<PAGE>

                                  UNITED STATES
                       SECURITIES AND EXCHANGE COMMISSION
                             WASHINGTON, D.C. 20549

                                   FORM 10-QSB


                  QUARTERLY REPORT UNDER SECTION 13 or 15(d) OF
                       THE SECURITIES EXCHANGE ACT OF 1934

                FOR THE QUARTERLY PERIOD ENDED SEPTEMBER 30, 2002

                                   ----------


                        Commission file number: 333-80537


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


<Table>
<S>                                                                    <C>
                         TEXAS                                                        75-2822804
               (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)
</Table>


         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 September 30, 2002, the issuer'
had 1,000 shares of common stock


    TRANSITIONAL SMALL BUSINESS DISCLOSURE FORMS (CHECK ONE): YES [ ] NO [X]



================================================================================

<PAGE>


                        TRANSITION AUTO FINANCE III, INC.

                                   FORM 10-QSB

                    FOR THE QUARTER ENDED SEPTEMBER 30, 2002


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

         ITEM 1.  Financial Statements

                  Balance Sheets..................................................................................3
                    September 30, 2002 (Unaudited) and December 31, 2001

                  Statements of Income (Unaudited)................................................................5
                    Quarter and nine months ended September 30, 2002 and September 30, 2001

                  Statements of Cash Flows (Unaudited)............................................................6
                    Nine Months ended September 30, 2002 and September 30, 2001

                  Notes to Consolidated Financial Statements (Unaudited)..........................................7

         ITEM 2.  Management's Discussion and Analysis of Financial Condition
                  and Results of Operations .....................................................................11

PART II. OTHER INFORMATION

         ITEM 1.  Legal Proceedings..............................................................................12

         ITEM 2.  Changes in Securities and Use of Proceeds......................................................13

         ITEM 3.  Defaults Upon Senior Securities................................................................13

         ITEM 4.  Submission of Matters to a Vote of Security Holders............................................13

         ITEM 5.  Other Information..............................................................................13

         ITEM 6.  Exhibits and Reports on Form 8-K...............................................................13

         Signatures .............................................................................................14
</Table>

         In the Opinion of management, all adjustments necessary to a 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 III, INC.

                                 BALANCE SHEETS

                                     ASSETS

<Table>
<Caption>
                                                                           9 months ended           FYE
                                                                             9/30/2002           12/31/2001
                                                                            (unaudited)         (See Note 1)
                                                                           --------------      --------------
<S>                                                                        <C>                 <C>
CURRENT ASSETS
  Cash and cash equivalents                                                $      351,166      $      181,867
  Other Assets                                                                      3,629               2,583
  Accounts receivable                                                             407,948             332,026
  Vehicles held for sale                                                          363,725             398,709
                                                                           --------------      --------------
      Total Current Assets                                                      1,126,468             915,185

PROPERTY, at cost
  Vehicles leased                                                               5,280,700           5,568,662
  Less accumulated depreciation                                                (1,335,984)           (976,390)
                                                                           --------------      --------------
      Net Property                                                              3,944,716           4,592,272
                                                                           --------------      --------------

OTHER ASSETS
  Debt issuance costs, net of amortization of $399,395 and $277,170               366,679             488,904
  Due from Associates                                                              20,620              39,061
                                                                           --------------      --------------
      Total Other Assets                                                          387,299             527,965
                                                                           --------------      --------------


TOTAL ASSETS                                                               $    5,458,483      $    6,035,422
                                                                           ==============      ==============
</Table>


See accompanying notes to financial statements.



                                       3
<PAGE>

                        TRANSITION AUTO FINANCE III, INC.

                           BALANCE SHEETS (Continued)

                 LIABILITIES AND STOCKHOLDERS' EQUITY (DEFICIT)


<Table>
<Caption>
                                                            9 Months Ended           FYE
                                                              9/30/2002           12/31/2001
                                                             (Unaudited)         (See Note 1)
                                                            --------------      --------------
<S>                                                         <C>                 <C>
CURRENT LIABILITIES
  Accrued liabilities                                       $      195,172      $       93,915
  Current portion of deferred revenue                              230,356             282,821
                                                            --------------      --------------
        Total Current Liabilities                                  425,528             376,736

OTHER LIABILITIES
  Due to affiliate                                                  34,616              52,255
  Deferred revenue                                                 350,935             430,272
  Investor notes payable                                         6,786,000           6,786,000
                                                            --------------      --------------
      Total Other Liabilities                                    7,171,551           7,268,527

TOTAL LIABILITIES                                                7,597,079           7,645,263
                                                            --------------      --------------
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)                                  (2,139,596)         (1,610,841)
                                                            --------------      --------------
       Total Stockholders' Equity (Deficit)                     (2,138,596)         (1,609,841)
                                                            --------------      --------------

TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY
   (DEFICIT)                                                $    5,458,483      $    6,035,422
                                                            ==============      ==============
</Table>

Note 1: The balance sheet at December 31, 2001, as presented, is derived from
the audited financial statements at that date.

See accompanying notes to financial statements.


                                       4
<PAGE>

                        TRANSITION AUTO FINANCE III, INC.

