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UNITED STATES SECURITIES AND EXCHANGE COMMISSION
 Washington, D.C. 20549
 Form 10-QSB
 þ
    
    QUARTERLY REPORT UNDER SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
 For the quarterly period ended March 31, 2007
 OR
 o
    
    TRANSITION REPORT UNDER SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
 For the transition period from  to
 Commission file number: 33-77510-C
 CAPTEC FRANCHISE CAPITAL PARTNERS L.P. III
  Delaware
 38-3160141
 th  P.O. Box 544, Ann Arbor, Michigan 48106-0544
 (734) 994-5505
 Not Applicable
 þ o
 o o
 APPLICABLE ONLY TO ISSUERS INVOLVED IN BANKRUPTCY
PROCEEDINGS DURING THE PRECEDING FIVE YEARS
 Not applicable
 APPLICABLE ONLY TO CORPORATE ISSUERS
 Not applicable
 o þ




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CAPTEC FRANCHISE CAPITAL PARTNERS L.P. III
 Index to Form 10-QSB
 Item No.
    
    PagePART I FINANCIAL INFORMATIONItem 1. Financial Statements:Statements of Net Assets in Liquidation (liquidation basis) at March 31, 2007 (unaudited) and December 31, 2006
    
    
    3Statement of Changes in Net Assets in Liquidation (liquidation basis) (unaudited) for the three months ended March 31, 2007
    
    
    4Statement of Discontinued Operations (going concern basis) (unaudited) for the three months ended March 31, 2006
    
    
    5Statements of Cash Flows (unaudited) for the three months ended March 31, 2007 (liquidation basis) and 2006 (going concern basis)
    
    
    6Notes to Financial Statements
    
    
    7  9Item 2. Managements Discussion and Analysis of Financial Condition and Results of Operations
    
    
    9-10Item 3. Controls and Procedures
    
    
    11PART II OTHER INFORMATIONOther Information
    
    
    12SIGNATURES
    
    
    13CERTIFICATION Pursuant to Section 302(a) of the Sarbanes-Oxley Act of 2002Certification Pursuant to Section 302Certification Pursuant to Section 906
    
    
    14-16Section 302 CertificationSection 906 Certification
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Captec Franchise Capital Partners L.P. III
 
 Statements of Net Assets in Liquidation (Liquidation Basis)
 March 31,
    
    
    December 31,2007
    
    
    2006AssetsCash and cash equivalents
    
    $
    574,864
    
    
    $
    1,531,355Due from related parties
    
    
    151
    
    
    
    151Total assets
    
    
    575,015
    
    
    
    1,531,506Liabilities and Net Assets
in LiquidationLiabilities:Reserve for estimated
costs during
liquidation period
    
    
    261,231
    
    
    
    315,782Total liabilities
    
    
    261,231
    
    
    
    315,782Net assets in liquidation
    
    $
    313,784
    
    
    $
    1,215,724
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Captec Franchise Capital Partners L.P. III
 
 Statement of Changes in Net Assets in Liquidation
 (Liquidation Basis)
  Net assets in liquidation  December 31, 2006
    
    $
    1,215,724Adjustments relating to adoption of liquidation basis of accountingDistributions to limited partners
    
    
    (900,000
    )Net change in net assets in liquidation
    
    
    (1,940
    )Net assets in liquidation  March 31, 2007
    
    $
    313,784
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Captec Franchise Capital Partners L.P. III
 
 Statement of Discontinued Operations
 (Going Concern Basis)
 For the threemonths endedMarch 31, 2006Operating revenue:Rental income
    
    $
    33,075Total operating revenue
    
    
    33,075Operating costs and expenses:Depreciation
    
    
    5,530General and administrative
    
    
    55,246Total operating costs and expenses
    
    
    60,776Loss from discontinued operations before other income
    
    
    (27,701
    )Other income:Gain on sale of real estate
    
    
    428,852Interest and other income
    
    
    15,460Total other income
    
    
    444,312Net Income from discontinued operations
    
    $
    416,611Net loss from discontinued operations allocable to general partner
    
    $
    (122
    )Net income from discontinued operations allocable to limited partners
    
    $
    416,733Net income from discontinued operations per limited partnership unit
    
    $
    21.23Weighted average number of limited partnership
units outstanding
    
    
    19,633
 The accompanying notes are an integral part of the financial statements.
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Captec Franchise Capital Partners L.P. III
 
