<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, 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 September 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 SEPTEMBER, 2001

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

         ITEM 1.  Financial Statements

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

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

                  Statements of Cash Flows (Unaudited)............................................................6
                    Nine Months ended September 30, 2001 and September 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>
                                                                      9 months ended         FYE
                                                                        9/30/2001          12/31/2000
                                                                       (unaudited)        (See Note 1)
                                                                      ---------------    ---------------
<S>                                                                   <C>                <C>
CURRENT ASSETS
  Cash and cash equivalents                                           $       306,327    $       446,662
  Accounts receivable                                                         370,587            554,406
  Vehicles held for sale                                                      422,778            126,919
                                                                      ---------------    ---------------
      Total Current Assets                                                  1,099,692          1,127,987
                                                                      ---------------    ---------------

PROPERTY, at cost
  Vehicles leased                                                           4,942,158          8,457,696
  Less accumulated depreciation                                            (1,868,235)        (2,286,505)
                                                                      ---------------    ---------------
      Net Property                                                          3,073,923          6,171,191
                                                                      ---------------    ---------------

OTHER ASSETS
  Debt issuance costs, net of amortization of $883,763 and $648,595           235,169            470,337
                                                                      ---------------    ---------------



TOTAL ASSETS                                                          $     4,408,784    $     7,769,515
                                                                      ===============    ===============
</Table>


                                       3

<PAGE>



                        TRANSITION AUTO FINANCE II, INC.

                           BALANCE SHEETS (Continued)

                 LIABILITIES AND STOCKHOLDERS' EQUITY (DEFICIT)


<Table>
<Caption>
                                                      9 Months Ended          FYE
                                                        9/30/2001          12/31/2000
                                                       (Unaudited)        (See Note 1)
                                                     ---------------    ---------------
<S>                                                  <C>                <C>
CURRENT LIABILITIES
  Accrued liabilities                                $        69,733    $       176,736
  Current portion of deferred revenue                        156,958            440,256
                                                     ---------------    ---------------
        Total Current Liabilities                            226,691            616,992
                                                     ---------------    ---------------

OTHER LIABILITIES
  Due to affiliate                                           181,684            163,598
  Deferred revenue                                           177,035            519,368
  Investor notes payable                                   7,170,000          9,482,000
                                                     ---------------    ---------------
      Total Other Liabilities                              7,528,719         10,164,966
                                                     ---------------    ---------------

TOTAL LIABILITIES                                          7,755,410         10,781,958
                                                     ---------------    ---------------

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)                            (3,718,956)        (3,384,773)
                                                     ---------------    ---------------
       Total Stockholders' Equity (Deficit)               (3,717,956)        (3,383,773)
                                                     ---------------    ---------------

TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY
   (DEFICIT)                                         $     4,408,784    $     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       Nine Months Ended       Quarter Ended       Nine Months Ended
                                       September 30, 2001    September 30, 2001    September 30, 2000    September 30, 2000
                                       ------------------    ------------------    ------------------    ------------------
<S>                                    <C>                   <C>                   <C>                   <C>
REVENUES

  Vehicle monthly lease payments       $          364,005    $        1,303,295    $          626,862    $        1,834,470
   Amortization of down payments                  150,623               573,384               158,098               417,414
                                       ------------------    ------------------    ------------------    ------------------

        Total Revenues                            514,628             1,876,679               784,960             2,251,884
                                       ------------------    ------------------    ------------------    ------------------

OPERATING EXPENSES

  Operating costs                                  74,875                66,588               123,007               538,313
  General and administrative                       71,988               120,158                 4,942                20,288
  Depreciation and amortization                   308,161             1,035,780               438,995             1,235,177
  Impairment loss                                     -0-                   -0-                   -0-                   -0-
                                       ------------------    ------------------    ------------------    ------------------

        Total Operating Expenses                  455,024             1,222,526               566,944             1,793,778
                                       ------------------    ------------------    ------------------    ------------------

Operating Income (Loss)                            59,604               654,153               218,016               458,106
                                       ------------------    ------------------    ------------------    ------------------

OTHER INCOME (EXPENSE)

