Page 1 of 11

                UNITED STATES SECURITIES AND EXCHANGE COMMISSION

                             Washington, D.C. 20549

                                   ----------

                                   FORM 10-QSB

  X     QUARTERLY REPORT UNDER SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE
-----   ACT OF 1934

                  For the quarterly period ended March 31, 1997

                                       OR

        TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
-----   EXCHANGE ACT OF 1934

        For the transition period from ______________ to ______________.

                         Commission file number 0-16615
                                                -------


                   PHOENIX LEASING CASH DISTRIBUTION FUND III,
                        A CALIFORNIA LIMITED PARTNERSHIP
--------------------------------------------------------------------------------
                                   Registrant

            California                                     68-0062480
-----------------------------------           ----------------------------------
       State of Jurisdiction                  I.R.S. Employer Identification No.


2401 Kerner Boulevard, San Rafael, California              94901-5527
--------------------------------------------------------------------------------
      Address of Principal Executive Offices                Zip Code

       Registrant's telephone number, including area code: (415) 485-4500
                                                           --------------


Indicate by check mark 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  preceding 12 months (or for such  shorter  period that the  Registrant  was
required  to file  such  reports),  and  (2) has  been  subject  to such  filing
preceding requirements for the past 90 days.

                                 Yes _X_    No ___

516,716 Units of Limited  Partnership  Interest were outstanding as of March 31,
1997.

Transitional small business disclosure format:

                                 Yes ___    No _X_



<PAGE>


                                                                    Page 2 of 11

                          Part I. Financial Information
                          Item 1. Financial Statements
                   PHOENIX LEASING CASH DISTRIBUTION FUND III,
                A CALIFORNIA LIMITED PARTNERSHIP AND SUBSIDIARIES
                           CONSOLIDATED BALANCE SHEETS
                 (Amounts in Thousands Except for Unit Amounts)
                                   (Unaudited)
                                                         March 31, December 31,
                                                           1997        1996
                                                           ----        ----
ASSETS
Cash and cash equivalents                                $ 4,228    $ 15,591

Accounts receivable (net of allowance for losses
   on accounts receivable of $59 and $56 at
   March 31, 1997 and December 31, 1996, respectively)       231          89

Notes receivable (net of allowance for losses on
   notes receivable of $604 at March 31, 1997 and
   December 31, 1996)                                         54          58

Equipment on operating leases and held for lease (net
   of accumulated depreciation of $12,203 and $12,885
   at March 31, 1997 and December 31, 1996, respectively)   --             1

Cable systems, property and equipment (net of
   accumulated depreciation of $308 and $239 at March 31,
   1997 and December 31, 1996, respectively)               3,196       3,215

Cable subscriber lists (net of accumulated amortization
   of $238 and $189 at March 31,1997 and December 31,
   1996, respectively)                                     1,277       1,464

Investment in joint ventures                                 526         547

Capitalized acquisition fees (net of accumulated
   amortization of $8,265 at March 31, 1997 and
   December 31, 1996)                                         11          11

Other assets                                                  26          15
                                                         -------    --------

     Total Assets                                        $ 9,549    $ 20,991
                                                         =======    ========

LIABILITIES AND PARTNERS' CAPITAL

Liabilities

   Accounts payable and accrued expenses                 $ 2,718    $  2,847

   Minority interest in subsidiary                             9           9
                                                         -------    --------

     Total Liabilities                                     2,727       2,856
                                                         -------    --------

Partners' Capital

   General Partner                                           (23)        (25)

   Limited Partners, 600,000 units authorized, 528,151
     units issued and 516,716 units outstanding at
     March 31, 1997 and December 31, 1996                  6,845      18,160
                                                         -------    --------

     Total Partners' Capital                               6,822      18,135
                                                         -------    --------

     Total Liabilities and Partners' Capital             $ 9,549    $ 20,991
                                                         =======    ========




        The accompanying notes are an integral part of these statements.

