<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, 2003

                                -----------------



                       Commission file number: 33-49261-D

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

<Table>
<S>                                              <C>
                  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)
</Table>


                   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 June 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 JUNE 30, 2003

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

      ITEM 1.  Financial Statements

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

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

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

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

      ITEM 2.  Management's Discussion and Analysis of Financial Condition and Results of Operations..........12

PART II. OTHER INFORMATION

      ITEM 1.  Legal Proceedings..............................................................................14

      ITEM 2.  Changes in Securities and Use of Proceeds......................................................14

      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...............................................................15

      Signatures .............................................................................................16
</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>
                                                                           6 months ended       FYE
                                                                              6/30/2003      12/31/2002
                                                                             (unaudited)    (See Note 1)
                                                                           --------------   ------------
<S>                                                                         <C>             <C>
CURRENT ASSETS
  Cash and cash equivalents                                                 $    390,749    $    573,137
  Accounts receivable, net of allowance for doubtful accounts of $354,803
    and $354,803 respectively                                                    345,652         345,134
  Vehicles held for sale                                                          70,275          47,285
  Other Assets                                                                    30,740          31,250
                                                                            ------------    ------------
    Total Current Assets                                                         837,416         996,806
                                                                            ------------    ------------

PROPERTY, at cost
  Vehicles leased                                                                854,448       1,542,247
  Less accumulated depreciation                                                 (552,656)       (824,131)
                                                                            ------------    ------------
    Net Property                                                                 301,792         718,116
                                                                            ------------    ------------

OTHER ASSETS
  Due from an affiliate                                                              -0-           9,286
                                                                            ------------    ------------
    Total other assets                                                               -0-           9,286
                                                                            ------------    ------------
TOTAL ASSETS                                                                $  1,139,208    $  1,724,208
                                                                            ============    ============
</Table>




                                       3
<PAGE>

                        TRANSITION AUTO FINANCE II, INC.

                           BALANCE SHEETS (Continued)

                 LIABILITIES AND STOCKHOLDERS' EQUITY (DEFICIT)

<Table>
<Caption>
                                                           6 Months Ended       FYE
                                                              6/30/2003      12/31/2002
                                                             (Unaudited)    (See Note 1)
                                                           --------------   ------------
<S>                                                         <C>             <C>
CURRENT LIABILITIES
  Accrued liabilities                                       $     24,449    $     24,576
  Investor notes payable                                       5,463,600       5,966,000
  Deferred revenue                                                24,017          85,954
                                                            ------------    ------------
     Total Current Liabilities                                 5,512,066       6,076,530
                                                            ------------    ------------

OTHER LIABILITIES
  Due to affiliate                                                59,160          47,301
                                                            ------------    ------------
     Total Other Liabilities                                      59,160          47,301
                                                            ------------    ------------

TOTAL LIABILITIES                                              5,571,226       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)                                (4,804,348)     (4,771,953)
                                                            ------------    ------------
     Total Stockholders' Equity (Deficit)                     (4,803,348)     (4,770,953)
                                                            ------------    ------------
TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY
  (DEFICIT)                                                 $  1,139,208    $  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   Six Months Ended    Quarter Ended   Six Months Ended
                                                June 30, 2003     June 30, 2003     June 30, 2002     June 30, 2002
                                                -------------   ----------------    -------------   ----------------
<S>                                               <C>               <C>               <C>               <C>
REVENUES
  Vehicle monthly lease payments                  $   66,724        $  153,928        $  197,856        $  447,596

   Amortization of down payments                       9,946            30,668            68,416           150,263
                                                  ----------        ----------        ----------        ----------
        Total Revenues                                76,670           184,596           266,272           597,859
                                                  ----------        ----------        ----------        ----------

OPERATING EXPENSES
  Operating costs                                      4,150            11,345            12,022            33,484
  General and administrative                          26,400            48,534            24,709            53,612
  Depreciation and amortization                       41,332            95,315           203,765           434,129

  Impairment loss                                        -0-               -0-               -0-               -0-
                                                  ----------        ----------        ----------        ----------
        Total Operating Expenses                      71,882           155,194           240,496           521,225
                                                  ----------        ----------        ----------        ----------

