<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 MARCH 31, 2004
                                -----------------

                       Commission file number: 33-49261-D

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

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

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

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

Check whether the registrant (1) has filed all reports required to be filed by
Section 13 or 15(d) of the Securities Exchange Act of 1934 during the past 12
months (or for such shorter period that the registrant was required to file such
reports), and (2) has been subject to such filing requirements for the past 90
days. Yes [X] No [ ]

State the number of shares outstanding of each of the issuer's classes of Common
equity, as of the latest practicable date: As March 31, 2004, 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 MARCH 31, 2004

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

         ITEM 1.  Financial Statements

                  Balance Sheets ............................................      3
                    March 31, 2004 (Unaudited) and December 31, 2003

                  Statements of Income (Unaudited) ..........................      5
                    Quarter ended March 31, 2004 and March 31, 2003

                  Statements of Cash Flows (Unaudited) ......................      6
                    Three Months ended March 31, 2004 and March 31, 2003

                  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.

                                       2
<PAGE>

                          PART I. FINANCIAL INFORMATION

                          ITEM 1. FINANCIAL STATEMENTS

                        TRANSITION AUTO FINANCE II, INC.

                                 BALANCE SHEETS

                                     ASSETS

<TABLE>
<CAPTION>
                                                                            3 months ended       FYE
                                                                               3/31/2004      12/31/2003
                                                                              (unaudited)    (See Note 1)
                                                                              -----------    ------------
<S>                                                                         <C>              <C>
CURRENT ASSETS
  Cash and cash equivalents                                                   $ 135,843       $ 225,140
  Accounts receivable                                                           258,708         266,767
  Vehicles held for sale                                                            -0-          10,598
  Other Assets                                                                    9,503           9,689
                                                                              ---------       ---------
      Total Current Assets                                                      404,054         512,194
                                                                              ---------       ---------

PROPERTY, at cost
  Vehicles leased                                                               299,828         380,584
  Less accumulated depreciation                                                (205,058)       (252,634)
                                                                              ---------       ---------
      Net Property                                                               94,770         127,950
                                                                              ---------       ---------

OTHER ASSETS
  Debt issuance costs, net of amortization of $1,118,932 and $1,118,932             -0-             -0-
                                                                              ---------       ---------
    Total other assets                                                        $      0        $       0
                                                                              =========       =========
TOTAL ASSETS                                                                  $ 498,824       $ 640,144
                                                                              =========       =========
</TABLE>

See accompanying notes to financial statements.

                                       3
<PAGE>

                        TRANSITION AUTO FINANCE II, INC.

                           BALANCE SHEETS (Continued)

                 LIABILITIES AND STOCKHOLDERS' EQUITY (DEFICIT)

<TABLE>
<CAPTION>
                                                 3 Months Ended         FYE
                                                    3/31/2004       12/31/2003
                                                   (Unaudited)      (See Note 1)
                                                   -----------      ------------
<S>                                              <C>                <C>
CURRENT LIABILITIES

  Accrued liabilities                              $    13,859      $    17,860
  Investor notes payable                             4,961,200        5,086,800
  Deferred revenue                                      13,412           14,164
                                                   -----------      -----------
          Total Current Liabilities                  4,988,471        5,118,824
                                                   -----------      -----------

OTHER LIABILITIES
  Due to affiliate                                      62,713           61,553
                                                   -----------      -----------
      Total Other Liabilities                           62,713           61,553
                                                   -----------      -----------

TOTAL LIABILITIES                                    5,051,184        5,180,377
                                                   -----------      -----------

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)                      (4,924,690)      (4,912,563)
                                                   -----------      -----------
       Total Stockholders' Equity (Deficit)         (4,923,690)      (4,911,563)
                                                   -----------      -----------

TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY
   (DEFICIT)                                       $   498,824      $   640,144
                                                   ===========      ===========
</TABLE>

Note 1: The balance sheet at December 31, 2003, 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>
                                         3 Months Ended      3 Months Ended
                                         March 31, 2004      March 31, 2003
                                         --------------      --------------
<S>                                      <C>                 <C>
REVENUES

  Vehicle monthly lease payments            $ 24,044            $  87,204
   Amortization of down payments                 752               20,722
                                            --------            ---------

        Total Revenues                        24,796              107,926
                                            --------            ---------