<PAGE>


                                                                    Page 3 of 11




                   PHOENIX LEASING CASH DISTRIBUTION FUND III,
                A CALIFORNIA LIMITED PARTNERSHIP AND SUBSIDIARIES
                      CONSOLIDATED STATEMENTS OF OPERATIONS
               (Amounts in Thousands Except for Per Unit Amounts)
                                   (Unaudited)


                                                          Three Months Ended
                                                              March 31,
                                                           1997        1996
                                                           ----        ----
INCOME
   Rental income                                          $  152     $   414
   Gain on sale of cable system                             --         1,212
   Interest income, notes receivable                           3          49
   Cable subscriber revenue                                  415         666
   Gain on sale of securities                                151          24
   Other income                                               70         128
                                                          ------     -------

     Total Income                                            791       2,493
                                                          ------     -------

EXPENSES
   Depreciation and amortization                             102         764
   Lease related operating expenses                           13          48
   Program service, cable system                             126         183
   Management fees to General Partner and affiliate           30         182
   Reimbursed administrative costs to General Partner         45          45
   Provision for (recovery of) losses on receivables           4      (2,109)
   Legal expense                                              25         122
   General and administrative expenses                       135         183
                                                          ------     -------

     Total Expenses                                          480        (582)
                                                          ------     -------

NET INCOME BEFORE MINORITY INTEREST                          311       3,075

Minority interest in earnings of subsidiary                 --          (209)
                                                          ------     -------

NET INCOME                                                $  311     $ 2,866
                                                          ======     =======


NET INCOME PER LIMITED PARTNERSHIP UNIT                   $  .60     $  5.49
                                                          ======     =======

DISTRIBUTIONS PER LIMITED PARTNERSHIP UNIT                $22.50     $  3.78
                                                          ======     =======

ALLOCATION OF NET INCOME:
     General Partner                                      $    2     $    29
     Limited Partners                                        309       2,837
                                                          ------     -------
                                                          $  311     $ 2,866
                                                          ======     =======

        The accompanying notes are an integral part of these statements.

<PAGE>


                                                                    Page 4 of 11

                   PHOENIX LEASING CASH DISTRIBUTION FUND III,
                A CALIFORNIA LIMITED PARTNERSHIP AND SUBSIDIARIES
                      CONSOLIDATED STATEMENTS OF CASH FLOWS
                             (Amounts in Thousands)
                                   (Unaudited)
                                                           Three Months Ended
                                                                March 31,
                                                            1997         1996
                                                            ----         ----
Operating Activities:
   Net income                                             $    311     $ 2,866
   Adjustments to reconcile net income to net
     cash provided  by operating activities:
       Depreciation and amortization                           102         764
       Gain on sale of cable system                           --        (1,212)
       Gain on sale of equipment                               (20)         (8)
       Equity in earnings from joint ventures, net             (12)        (55)
       Recovery of losses on notes receivable                 --        (2,035)
       Recovery of early termination, financing leases        --           (81)
       Provision for losses on accounts receivable               4           7
       Gain on sale of securities                             (151)        (24)
       Increase in accounts receivable                          (7)       (208)
       Increase (decrease) in accounts payable and
         accrued expenses                                     (113)        240
       Increase in other assets                                (11)         (1)
       Minority interest in earnings of subsidiary            --           209
       Other                                                  --           217
                                                          --------     -------

Net cash provided by operating activities                      103         679
                                                          --------     -------

Investing Activities:
   Principal payments, notes receivable                          4         367
   Proceeds from sale of cable system                         --         2,583
   Proceeds from sale of equipment                              21          26
   Proceeds from sale of securities                            151          24
   Distributions from joint ventures                            33          33
   Cable systems, property and equipment                       (51)        (59)
                                                          --------     -------

Net cash provided by investing activities                      158       2,974
                                                          --------     -------

Financing Activities:
   Payments of principal, notes payable                       --          (200)
   Distributions to partners                               (11,624)     (1,954)
   Distributions to minority partners                         --          (485)
                                                          --------     -------

Net cash used by financing activities                      (11,624)     (2,639)
                                                          --------     -------

Increase (decrease) in cash and cash equivalents           (11,363)      1,014

Cash and cash equivalents, beginning of period              15,591       3,619
                                                          --------     -------

Cash and cash equivalents, end of period                  $  4,228     $ 4,633
                                                          ========     =======

Supplemental Cash Flow Information:
   Cash paid for interest expense                         $   --       $     6

        The accompanying notes are an integral part of these statements.

<PAGE>


                                                                    Page 5 of 11

                   PHOENIX LEASING CASH DISTRIBUTION FUND III,
                A CALIFORNIA LIMITED PARTNERSHIP AND SUBSIDIARIES
                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
                                   (Unaudited)

Note 1.       General.

