVESTING ACTIVITIES
   Purchase of fixed assets                                              -0-        (3,029,161)
   Cash proceeds from sale of property                             1,300,580           323,293
                                                              --------------    --------------
NET CASH (USED) BY INVESTING ACTIVITIES                            1,300,580        (2,705,868)
                                                              --------------    --------------

CASH FLOWS FROM FINANCING ACTIVITIES
   Proceeds from issuance of common stock                                -0-               -0-
   Net advances (payments) to affiliates                             (43,410)          (23,843)
   Debt issuance costs                                                   -0-           (15,076)
   Proceeds from notes payable                                           -0-               -0-
   Payments of Notes Payable                                      (1,699,000)              -0-
                                                              --------------    --------------
NET CASH PROVIDED  BY FINANCING ACTIVITIES                        (1,742,410)          (38,919)
                                                              --------------    --------------

NET INCREASE (DECREASE)  IN CASH                                         309        (2,034,241)

CASH AND CASH EQUIVALENTS, beginning of period                       446,662         2,483,593
                                                              --------------    --------------

CASH AND CASH EQUIVALENTS, end of period                      $      446,971    $      449,352
                                                              ==============    ==============

CASH PAID DURING THE YEAR FOR
   Interest                                                   $      490,370    $      550,200
                                                              ==============    ==============
   Income taxes                                               $          -0-    $          -0-
                                                              ==============    ==============

NON-CASH INVESTING ACTIVITIES
Vehicles purchased during the six months ended June 30, 2001
with a net book value of $245,298 were reclassified from
vehicles leased to vehicles held for sale.
</Table>



                                       6
<PAGE>

                        TRANSITION AUTO FINANCE II, INC.

                          NOTES TO FINANCIAL STATEMENTS
                                   (Unaudited)

                                  JUNE 30, 2001

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.

                  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.

                  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 book value or market value. Generally these
                           vehicles will be sold at auction by the Company.



                                       7
<PAGE>

                        TRANSITION AUTO FINANCE II, INC.

                          NOTES TO FINANCIAL STATEMENTS
                                   (Unaudited)

                                  JUNE 30, 2001


NOTE 2:           SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
                  (CONTINUED)

                  EQUIPMENT AND LEASED VEHICLES

                           Equipment and leased vehicles 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.

                           The Company adopted Financial Accounting Standards
                           Board issued Statement No. 121, Accounting for the
                           Impairment of Long-Lived Assets and for Long-Lived
                           Assets to Be Disposed Of, which requires impairment
                           losses to be recorded on long-lived assets used in
                           operations when indicators of impairment are present.
                           An impairment loss of $617,684 has been recorded in
                           these financial statements for the year ended
                           December 31, 1999.

                  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
                           mature on June 30, 2002.

                  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.

                  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.



                                       8
<PAGE>

                        TRANSITION AUTO FINANCE II, INC.

                          NOTES TO FINANCIAL STATEMENTS
                                   (Unaudited)

                                  JUNE 30, 2001


NOTE 2:           SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
                  (CONTINUED)

                  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) as of December 1999 in the amount of
                  $10,000,000. During the second quarter ended June 30, 2001,
                  approximately $887,000 was repaid to investors. The remaining
                  balance as of June 30, 2001 was $7,783,000.

                  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.



                                       9
<PAGE>

                        TRANSITION AUTO FINANCE II, INC.

                          NOTES TO FINANCIAL STATEMENTS
                                   (Unaudited)

                                  JUNE 30, 2001


NOTE 4:           INCOME TAXES

                  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 December 31, 2000
                  and 1999 (primarily from net operating loss carryforward),
                  which has been completely offset by recognition of a valuation
                  allowance.

                  The Company has a net operating loss (NOL) carryforward of
                  approximately $5,400,000 and $1,450,000 for the year ended
                  December 31, 2000 and the year ended December 31, 1999,
                  respectively. The Company's NOL carryforward expires between
                  December 31, 2012 and December 31, 2020.

NOTE 5:           RELATED PARTIES

                  The Company has entered into a Servicing Agreement with TLMI.
                  TLMI will be entitled to a servicing fee of $20 per month per
                  contract and a payment of $150 per contract purchased. TLMI
                  will receive, as a marketing fee, 57.5% of the down payment
                  made by the customers with respect to contracts it originates.
                  TLMI will receive from the Company a Releasing Fee of 57.5% of
                  the down payment with respect to a new contract following
                  repossession of a leased vehicle.

NOTE 6:           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 can
                  not be repaid before any other creditors or investors.



                                       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 six-
month period ended June 30, 2001. The balance sheet at December 31, 2000, 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 June 30, 2001, compared to three
months ended June 30,2000

         For the three months ended June 30, 2001 the company had received
monthly contract lease payments of $401,607 and amortization of down payments of
$189,390. For the same period in 2000, the Company had contract lease income of
$732,218, amortization of down payments of $148,062. The drop in monthly
contract lease payments of $330,611 for the three month period ended June, 30,
2001, compared to the same period in 2000, was the result of three primary
factors; (1) A decline in the number of new leases written, (2) an increase in
repossessions and (3) an increase in early pay-offs. The Company does not
believe that the decrease in monthly lease payments in 2001 represents a trend
but is merely an anomaly.

         Operating costs including general and administrative expenses were
$17,206 for the second quarter of 2001 compared to $70,431 for the same period
in 2000.