Investment income                                     678                 3,479                 2,116                29,632
Other income (expense)                                 34                   129                     1                17,685
Interest expense                                 (204,522)             (680,405)             (275,100)             (825,330)
Loss on sale of inventory                         (64,137)             (311,539)              (19,615)              (22,460)
                                       ------------------    ------------------    ------------------    ------------------

        Total Other Income (Expense)             (267,947)             (988,336)             (292,598)             (800,473)
                                       ------------------    ------------------    ------------------    ------------------

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


Net Loss                               $         (208,343)   $         (334,183)   $          (74,582)   $         (342,367)
                                       ==================    ==================    ==================    ==================

Loss Per Share (basic and diluted)     $           208.34    $           334.18    $            74.58    $           342.37
                                       ==================    ==================    ==================    ==================
</Table>


                                       5






<PAGE>



                        TRANSITION AUTO FINANCE II, INC.

                            STATEMENTS OF CASH FLOWS

                                   (Unaudited)

<Table>
<Caption>
                                                                       9 Months Ended          9 Months Ended
                                                                     September 30, 2001      September 30, 2000
                                                                    --------------------    --------------------
<S>                                                                 <C>                     <C>
CASH FLOWS FROM OPERATING ACTIVITIES
Net loss                                                            $           (334,183)   $           (342,367)
Adjustments to reconcile net income to net cash provided by
  operating activities:
     Depreciation and amortization                                             1,035,780               1,235,177
     Amortization of down payments                                              (573,384)               (417,414)
     Impairment loss                                                                 -0-                     -0-
     Provision for allowance for doubtful accounts                                   -0-                     -0-
     (Gain) loss on sale of property                                             311,539                  22,460
Net changes in operating assets and liabilities:
     Accounts receivable                                                         183,819                  12,193
     Accrued liabilities                                                        (107,003)               (468,594)
     Deferred revenue                                                            (52,247)                845,567
                                                                    --------------------    --------------------
NET CASH PROVIDED (USED) BY OPERATING ACTIVITIES                                 464,321                 887,022
                                                                    --------------------    --------------------


CASH FLOWS FROM INVESTING ACTIVITIES
   Purchase of fixed assets                                                          -0-              (3,222,933)
   Cash proceeds from sale of property                                         1,689,258                 326,199
                                                                    --------------------    --------------------
NET CASH (USED) BY INVESTING ACTIVITIES                                        1,689,258              (2,896,734)
                                                                    --------------------    --------------------

CASH FLOWS FROM FINANCING ACTIVITIES
   Proceeds from issuance of common stock                                            -0-                     -0-
   Net advances (payments) to affiliates                                          18,086                 (38,862)
   Debt issuance costs                                                               -0-                 (16,800)
   Proceeds from notes payable                                                       -0-                     -0-
   Payments of Notes Payable                                                  (2,312,000)                    -0-
                                                                    --------------------    --------------------
Net cash provided by financing activities                                     (2,293,914)                (55,662)
                                                                    --------------------    --------------------

NET INCREASE (DECREASE) IN CASH                                                 (140,335)             (2,065,374)

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

CASH AND CASH EQUIVALENTS, end of period                            $            306,327    $            418,219
                                                                    ====================    ====================

CASH PAID DURING THE YEAR FOR
   Interest                                                         $            700,492    $            825,300
                                                                    ====================    ====================
   Income taxes                                                     $                -0-    $                -0-
                                                                    ====================    ====================
</Table>




NON CASH INVESTING ACTIVITIES

Vehicles purchased during the nine months ended September 30, 2001 with a net
book value of $235,118 were reclassified from vehicles leased to vehicles held
for sale.


                                       6


<PAGE>



                        TRANSITION AUTO FINANCE II, INC.

                          NOTES TO FINANCIAL STATEMENTS
                                   (Unaudited)

                               September 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)

                               September 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)

                               September 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 third quarter ended September 30,
                  2001, approximately $613,000 was repaid to investors. The
                  remaining balance as of September 30, 2001 was $7,170,000.

                  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)

                               September 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

General.