         The accompanying  unaudited  condensed  financial  statements have been
prepared by the  Partnership in accordance  with generally  accepted  accounting
principles, pursuant to the rules and regulations of the Securities and Exchange
Commission. In the opinion of Management,  all adjustments (consisting of normal
recurring  accruals)  considered  necessary  for a fair  presentation  have been
included. Although management believes that the disclosures are adequate to make
the information  presented not misleading,  it is suggested that these condensed
financial  statements be read in conjunction  with the financial  statements and
the notes included in the Partnership's  Financial Statement,  as filed with the
SEC in the latest annual report on Form 10-K.

         Non-Cash  Investing  Activities.  The  Partnership  foreclosed upon two
cable  television  systems  during the three  months  ended March 31,  1996,  as
discussed in Note 2 in the consolidated financial statements.

Note 2.       Reclassification.

         Reclassification  - Certain  1996  amounts  have been  reclassified  to
conform to the 1997 presentation.

Note 3.       Income Taxes.

         Federal  and state  income tax  regulations  provide  that taxes on the
income  or loss of the  Partnership  are  reportable  by the  partners  in their
individual income tax returns. Accordingly, no provision for such taxes has been
made in the accompanying financial statements.

Note 4.       Notes Receivable.

         Impaired Notes Receivable.  At March 31, 1997, the recorded  investment
in notes that are  considered  to be impaired was $658,000 for which the related
allowance for losses was $604,000.  The average recorded  investment in impaired
loans during the three months ended March 31, 1997 was approximately $658,000.

         At March 31, 1996, the recorded investment in notes that are considered
to be impaired was  $2,596,000  for which the related  allowance  for losses was
$1,584,000.  The average recorded  investment in impaired loans during the three
months ended March 31, 1996 was approximately $2,596,000.

         The activity in the allowance for losses on notes receivable during the
three months ended March 31, is as follows:

                                              1997          1996
                                              ----          ----
                                              (Amounts in Thousands)


           Beginning balance                  $  604       $ 3,880
             Provision for losses                --         (2,035)
             Write downs                         --           --
                                              ------       -------
           Ending balance                     $  604       $ 1,845
                                              ======       =======




<PAGE>


                                                                    Page 6 of 11

Note 5.       Net Income (Loss) and Distributions Per Limited Partnership Unit.

         Net income and distributions per limited partnership unit were based on
the limited  partners' share of net income and  distributions,  and the weighted
average number of units  outstanding of 516,716 for the three months ended March
31,  1997  and  1996.   For  purposes  of  allocating   net  income  (loss)  and
distributions to each individual limited partner, the Partnership  allocates net
income (loss) and distributions based upon each respective limited partner's net
capital contributions.

Note 6.       Investment in Joint Ventures.

Equipment Joint Ventures

         The aggregate  combined  financial  information of the equipment  joint
ventures is presented as follows:

                                                March 31,    December 31,
                                                  1997           1996
                                                  ----           ----
                                                 (Amounts in Thousands)

         Assets                                  $2,632         $2,851
         Liabilities                                716            733
         Partners' Capital                        1,916          2,118

                                                    Three Months Ended
                                                        March 31,
                                                   1997           1996
                                                   ----           ----
                                                 (Amounts in Thousands)

          Revenue                                $  556         $  893
          Expenses                                  321            566
          Net Income                                235            327

Foreclosed Cable Systems Joint Ventures

         The aggregate  combined  financial  information of the foreclosed cable
systems joint ventures is presented as follows:

                                                 March 31,    December 31,
                                                   1997           1996
                                                   ----           ----
                                                  (Amounts in Thousands)

         Assets                                  $ 2,198        $ 2,203
         Liabilities                                 412            377
         Partners' Capital                         1,786          1,826


<PAGE>

                                                                    Page 7 of 11


                                                    Three Months Ended
                                                        March 31,
                                                   1997           1996
                                                   ----           ----
                                                 (Amounts in Thousands)

         Revenue                                 $   245        $   247
         Expenses                                    277            276
         Net Loss                                    (32)           (29)





<PAGE>


                                                                    Page 8 of 11

                   PHOENIX LEASING CASH DISTRIBUTION FUND III,
                A CALIFORNIA LIMITED PARTNERSHIP AND SUBSIDIARIES

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


Results of Operations

         Phoenix  Leasing  Cash  Distribution  Fund III,  a  California  limited
partnership and Subsidiaries (the  Partnership)  reported net income of $311,000
for the three  months  ended  March  31,  1997,  as  compared  to net  income of
$2,866,000 for the same period in 1996.  The  $2,555,000  decrease in net income
during the three months ended March 31, 1997,  as compared to the same period in
1996,  is  primarily  attributable  to the  absence  of a gain on sale of  cable
system, as compared to $1,212,000 during the same period in 1996 and an increase
in provision for losses on receivables of $2,113,000.

