Page 1 of 12



                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 June 30, 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 June 30,
1997.

Transitional small business disclosure format:

                              Yes _____                    No __X__


<PAGE>


                                                                    Page 2 of 12


                          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)
                                                          June 30,  December 31,
                                                            1997       1996
                                                            ----       ----
ASSETS
Cash and cash equivalents                                $  4,489    $ 15,591

Accounts receivable (net of allowance
  for losses on accounts receivable of
  $63 and $56 at June 30, 1997 and
  December 31, 1996, respectively)                            219          89

Notes receivable (net of allowance for
  losses on notes receivable of $604 at
  June 30, 1997 and December 31, 1996)                         50          58

Equipment on operating leases and held
  for lease (net of accumulated depreciation
  of  $11,632 and $12,885 at June 30, 1997
  and December 31, 1996, respectively)                       --             1

Cable systems, property and equipment (net of
  accumulated depreciation of $378 and $239 at
  June 30, 1997 and December 31, 1996, respectively)        3,164       3,215

Cable subscriber lists (net of accumulated
  amortization of  $286 and $189 at June 30,
  1997 and December 31, 1996, respectively)                 1,230       1,464

Investment in joint ventures                                  524         547

Capitalized acquisition fees (net of accumulated
  amortization of $8,266 and $8,265 at June 30,
  1997 and December 31, 1996)                                  11          11

Other assets                                                   32          15
                                                         --------    --------

     Total Assets                                        $  9,719    $ 20,991
                                                         ========    ========

LIABILITIES AND PARTNERS' CAPITAL

Liabilities

   Accounts payable and accrued expenses                 $  2,728    $  2,847

   Minority interest in subsidiary                              1           9
                                                         --------    --------

     Total Liabilities                                      2,729       2,856
                                                         --------    --------

Partners' Capital

   General Partner                                            (22)        (25)

   Limited Partners, 600,000 units authorized,
    528,151 units issued and 516,716 units
    outstanding at June 30, 1997 and December 31, 1996      7,012      18,160
                                                         --------    --------

     Total Partners' Capital                                6,990      18,135
                                                         --------    --------

     Total Liabilities and Partners' Capital             $  9,719    $ 20,991
                                                         ========    ========



        The accompanying notes are an integral part of these statements.

<PAGE>


                                                                    Page 3 of 12


                   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  Six Months Ended
                                               June 30,           June 30,
                                            1997     1996      1997      1996
                                            ----     ----      ----      ----
INCOME
   Rental income                            $ 76   $   175    $  203   $   588
   Gain (adjustment to gain) on
     sale of cable system                    --        (35)     --       1,178
   Cable subscriber revenue                  436     1,066       852     1,732
   Equity in earnings from joint
     ventures, net                            35        73        47       128
   Gain on sale of securities                --       --         150        24
   Other income                               81       122       208       245
                                            ----   -------    ------   -------
     Total Income                            628     1,401     1,460     3,895
                                            ----   -------    ------   -------

EXPENSES
   Depreciation and amortization             118       410       219     1,174
   Lease related operating expenses            8        24        22        72
   Program service, cable system             133       328       266       511
   Management fees to General Partner and
     affiliate                                23        64        53       246
   Reimbursed administrative costs
     to General Partner                       29        42        74        87
   Provision for (recovery of) losses on
     receivables                               4        11         9    (2,099)
   Legal expense                              13        78        38       200
   General and administrative expenses       139       278       307       463
                                            ----   -------    ------   -------
     Total Expenses                          467     1,235       988       654
                                            ----   -------    ------   -------

NET INCOME BEFORE MINORITY INTEREST          161       166       472     3,241

Minority interest in losses (earnings)
     of subsidiary                             8         5         8      (203)
                                            ----   -------    ------   -------

NET INCOME                                  $169   $   171    $  480   $ 3,038
                                            ====   =======    ======   =======


NET INCOME PER LIMITED
PARTNERSHIP UNIT                            $.32   $   .33    $  .92   $  5.82
                                            ====   =======    ======   =======

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

ALLOCATION OF NET INCOME:
     General Partner                        $  1   $     1    $    3   $    31
     Limited Partners                        168       170       477     3,007
                                            ----   -------    ------   -------
                                            $169   $   171    $  480   $ 3,038
                                            ====   =======    ======   =======

        The accompanying notes are an integral part of these statements.