OPERATING EXPENSES

  Operating costs                              1,060                7,195
  General and administrative                  19,892               22,134
  Depreciation and amortization               12,377               53,983
                                            --------            ---------

        Total Operating Expenses              33,329               83,312
                                            --------            ---------

Operating Income (Loss)                       (8,533)              24,614
                                            --------            ---------

OTHER INCOME (EXPENSE)

Investment income                                101                  772
Other income (expense)                           -0-                   13
Loss on sale of inventory                     (3,695)             (38,432)
                                            --------            ---------
        Total Other Income (Expense)          (3,594)             (37,647)
                                            --------            ---------

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

Net Loss                                    $(12,127)           $ (13,033)
                                            ========            =========

Loss per share (basic and diluted)          $ (12.13)           $  (13.03)
                                            ========            =========
</TABLE>

         See accompanying notes to financial statements.

                                       5
<PAGE>

                        TRANSITION AUTO FINANCE II, INC.

                            STATEMENTS OF CASH FLOWS

                                   (Unaudited)

<TABLE>
<CAPTION>
                                                                3 Months Ended     3 Months Ended
                                                                March 31, 2004     March 31, 2003
                                                                --------------     --------------
<S>                                                             <C>                <C>
CASH FLOWS FROM OPERATING ACTIVITIES
Net loss                                                          ($ 12,127)         ($ 13,033)
Adjustments to reconcile net income to net cash provided by
  operating activities:
     Depreciation and amortization                                   12,377             53,983
     Amortization of down payments                                     (752)           (20,722)
     Impairment loss                                                    -0-                -0-
     Provision for allowance for doubtful accounts                      -0-              2,579
     (Gain) loss on sale of property                                  3,695             38,432
Net changes in operating assets and liabilities:
     Accounts receivable                                              8,059              9,780
     Other Assets                                                       183                625
     Accrued liabilities                                             (4,001)             2,267
     Deferred revenue                                                   -0-            (18,864)
                                                                  ---------          ---------
NET CASH PROVIDED (USED) BY OPERATING ACTIVITIES                      7,434             55,047

CASH FLOWS FROM INVESTING ACTIVITIES
   Purchase of fixed assets                                             -0-                -0-
   Cash proceeds from sale of property                               27,709            136,621
                                                                  ---------          ---------
NET CASH (USED) BY INVESTING ACTIVITIES                              27,709            136,621

CASH FLOWS FROM FINANCING ACTIVITIES
   Proceeds from issuance of common stock                               -0-                -0-
   Net advances (payments) to affiliates                              1,160              7,730
   Debt issuance costs                                                  -0-                -0-
   Proceeds from notes payable                                          -0-                -0-
   Payments of Notes Payable                                       (125,600)          (314,000)
                                                                  ---------          ---------
NET CASH PROVIDED BY FINANCING ACTIVITIES                          (124,440)          (306,270)
                                                                  ---------          ---------

NET INCREASE (DECREASE) IN CASH                                     (89,297)          (114,602)

CASH AND CASH EQUIVALENTS, beginning of period                      225,140            573,137
                                                                  ---------          ---------

CASH AND CASH EQUIVALENTS, end of period                          $ 135,843          $ 458,535
                                                                  =========          =========


CASH PAID DURING THE YEAR FOR
   Interest                                                       $     -0-          $     -0-
                                                                  =========          =========
   Income taxes                                                   $     -0-          $     -0-
                                                                  =========          =========
</TABLE>

      NON-CASH INVESTING ACTIVITIES

      Vehicles with a net book value of $10,598 were reclassified from vehicles
      held for sale to vehicles leased as of March 31,2004.

      Vehicle purchases as of March 31, 2003 with a net book value of $87,712
      were reclassified from vehicles leased to vehicles held for sale.

      See accompanying notes to financial statements.


<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 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 to cash and cash
            equivalents.

            As of March 31, 2004, 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 March 31,
            2004.

         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 first Quarter ended March 31, 2004,
            approximately $125,600 was repaid to investors. The remaining
            balance as of March 31, 2004 was $4,961,200.

            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 March 31, 2004. As of that date all
            income from leasing activities is used to

                                       9
<PAGE>

            repay Investor Notes. All Company disbursements require approval of
            Trust Management.