Operating Income (Loss)                                4,788            29,402            25,776            76,634
                                                  ----------        ----------        ----------        ----------

OTHER INCOME (EXPENSE)
Investment income                                        514             1,286                75               228
Other income (expense)                                     4                17                26                65
Interest expense                                         -0-               -0-          (117,609)         (301,602)
Loss on sale of inventory                            (24,668)          (63,100)          (44,917)         (158,937)
                                                  ----------        ----------        ----------        ----------
        Total Other Income (Expense)                 (24,150)          (61,797)         (162,425)         (460,246)
                                                  ----------        ----------        ----------        ----------

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

Net Loss                                          $  (19,362)       $  (32,395)       $ (136,649)       $ (383,612)
                                                  ==========        ==========        ==========        ==========

Profit (Loss) per share (basic and diluted)       $  (19.36)        $   (32.40)       $  (136.65)       $  (383.61)
</Table>

See accompanying notes to financial statements.


                                       5
<PAGE>

                        TRANSITION AUTO FINANCE II, INC.

                            STATEMENTS OF CASH FLOWS

                                   (Unaudited)

<Table>
<Caption>
                                                                6 Months Ended    6 Months Ended
                                                                June 30, 2003     June 30, 2002
                                                                --------------    --------------
<S>                                                               <C>               <C>
Cash flows from operating activities
Net loss                                                          $  (32,395)       $ (383,612)
Adjustments to reconcile net income to net cash provided by
  operating activities:
     Depreciation and amortization                                    95,315           434,129
     Amortization of down payments                                   (30,668)         (150,263)
     Impairment loss                                                     -0-               -0-
     Provision for allowance for doubtful accounts                     2,579               -0-
     (Gain) loss on sale of property                                  63,100           158,937
Net changes in operating assets and liabilities:
     Accounts receivable                                                (518)          (24,399)
     Other Assets                                                        510             2,082
     Accrued liabilities                                                (127)          (65,752)
     Deferred revenue                                                (31,269)           14,777
                                                                  ----------        ----------
Net cash provided (USED) by operating activities                      66,527           (14,101)

Cash flows from investing activities
   Purchase of fixed assets                                              -0-              (800)
   Cash proceeds from sale of property                               232,340           476,760
                                                                  ----------        ----------
Net cash Provided (used) by investing activities                     232,340           475,960

Cash flows from financing activities
   Proceeds from issuance of common stock                                -0-               -0-
   Net advances (payments) to affiliates                              21,145           (75,680)
   Debt issuance costs                                                   -0-               -0-
   Proceeds from notes payable                                           -0-               -0-
   Payments of Notes Payable                                        (502,400)         (456,000)
                                                                  ----------        ----------

Net cash provided by financing activities                           (481,255)         (531,680)
                                                                  ----------        ----------

Net INcrease (DECREASE) In cash                                     (182,388)          (69,821)
CASH AND CASH EQUIVALENTS, beginning of period                       573,137           263,633
                                                                  ----------        ----------

CASH AND CASH EQUIVALENTS, end of period                          $  390,749        $  193,812
                                                                  ==========        ==========

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 $15,050 were reclassified from vehicles held
for sale to vehicles leased as of June 30, 2003.

Vehicles purchased during the six months ended June 30, 2002 with a net book
value of $216,484 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 June 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 second Quarter ended June 30, 2003,
         approximately $188,400 was repaid to investors. The remaining balance
         as of June 30, 2003 was $5,463,600.

         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 June 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.



                                       10
<PAGE>

                        TRANSITION AUTO FINANCE II, INC.

                          NOTES TO FINANCIAL STATEMENTS
                                   (Continued)

NOTE 7:  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.


                                       11
<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, 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 June 30, 2003, compared to three
months ended June 30,2002

         For the three months ended June 30, 2003 the company had received
monthly contract lease payments of $66,724 and amortization of down payments of
$9,946. For the same period in 2002, the Company had contract lease income of
$197,856 and amortization of down payments of $68,416. The drop in monthly
contract lease payments for the three month period ended June, 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
$30,550 for the second quarter of 2003 compared to $36,731 for the same period
in 2002.