<PAGE>


                                                                    Page 4 of 12

                   PHOENIX LEASING CASH DISTRIBUTION FUND III,
                A CALIFORNIA LIMITED PARTNERSHIP AND SUBSIDIARIES
                      CONSOLIDATED STATEMENTS OF CASH FLOWS
                             (Amounts in Thousands)
                                   (Unaudited)
                                                          Six Months Ended
                                                              June 30,
                                                         1997          1996
                                                         ----          ----
Operating Activities:
   Net income                                          $    480      $  3,038
   Adjustments to reconcile net income to net
     cash provided  by operating activities:
       Depreciation and amortization                        219         1,174
       Gain on sale of cable system                        --          (1,178)
       Gain on sale of equipment                            (23)          (36)
       Equity in earnings from joint
        ventures, net                                       (47)         (128)
       Recovery of  losses on notes receivable             --          (2,035)
       Provision for losses on accounts receivable            9            17
       Recovery of early termination,
        financing leases                                   --             (81)
       Gain on sale of securities                          (150)          (24)
       Increase in accounts receivable                     --            (131)
       Increase (decrease) in accounts payable
        and accrued expenses                               (103)          170
       Increase in other assets                             (17)           (2)
       Minority interest in earnings (losses)
        of subsidiary                                        (8)          203
       Other                                               --             218
                                                       --------      --------

       Net cash provided by operating activities            360         1,205
                                                       --------      --------

Investing Activities:
   Principal payments, notes receivable                       8           566
   Proceeds from sale of cable system                      --           2,586
   Proceeds from sale of equipment                           24            57
   Proceeds from sale of securities                         150            24
   Distributions from joint ventures                         70           114
   Cable systems, property and equipment                    (89)         (124)
                                                       --------      --------

Net cash provided by investing activities                   163         3,223
                                                       --------      --------

Financing Activities:
   Payments of principal, notes payable                    --            (729)
   Distributions to partners                            (11,625)       (1,954)
   Distributions to minority partners                      --            (505)
                                                       --------      --------

Net cash used by financing activities                   (11,625)       (3,188)
                                                       --------      --------

Increase (decrease) in cash and
 cash equivalents                                       (11,102)        1,240

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

Cash and cash equivalents, end of period               $  4,489      $  4,859
                                                       ========      ========

Supplemental Cash Flow Information:
   Cash paid for interest expense                      $   --        $     26

        The accompanying notes are an integral part of these statements.

<PAGE>


                                                                    Page 5 of 12

                   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 six months ended June 30, 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 June 30, 1997, the recorded investment in
notes that are  considered  to be impaired  was  $654,000  for which the related
allowance for losses was $604,000.  The average recorded  investment in impaired
loans during the six months ended June 30, 1997 was approximately $656,000.

         At June 30, 1996, the recorded  investment in notes that are considered
to be impaired was  $2,396,000  for which the related  allowance  for losses was
$1,584,000.  The average  recorded  investment in impaired  loans during the six
months ended June 30, 1996 was approximately $2,496,000.

         The activity in the allowance for losses on notes receivable during the
six months ended June 30, 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 12

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 six months ended June 30,
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:

                                        June 30,       December 31,
                                         1997             1996
                                         ----             ----
                                         (Amounts in Thousands)

         Assets                        $  2,545        $  2,851
         Liabilities                        814             733
         Partners' Capital                1,731           2,118


                                Three Months Ended       Six Months Ended
                                     June 30,                June 30,
                                 1997        1996       1997          1996
                                 ----        ----       ----          ----
                                         (Amounts in Thousands)

         Revenue               $ 636       $ 994        $  1,192      $ 1,887
         Expenses                348         522             669        1,088
         Net Income              288         472             523          799

Foreclosed Cable Systems Joint Ventures

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

                                        June 30,       December 31,
                                         1997             1996
                                         ----             ----
                                        (Amounts in Thousands)

         Assets                        $  2,245        $  2,203
         Liabilities                        472             377
         Partners' Capital                1,773           1,826



<PAGE>


                                                                    Page 7 of 12

                               Three Months Ended       Six Months Ended
                                     June 30,                June 30,
                                1997         1996       1997         1996
                                ----         ----       ----         ----
                                         (Amounts in Thousands)

         Revenue              $  260       $  278     $  505       $  524
         Expenses                274          268        551          543
         Net Income (Loss)       (14)          10        (46)         (19)





<PAGE>


                                                                    Page 8 of 12

                   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 $169,000
and $480,000 for the three and six months ended June 30, 1997, respectively,  as
compared to net income of $171,000 and  $3,038,000 for the same periods in 1996.
Net income for the three months ended June 30, 1997  compared to the same period
in  1996  remained  relatively  the  same;  however,  net  income  decreased  by
$2,558,000  for the six months  ended June 30,  1997,  as  compared  to the same
period in 1996.  The  decrease in net income  experienced  during the six months
ended June 30, 1997 is primarily  attributable  to the absence of a gain on sale
of cable system, as compared to the gain of $1,178,000  reported during the same
period  in 1996 and an  increase  in  provision  for  losses on  receivables  of
$2,108,000.