         During the three months ended March 31, 1996,  Phoenix Black Rock Cable
J.V., a wholly owned subsidiary of Phoenix Leasing Cash  Distribution  Fund III,
sold the assets of its cable  television  system for $2.6 million in cash.  As a
result of this sale, the Partnership recognized a gain on sale of $1,240,000.

         During the three months ended March 31, 1996, the  Partnership  entered
into agreements with two cable  television  system  operators to transfer all of
the assets of the cable  television  systems in  satisfaction of defaulted notes
receivable from these cable  television  system  operators.  The assets of these
cable  television  systems were  transferred to newly formed  limited  liability
companies, Phoenix Concept Cablevision of Indiana, L.L.C. and Phoenix Grassroots
Cable Systems, L.L.C. On August 30, 1996, the Partnership  subsequently sold the
assets of Phoenix Grassroots Cable Systems, L.L.C.

         Upon  the  transfer  of  these  two  cable  television   systems,   the
Partnership reduced its allowance for loan losses by $2,109,000 during the three
months ended March 31, 1996. This reduction in the allowance for loan losses was
recognized as income during the period.

         Total  revenues  decreased by $1,702,000  during the three months ended
March 31,  1997,  when  compared  to the same period in 1996.  This  decrease is
primarily the result of an absence of a gain on the sale of a cable  system,  as
previously  discussed,  and  decreases  in rental  income of $262,000  and cable
subscriber  revenue of  $251,000  for the three  months  ended  March 31,  1997,
compared to 1996.  Rental income declined  primarily as the result of a decrease
in the amount of equipment  owned by the  Partnership.  At March 31,  1997,  the
Partnership  owned equipment,  excluding the  Partnership's pro rata interest in
joint ventures,  with an aggregate original cost of $13 million,  as compared to
$18.9 million at March 31, 1996.

         The  decline  in cable  subscriber  revenue of  $251,000  for the three
months  ended  March  31,  1997,  compared  to  the  same  period  in  1996,  is
attributable  to the sale of the  assets of the cable  system  owned by  Phoenix
Black Rock Cable J.V. and Phoenix  Grassroots Cable Systems,  L.L.C. As a result
of the sale of the assets,  Phoenix Black Rock Cable J.V. and Phoenix Grassroots
Cable System, L.L.C. ceased operations.

         Total expenses increased by $1,062,000 for the three months ended March
31, 1997, as compared to the same period in 1996. The increase in total expenses
for the period is primarily  due to an adjustment to the provision for losses on
receivables of $2,113,000 during 1996, as previously discussed.  The Partnership
reported a decrease in depreciation  and  amortization of $662,000 for the three
months  ended  March 31,  1997,  compared  to the prior  year.  The  decrease in
depreciation and amortization expense is a result of the Partnership's equipment
being fully depreciated.




<PAGE>


                                                                    Page 9 of 11

Liquidity and Capital Resources

         The  Partnership's   primary  source  of  liquidity  comes  from  cable
subscriber  revenues  and from its  contractual  obligations  with  lessees  and
borrowers  for fixed  payment  terms.  As the initial  lease terms of the leases
expire, the Partnership will continue to renew,  remarket or sell the equipment.
The future liquidity of the Partnership  will depend upon the General  Partner's
success  in  collecting  contractual  amounts  and  releasing  and  selling  the
Partnership's  equipment as it comes off lease.  As another source of liquidity,
the Partnership  owns cable  television  systems,  has investments in foreclosed
cable system joint ventures and investments in leasing joint ventures.

         The net cash generated by operating  activities was $103,000 during the
three  months  ended March 31,  1997,  as  compared to $679,000  during the same
period in 1996. This decrease is primarily due to a decline in rental income and
cable subscriber revenue.