 Statements of Cash Flows
  Liquidation
    
    
    Going ConcernBasis
    
    
    Basis2007
    
    
    2006Cash flows from operating activities:Change in net assets in liquidation from operating activity
    
    $
    (1,940
    )
    
    $
    Change in reserve for estimated costs during liquidation period
    
    
    9,945
    
    
    
    Cash payments made against reserve
    
    
    (64,496
    )
    
    
    Net Income
    
    
    
    
    
    
    416,611Adjustments to net income:Depreciation
    
    
    
    
    
    
    5,530Gain on sale of real estate
    
    
    
    
    
    
    (428,852
    )Decrease in unbilled rent
    
    
    
    
    
    
    770Decrease in accounts receivable
    
    
    
    
    
    
    238Decrease in due to related parties
    
    
    
    
    
    
    (138,435
    )Net cash used in operating activities
    
    
    (56,491
    )
    
    
    (144,138
    )Cash flows from investing activities:Net proceeds from sale of real estate
    
    
    
    
    
    
    1,601,950Net cash provided by investing activities
    
    
    
    
    
    
    1,601,950Cash flows from financing activities:Distributions to limited partners
    
    
    (900,000
    )
    
    
    Net cash used in financing activities
    
    
    (900,000
    )
    
    
    Net (decrease) increase in cash and cash equivalents
    
    
    (956,491
    )
    
    
    1,457,812Cash and cash equivalents, beginning of period
    
    
    1,531,355
    
    
    
    935,510Cash and cash equivalents, end of period
    
    $
    574,864
    
    
    $
    2,393,322
 The accompanying notes are an integral part of the financial statements.
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CAPTEC FRANCHISE CAPITAL PARTNERS L.P. III
NOTES TO FINANCIAL STATEMENTS
 1.
    
    THE PARTNERSHIP AND ITS SIGNIFICANT ACCOUNTING PRINCIPLES:
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2.
    
    LAND AND BUILDING SUBJECT TO OPERATING LEASES:
  Leases
 Real Estate Leases:
  
 ITEM 2.      MANAGEMENTS DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
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RESULTS OF OPERATIONS
 Three Months Ended March 31, 2007
  Three Months Ended March 31, 2006
      LIQUIDITY AND CAPITAL COMMITMENTS
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ITEM 3. Controls and Procedures
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PART II  OTHER INFORMATION
 ITEM 1.
    
    LEGAL PROCEEDINGS. None.ITEM 2.
    
    CHANGES IN SECURITIES AND SMALL BUSINESS ISSUER PURCHASES OF EQUITY SECURITIES. None.ITEM 3.
    
    DEFAULTS UPON SENIOR SECURITIES. None.ITEM 4.
    
    SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS. None.ITEM 5.
    
    OTHER INFORMATION. NoneITEM 6.
    
    EXHIBITSThe following exhibits are included herein or incorporated by reference:
 Number
    
    Exhibit2
    
    Plan of Liquidation and Dissolution (Incorporated by reference to the
Registrants Definitive Proxy Statement on Schedule 14A, filed on September 21, 2004)4
    
    Amended Agreement of Limited Partnership of Registrant. (Incorporated by
reference to the corresponding exhibit in the Registrants Form 10-KSB for the year
ended December 31, 1998)10.1
    
    Promissory Note dated November 28, 1998 between Registrant and National
Realty Funding L.C. (Incorporated by reference to the corresponding exhibit in the
Registrants Form 10-KSB for the year ended December 31, 1998)10.2
    
    Promissory Note dated March 31, 1999 between Registrant and National Realty
Funding L.C. (Incorporated by reference to the corresponding exhibit in the
Registrants Form 10-QSB for the quarter ended March 31, 1999)31
    
    Certification Pursuant to Section 302 of the Sarbanes-Oxley Act of 200232
    
    Certification Pursuant to 18 U.S.C. Section 1350, as adopted pursuant to
Section 906 of the Sarbanes-Oxley Act of 2002
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SIGNATURES
  By:
    
    Captec Franchise Capital Partners L.P. IIIGP3 Asset Acquisition, LLC
Its ManagerBy:
    
    /s/ Patrick L. BeachPatrick L. Beach
PresidentDate:
    
    May 11, 2007
 13