         Depreciation and amortization was $41,332 for the three months ended
June 30, 2003, compared to $203,765 for the same period in 2002. The decline of
$162,433, for the second 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 June 30, 2003, was $-0-
compared to $117,609 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 second quarter of 2003 was $24,668
compared to a loss of $44,917 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. This change is primarily the result of fewer units
being sold during 2003.

         The net loss for the second quarter ended June 30, 2003 was $19,362
compared to a loss of $136,649 for the same period in 2002. The change in the
loss is primarily the results of a decrease in operating costs and depreciation.

Results of Operations: Six- month period ended June 30, 2003 compared to six
months ended June 30, 2002

         Total revenue for the six months ended June 30, 2003 was $184,596
compared to $597,859 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 $59,879 for the six-month period
ended June 30, 2003 compared to $87,096 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 six months ended June 30, 2003
was $95,315 compared to $434,129 for the same period in 2002. The decrease in
depreciation for the 2003 period was due to a smaller portfolio of leases.

         Interest expense for the six months ended June 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.



                                       12
<PAGE>

         Loss on sale of inventory for the six month ended June 30, 2003 was
$63,100 compared to $158,937 loss for the same period in 2002. The decrease of
$95,837 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 $32,395 for the six months ended June 30,
2003 compared to a loss of $383,612 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 June 30, 2003 the total amount paid
to note-holders was $8,226,813. The Company estimates that its remaining lease
portfolio will generate approximately $400,000 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 $323,970 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.

         Management does not expect inflation to have a material impact on
revenue.

Liquidity and Capital Resources

         During the six months ended June 30, 2003 the Company provided cash of
$232,340 in its investing activities from the sale of property and used $481,525
in its financing activities. For the same period in 2002, the Company utilized
cash of $475,960 in its investing activities and used $531,680 in its financing
activities.

         The Company's portfolio, which consisted of 426 leases, included 377
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
                 # of    Gross Cost   Misc.       Total      Down         Sale
              Contracts  Of Vehicle  Expenses   Payments    Payment      Amount
<S>              <C>     <C>         <C>       <C>         <C>         <C>
Repossession     229     $5,491,818  $146,337  $2,677,184  $1,085,620  $2,437,536
Early Payoff     148     $3,232,006  $  6,106  $1,739,239  $  685,290  $2,068,299
                 ---     ----------  --------  ----------  ----------  ----------
Total            377     $8,723,824  $152,443  $4,416,423  $1,770,910  $4,505,835
<Caption>
                                                 Total
               Sales Tax  Warranty  Marketing    Amount      Profit
                 Credit    Rebate    Fee Paid   Received     (Loss)
<S>             <C>        <C>       <C>       <C>         <C>
Repossession    $109,415   $59,348   $604,292  $5,764,812  $  126,658
Early Payoff    $ 99,183   $15,805   $377,109  $4,230,707  $  992,596
                --------   -------   --------  ----------  ----------
Total           $208,598   $75,153   $981,401  $9,995,519  $1,119,254
</Table>

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



                                       13
<PAGE>

         At June 30, 2003 the company had 31 active leases remaining on its
books. If all of the 31 leases go to term, they would generate approximately
$400,000. 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.


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.

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 Second quarter of 2003.

ITEM 5. OTHER INFORMATION

None


                                       14
<PAGE>

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,
         2003.


                                       15
<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: August 12, 2003                              /s/ KENNETH C. LOWE
                                        ---------------------------------------
                                                Kenneth C. Lowe, President/
                                                Chief Executive Officer

Date: August 12, 2003                              /s/ KENNETH C. LOWE
                                        ---------------------------------------
                                                Kenneth C. Lowe, President/
                                                Chief Operating Officer

Date: August 12, 2003                              /s/ KENNETH C. LOWE
                                        ---------------------------------------
                                                Kenneth C. Lowe, President/
                                                Chief Financial Officer


                                       16
<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.