                        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 of approximately $1,670,000 and
         $413,000 as of December 31, 2003 and 2002 (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 $4,913,000 and $2,000,000 for the year ended December 31,
         2003 and the year ended December 31, 2002, respectively. The Company's
         NOL carry-forward expires between December 31, 2012 and December 31,
         2023.

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. The Company had
         $17,950 accrued as payable to TLMI in 2003 for servicing, documentation
         and marketing fees. The Company also has a payable to TLMI for $62,713
         as of March 31, 2004.

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 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 March 31,
2004. The balance sheet at December 31, 2003, 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.

      On June 30, 2002 Transition Auto Finance II, Inc. defaulted on its
$10,000,000 11% Redeemable Secured Notes.

Results of Operations: Three months ended March 31, 2004, compared to three
months ended March 31, 2003.

      For the three months ended March 31, 2004, the company had received
monthly contract lease payments of $24,044 and amortization of down payments of
$752. For the same period in 2003, the Company had contract lease income of
$87,204 and amortization of down payments of $20,722. The drop in monthly
contract lease payments and amortization of down payments for the three month
period ended March 31, 2004, compared to the same period in 2003, 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 $20,952
for the first quarter of 2004, compared to $29,329 for the same period in 2003.
The lower operating costs for the 2004 period were due to a smaller lease base
and the lower cost of servicing fewer leases.

      Depreciation and amortization was $12,377 for the three months ended March
31, 2004, compared to $53,983 for the same period in 2003. The decline of
$41,606 for the first quarter of 2004 was due to fewer active leases, the result
of repossessions, early terminations and matured leases.

      Interest expense for the three months ended March 31, 2004 was zero ($0)
and the same for the 2003 period. All payments subsequent to June 30, 2002 go to
the repayment of principal.

      Loss on sale of inventory for the first quarter of 2004 was $3,695
compared to a loss of $38,432 for the same period in 2003. 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 quarter ended March 31, 2004 was $12,127 compared to
a loss of $13,033 for the same period in 2003.

      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 March 31, 2004, the principal amount paid to
Noteholders was $5,038,800. The Company estimates that its remaining lease
portfolio will generate approximately $123,825 in additional funds not including
$102,091 currently held by the trustee, Trust Management, Inc.

      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.

                                       12
<PAGE>

      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 lower 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
Noteholders, the plan was never submitted to the Noteholders. Management does
not expect inflation to have a material impact on revenue.

Liquidity and Capital Resources

      During the three months ended March 31, 2004 the Company used cash of
$27,709 in its investing activities from the sale of property and used $124,440
in its financing activities. For the same period in 2003, the Company utilized
cash of $136,623 in its investing activities and used $306,270 in its financing
activities.

      The Company's portfolio, which consisted of 426 leases, included 387
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       Sales Tax    Warranty
              Contracts    Of Vehicle    Expenses     Payments      Payment        Amount       Credit       Rebate
<S>           <C>          <C>           <C>         <C>           <C>           <C>           <C>          <C>
Repossession    235        $5,680,094    $150,371    $2,846,594    $1,126,554    $2,497,936    $111,712     $59,687
Early Payoff    152        $3,370,115    $  6,422    $1,912,356    $  706,890    $2,091,153    $100,611     $15,805
                ---        ----------    --------    ----------    ----------    ----------    --------     -------
Total           387        $9,050,209    $156,793    $4,758,950    $1,833,444    $4,589,089    $212,323     $75,492

<CAPTION>
                               Total
              Marketing        Amount         Profit
              Fee Paid        Received        (Loss)
<S>           <C>           <C>            <C>
Repossession  $  625,020    $ 6,017,463    $   86,998
Early Payoff  $  389,232    $ 4,437,583    $1,061,046
              ----------    -----------    ----------
Total         $1,014,252    $10,455,046    $1,248,044

</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

         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.

                                       13
<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

         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 First quarter of 2004.

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 three months ended March 31,
      2004.

                                       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: April 30, 2004                        /s/   Kenneth C. Lowe
                                        ----------------------------------------
                                                    Kenneth C. Lowe, President/
                                                    Chief Executive Officer

Date: April 30, 2004                        /s/   Kenneth C. Lowe
                                        ----------------------------------------
                                                    Kenneth C. Lowe, President/
                                                    Chief Operating Officer

Date: April 30, 2004                        /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


*         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.
</TABLE>

                                       17