         During the six months  ended June 30,  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 $1,178,000.

         During the six months ended June 30, 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 $2,035,000  during the six
months ended June 30, 1996.  This reduction in the allowance for loan losses was
recognized as income during the period.

         Total revenues  decreased by $775,000 and  $2,477,000  during the three
and six months  ended June 30,  1997,  respectively,  when  compared to the same
periods in 1996.  The decline in total  revenues for the three months ended June
30,  1997,  compared to 1996,  is  primarily  the result of a reduction in cable
subscriber revenues.  In addition to the reduction in cable subscriber revenues,
the absence of a gain on sale of cable  system and the decline in rental  income
contributed  to the decrease in total revenues for the six months ended June 30,
1997, compared to the same period in 1996.

         The decline in cable  subscriber  revenue of $630,000  and $880,000 for
the three and six months ended June 30, 1997, respectively, compared to the same
periods 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.

         Rental  income  decreased by $99,000 and $385,000 for the three and six
months ended June 30, 1997, respectively,  compared to the same periods in 1996,
primarily  as the result of a decrease in the amount of  equipment  owned by the
Partnership.  At June 30, 1997, the Partnership  owned equipment,  excluding the
Partnership's  pro rata interest in joint ventures,  with an aggregate  original



<PAGE>


                                                                    Page 9 of 12

cost of $12.4 million, as compared to $16.4 million at June 30, 1996.

         Total  expenses  decreased  by $770,000 for the three months ended June
30, 1997,  as compared to the same period in 1996 but  increased by $292,000 for
the six months  ended June 30,  1997,  as  compared  to the same period in 1996.
During the three and six months ended June 30, 1997, the Partnership experienced
decreases in  depreciation  and  amortization,  program  service and general and
administrative  expenses.  These  factors  contributed  to the decrease in total
expenses  for the three  months  ended June 30,  1997,  as compared to the prior
year.  However,  the  increase  in  provision  for  losses  on  receivables,  as
previously  discussed,  more than offset these  factors for the six months ended
June 30, 1997, compared to the same period in 1996.

         The  decreases  in  depreciation   and  amortization  of  $292,000  and
$955,000,   program   service  of  $195,000   and   $252,000   and  general  and
administrative  expenses of $141,000  and  $191,000 for the three and six months
ended June 30,  1997,  respectively,  compared to the same  periods in the prior
year,  are all a result  of the sale of assets in  several  Subsidiaries  of the
Partnership.  As a  result  of the sale of  assets,  these  Subsidiaries  ceased
operations.  The decrease in depreciation and amortization expense for the three
and six  months  ended  June  30,  1997 is also a  result  of the  Partnership's
equipment being fully depreciated.

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 $360,000 during the
six months ended June 30, 1997, as compared to $1,205,000 during the same period
in 1996.  This decrease is primarily due to a decline in rental income and cable
subscriber revenue.

         During the six months ended June 30,  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 six months ended June 30, 1997, the  Partnership  reported a
decrease in principal  payments from notes  receivable of $558,000,  compared to
the same period in 1996.  This  decrease is  reflective  of the decline in notes
receivable, as reported on the balance sheet at June 30, 1997.

         The  Partnership  received  proceeds  from  the sale of  securities  of
$150,000  for the six months  ended June 30,  1997,  compared to $24,000 for the
same period in 1996. The securities  sold during both 1996 and 1997 consisted of
common  stock  received  through the exercise of stock  warrants  granted to the
Partnership  as part of a  financing  agreement  with  several  emerging  growth
companies.

         As of June 30, 1997,  the  Partnership  owned  equipment held for lease
with an  aggregate  original  cost of  $3,196,000  and a net  book  value of $0,
compared  to  $3,653,000  and $1,000,  respectively,  as of June 30,  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 six months
ended June 30, 1997 and 1996 was $11,625,000 and $1,954,000, respectively.  As a



<PAGE>


                                                                   Page 10 of 12


result,   the  cumulative  cash   distributions  to  the  limited  partners  are
$109,804,000  and  $98,179,000 as of June 30, 1997 and 1996,  respectively.  The
General Partner did not receive cash  distributions  during the six months ended
June 30, 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  Partnership   currently
distributes on an annual basis with the first annual  distribution being 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
included  the excess  cash  provided  by these  events in 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 11 of 12

                   PHOENIX LEASING CASH DISTRIBUTION FUND III,
                        A CALIFORNIA LIMITED PARTNERSHIP

                                  June 30, 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:

                One report,  dated  June 16, 1997, on Form 8-K  was filed during
the quarter ending June 30, 1997, pursuant to Item 4 and Item 7 of that form. No
financial statements were filed as part of that report.

<PAGE>      
                                                                   Page 12 of 12






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


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


August 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


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


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