         The following discussion and analysis relates to factors that have
affected the operating results of the Company for the nine month period ended
September 30, 2001. The balance sheet at December 31, 2000, as presented, is
derived from the audited financial statements at that date.

         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, 2001 compared to three
months ended September 30, 2000

         For the three months ended September 30, 2001 the company had received
monthly contract lease payments of $364,005 and amortization of down payments of
$150,623. For the same period in 2000, the Company had contract lease income of
$626,682, amortization of down payments of $158,098. The drop in monthly
contract lease payments of $262,677 for the three month period ended September
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 believes that
the decrease in monthly lease payments in 2001 is due to the economic downturn
and is likely to continue until economic recovery takes place.

         Operating costs including general and administrative expenses were
$146,863 for the third quarter of 2001 compared to $127,949 for the same period
in 2000. The increase in operating costs and general and administrative expenses
is due to higher cost associated with repossessing vehicles and legal and
administrative costs for a larger total of leased vehicles.

         Depreciation and amortization was $308,161 for the three months ended
September 30, 2001, compared to $438,995 for the same period in 2000. The
decline of $130,834 (29.8%) 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 September 30, 2001, was
$204,522 compared to $275,100 for the same period in 2000. The reduction in
interest expense for the third quarter of 2001 was due to a reduction in Notes
outstanding at September 20, 2001, compared to the same period in 2000.

         Loss on sale of inventory for the third quarter of 2001 was $64,137
compared to $19,615 for the same period in 2000. 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 third quarter ended September 30, 2001 was
$208,343 compared to a loss of $74,582 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: Nine- month period ended September 30, 2001 compared to
nine months ended September 30, 2000

         Total revenue for the nine months ended September 30, 2001 was
$1,876,679 compared to $2,251,884 for the same period in 2000. The decrease in
2001 revenue of $375,205 or 16.6% was due to decreased lease activity,
repossessions and early-payoffs in the third quarter of 2001.

         Operating costs and expenses were $186,746 for the nine- month period
ended September 30, 2001 compared to $558,601 for the same period in 2000, a
decline in 2001 of $371,855, or 66.6%. The decline was primarily due to the lack
of investment funds for the nine- month period in 2001.

         Depreciation and amortization for the nine months ended September 30,
2001 was $1,035,780 compared to $1,235,177 for the same period in 2000. The
decline in 2001 reflects the lower number of active leases due to lease
terminations, repossessions and early pay-offs.

                                       11
<PAGE>

         Interest expense for the nine months ended September 30, 2001 was
$680,405 compared to $825,330 for the same period in 2000. The decrease in
interest expense of $144,925 (17.5%) was due to a reduction of notes outstanding
at September 30, 2001 compared to the same period in 2000.

         Loss on sale of inventory for the nine month ended September 30, 2001
was $311,539 compared to $22,460. The increase of $289,079 for the third 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 $334,183 for the nine months ended September
30, 2001 compared to a loss of $342,367 for the same period in 2000.

Liquidity and Capital Resources

         During the nine months ended September 30, 2001 the Company utilized
cash of $1,689,258 in its investing activities and used $2,293,914 in its
financing activities. For the same period in 2000, the Company utilized cash of
$2,896,734 in its investing activities and used $55,662 in its financing
activities. For the nine months ended September 30, 2001, the Company purchased
no additional vehicles and reduced its notes payable by $613,000. For the same
period in 2000, the Company purchased $591,724 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 519 leases, included 229
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        126 $2,946,054 $ 62,222 $1,156,127 $  564,532  $1,467,342  $ 71,341  $29,764   $317,242   $2,971,865  $(36,411)
Early Payoff        103 $2,267,634 $  3,944 $1,018,396 $  484,696  $1,561,354  $ 79,030  $15,516   $266,890   $2,892,102  $620,525
              --------- ---------- -------- ---------- ----------  ----------  --------  -------   --------   ----------  --------
Total               229 $5,213,688  $66,166 $2,174,523 $1,049,228  $3,028,696  $150,371  $45,280   $584,132   $5,863,967  $584,114
</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 third 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 nine months ended September
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 Operating Officer


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