         Depreciation and amortization was $343,214 for the three months ended
June 30, 2001, compared to $421,542 for the same period in 2000. The decline of
$78,328 for the third quarter of 2001 was due to (1) fewer new leases added, (2)
higher repossessions and (3) early pay -offs.

         Interest expense for the three months ended June 30, 2001, was $223,410
compared to $275,100 for the same period in 2000. The reduction in interest
expense for the second quarter of 2001 was due to a reduction in Notes
outstanding at June 30, 2001, compared to the same period in 2000.

         Loss on sale of inventory for the second quarter of 2001 was $126,837
compared to a profit of $14,469 for the same period in 2000. The loss on
inventory for 2001 reflects a weaker economy and earlier repossessions in the
lease term. Loss on sale of inventory occurs when the book value of the asset
exceeds the market value of the repossessed vehicle.

         The net loss for the second quarter ended June 30, 2001 was $118,293
compared to a profit of $129,492 for the same period in 2000. The higher loss
for the 2001 period reflects the lower number of new lease added in the period
compared to the same period in 2000.

Results of Operations :Six- month period ended June 30, 2001 compared to six
months ended June 30, 2000

         Total revenue for the six months ended June 30, 2001 was
$1,362,051 compared to $1,466,924 for the same period in 2000.

         Operating costs and expenses were $39,883 for the six month period
ended June 30, 2001 compared to $430,652 for the same period in 2000, a decline
in 2001 of $390,769, or 90.7%. The decline was primarily due to the lack of
investable funds for the six month period in 2001.

         Depreciation and amortization for the six months ended June 30, 2001
was $727,619, compared to $796,182 for the same period in 2000.

         Interest expense for the six months ended June 30, 2001 was $475,883
compared to $550,230 for the same period in 2000. The decrease in interest
expense of $74,347 was due to a reduction of notes outstanding at June 30, 2001
compared to the same period in 2000.



                                       11
<PAGE>

         Loss on sale of inventory for the six month ended June 30, 2001 was
$247,402 compared to $2,845 loss for the same period in 2000.. The increase of
$244,557 for the second quarter of 2001 was the result of leases defaulting
early in the lease term and an increase in repossessions. If the economy
continues to weaken, the company anticipates that repossessions will continue to
increase.

         The Company had a loss of $125,840 for the six months ended June 30,
2001 compared to a loss of $267,785 for the same period in 2000. The decreased
loss of $141,945 was primarily due to lower operating expenses for the six month
period ended June 30, 2001.

Liquidity and Capital Resources

         During the six months ended June 30, 2001 the Company used cash of
$1,300,580 in its investing activities from the sale of property and used
$1,742,410 in its financing activities. For the same period in 2000, the Company
utilized cash of $2,705,868 in its investing activities and used $38,919 in its
financing activities. For the six months ended June 30, 2001, the Company
purchased no additional vehicles and reduced its notes payable by $887,000. For
the same period in 2000, the Company purchased $482,136 of leased vehicles and
made no reduction in notes payable.

         The Company's only source of liquidity in the future will be from its
monthly lease payments after interest and other allowed expenses.

         The Company's portfolio, which consisted of 511 leases, included 196
leases which resulted in early terminations. The information on the Company's
experience with respect to early terminations is set forth below:

<Table>
<Caption>
                                                                      Vehicle                                    Total
                # of    Gross Cost    Misc.     Total      Down        Sale     Sales Tax  Warranty  Marketing   Amount     Profit
             Contracts  Of Vehicle  Expenses   Payments   Payment     Amount     Credit     Rebate   Fee Paid   Received    (Loss)
             ---------  ----------  --------  ----------  --------  ----------  ---------  --------  --------- ----------  --------
<S>          <C>        <C>         <C>       <C>         <C>       <C>         <C>        <C>       <C>       <C>         <C>
Repossession       106  $2,454,088  $ 50,335  $  886,920  $466,231  $1,266,292  $  61,460  $ 28,108  $260,719  $2,448,291  $(56,132)
Early Payoff        90  $1,966,889  $  3,944  $  816,449  $426,718  $1,394,293  $  70,301  $ 14,752  $233,553  $2,488,960  $518,128
              --------  ----------  --------  ----------  --------  ----------  ---------  --------  --------  ----------  --------
Total              196  $4,420,977  $ 54,279  $1,703,369  $892,949  $2,660,585  $ 131,761  $ 42,860  $494,272  $4,937,251  $461,996
</Table>

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

         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.

PART II. OTHER INFORMATION

ITEM 1. LEGAL PROCEEDINGS

         The Company is not a party to any material legal proceedings, and no
material legal proceedings have been threatened by or, to the best of the
Company's knowledge, instituted against the Company.



                                       12
<PAGE>

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.

ITEM 3. DEFAULTS UPON SENIOR SECURITIES

None

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 second quarter of 2001.

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-KSB:

              The Index to Financial Statements is set out in Item 7 herein.

       Exhibits

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

              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 six months ended June 30,
2001.



                                       13
<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:March 19, 2002                              /s/ KENNETH C. LOWE
     ------------------------          -----------------------------------------
                                              Kenneth C. Lowe, President/
                                                Chief Executive Officer


Date:March 19, 2002                               /s/ KENNETH C. LOWE
     ------------------------          -----------------------------------------
                                              Kenneth C. Lowe, President/
                                                Chief Executive Officer


Date:March 19, 2002                               /s/ KENNETH C. LOWE
     ------------------------          -----------------------------------------
                                              Kenneth C. Lowe, President/
                                                Chief Executive Officer



                                       14
<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.**

</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.




                                       15