         During the three months ended March 31, 1996, the Partnership  received
proceeds of $2.6 million for the sale of a cable  system owned by Phoenix  Black
Rock Cable J.V., a majority  owned  subsidiary  of the  Partnership.  This cable
system was sold on January 17, 1996.

         During the three months ended March 31, 1997, the Partnership  reported
a decrease in principal payments from notes receivable of $363,000,  compared to
the same period in 1996.  This  decrease is  reflective  of the decline in notes
receivable, as reported on the balance sheet at March 31, 1997.

         As of March 31, 1997, the  Partnership  owned  equipment held for lease
with an  aggregate  original  cost of  $2,565,000  and a net  book  value of $0,
compared to  $3,615,000  and $10,000,  respectively,  as of March 31, 1996.  The
General  Partner  is  actively  engaged,  on  behalf  of  the  Partnership,   in
remarketing and selling the Partnership's off-lease portfolio.

         The cash  distributed to limited  partners during both the three months
ended March 31, 1997 and 1996 was $11,624,000 and $1,954,000, respectively. As a
result,   the  cumulative  cash   distributions  to  the  limited  partners  are
$109,803,000  and $98,179,000 as of March 31, 1997 and 1996,  respectively.  The
General Partner did not receive cash distributions during the three months ended
March 31, 1997 and 1996. The General Partner has elected not to receive payment,
at this time,  for its share of the cash available for  distribution  due to its
negative capital account.

         The Partnership's  asset portfolio  continues to decline as a result of
the ongoing  liquidation  of assets,  and therefore it is expected that the cash
generated from  Partnership  leasing  operations will also decline.  As the cash
generated by  operations  continues to decline,  the rate of cash  distributions
made to limited  partners will also decline.  The first annual  distribution was
made on January 15, 1997.  As a result of the sale of certain  cable  television
systems and the  settlement  of an impaired  note  receivable  during 1996,  the
Partnership  distributed the excess cash provided by these events on the January
15, 1997 distribution.

         Cash  generated  from leasing and financing  operations has been and is
anticipated  to continue to be sufficient to meet the  Partnership's  continuing
operational expenses and to provide for distributions to partners.



<PAGE>


                                                                   Page 10 of 11

                   PHOENIX LEASING CASH DISTRIBUTION FUND III,
                        A CALIFORNIA LIMITED PARTNERSHIP

                                 March 31, 1997

                           Part II. Other Information.


Item 1.    Legal Proceedings.  Inapplicable

Item 2.    Changes in Securities.  Inapplicable

Item 3.    Defaults Upon Senior Securities.  Inapplicable

Item 4.    Submission of Matters to a Vote of Securities Holders.  Inapplicable

Item 5.    Other Information.  Inapplicable

Item 6.    Exhibits and Reports on 8-K:

           a)  Exhibits:

               (27)       Financial Data Schedule

           b)  Reports on 8-K: None




<PAGE>


                                                                   Page 11 of 11

                                   SIGNATURES


         Pursuant to the  requirements  of Section 13 or 15(d) of the Securities
Exchange Act of 1934, the Registrant has duly caused this report to be signed on
its behalf by the undersigned, thereunto duly authorized.

                               PHOENIX LEASING CASH DISTRIBUTION FUND III,
                               -------------------------------------------
                                    A CALIFORNIA LIMITED PARTNERSHIP
                                    --------------------------------
                                             (Registrant)

      Date                          Title                  Signature
      ----                          -----                  ---------




  May 13, 1997           Chief Financial Officer,       /S/ PARITOSH K. CHOKSI
----------------------   Senior Vice President,        -----------------------
                         Treasurer and a Director of   (Paritosh K. Choksi)
                         Phoenix Leasing Incorporated
                         General Partner


  May 13, 1997           Senior Vice President,          /S/ BRYANT J. TONG
-----------------------  Financial Operations of        ----------------------
                         (Principal Accounting Officer) (Bryant J. Tong)
                         Phoenix Leasing Incorporated
                         General Partner


  May 13, 1997           Senior Vice President           /S/ GARY W. MARTINEZ
-----------------------  and a Director of              ----------------------
                         Phoenix Leasing Incorporated   (Gary W. Martinez)
                         General Partner


  May 13, 1997           Partnership Controller of       /S/ MICHAEL K. ULYATT
-----------------------  Phoenix Leasing Incorporated   ----------------------
                         General Partner                (Michael K. Ulyatt)