                              STATEMENTS OF INCOME

                                   (Unaudited)


<Table>
<Caption>
                                          Quarter Ended     Nine Months Ended     Quarter Ended     Nine Months Ended
                                       September 30, 2002  September 30, 2002  September 30, 2001  September 30, 2001
                                       ------------------  ------------------  ------------------  ------------------
<S>                                    <C>                 <C>                 <C>                 <C>
REVENUES

  Vehicle monthly lease payments         $      397,488      $    1,226,101      $      402,803      $    1,131,091
   Amortization of down payments                163,187             489,616             208,950             494,528
                                         --------------      --------------      --------------      --------------

        Total Revenues                          560,675           1,715,717             611,753           1,625,619
                                         --------------      --------------      --------------      --------------

OPERATING EXPENSES

  Operating costs                                90,658             316,515             159,554             403,056
  General and administrative                     16,335              81,513              39,309             100,940
  Depreciation and amortization                 293,061             903,732             312,382             894,398
  Impairment loss                                   -0-                 -0-                 -0-                 -0-
                                         --------------      --------------      --------------      --------------

        Total Operating Expenses                400,054           1,301,760             511,245           1,398,394
                                         --------------      --------------      --------------      --------------

Operating Income (Loss)                         160,621             413,957             100,508             227,225
                                         --------------      --------------      --------------      --------------

OTHER INCOME (EXPENSE)

Investment income                                   309                 720               3,338              25,591
Other income (expense)                               17                  78                  (1)                124
Interest expense                               (186,729)           (560,099)           (186,743)           (562,894)
Loss on sale of inventory                      (163,346)           (383,410)            (86,377)           (233,580)
                                         --------------      --------------      --------------      --------------

       Total Other Income (Expense)            (349,749)           (942,711)           (269,783)           (770,759)
                                         --------------      --------------      --------------      --------------

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

Net Loss                                 $     (189,128)     $     (528,754)     $     (169,275)     $     (543,534)
                                         ==============      ==============      ==============      ==============

Loss per share (basic and diluted)       $       189.13      $       528.75      $       169.28      $       543.53
</Table>


See accompanying notes to financial statements.



                                       5
<PAGE>

                        TRANSITION AUTO FINANCE III, INC.

                            STATEMENTS OF CASH FLOWS

                                   (Unaudited)


<Table>
<Caption>
                                                                       9 Months Ended      9 Months Ended
                                                                     September 30, 2002  September 30, 2001
                                                                     ------------------  ------------------
<S>                                                                  <C>                 <C>
CASH FLOWS FROM OPERATING ACTIVITIES
Net loss                                                               $     (528,754)     $     (543,534)
Adjustments to reconcile net income to net cash provided by
  operating activities:
     Depreciation and amortization                                            903,732             894,398
     Amortization of down payments                                           (489,616)           (494,528)
     Impairment loss                                                              -0-                 -0-
     Provision for allowance for doubtful accounts                                -0-                 -0-
     (Gain) loss on sale of property                                          383,410             233,580
Net changes in operating assets and liabilities:
     Accounts receivable                                                      (75,922)             (7,209)
     Other Assets                                                              (1,047)             57,790
     Accrued liabilities                                                      101,257
     Deferred revenue                                                         357,814             510,843
                                                                       --------------      --------------
NET CASH PROVIDED (USED) BY OPERATING ACTIVITIES                              650,874             651,340
                                                                       --------------      --------------

CASH FLOWS FROM INVESTING ACTIVITIES
   Purchase of fixed assets                                                (1,718,939)         (2,746,526)
   Cash proceeds from sale of property                                      1,238,167             884,639
                                                                       --------------      --------------
NET CASH (USED) BY INVESTING ACTIVITIES                                      (480,772)         (1,861,887)
                                                                       --------------      --------------

CASH FLOWS FROM FINANCING ACTIVITIES
   Net advances (payments) to affiliates                                         (802)           (124,099)
   Debt issuance costs                                                             (1)            (22,799)
   Proceeds from notes payable                                                    -0-             295,000
                                                                       --------------      --------------
NET CASH PROVIDED BY FINANCING ACTIVITIES                                        (803)            148,102
                                                                       --------------      --------------

NET INCREASE (DECREASE) IN CASH                                               169,299          (1,062,445)

CASH AND CASH EQUIVALENTS, beginning of period                                181,867           1,314,761
                                                                       --------------      --------------

CASH AND CASH EQUIVALENTS, end of period                               $      351,166      $      252,316
                                                                       ==============      ==============

CASH PAID DURING THE YEAR FOR
   Interest                                                            $      498,553      $      556,911
                                                                       ==============      ==============
   Income taxes                                                        $          -0-      $          -0-
                                                                       ==============      ==============
</Table>


See accompanying notes to financial statements.

NON-CASH INVESTING ACTIVITIES

Vehicles with a net book value of $279,699 were reclassified from vehicles
leased to vehicles held for resale as of September 30, 2002.

NON-CASH INVESTING ACTIVITIES

Vehicles with a net book value of $108,400 were reclassified from vehicles
leased to vehicles held for resale as of September 30, 2001.



                                       6
<PAGE>

                        TRANSITION AUTO FINANCE III, INC.

                          NOTES TO FINANCIAL STATEMENTS
                                   (Unaudited)

                               SEPTEMBER 30, 2002

NOTE 1:  BUSINESS ACTIVITY

         Transition Auto Finance III, Inc. (the Company) is a Texas corporation
         organized May 26, 1999. The Company was established to purchase motor
         vehicles and automobile lease contracts, collecting and servicing
         automobile lease contracts and remarketing motor vehicles upon
         termination of their leases. Transition Leasing Management, Inc. (TLMI)
         owns 100% of the Company's common stock.

NOTE 2:  SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

         CASH AND CASH EQUIVALENTS

                  For purposes of the statement of cash flows, the Company
                  considers all highly liquid investments with a maturity of
                  three months or less when purchased to be cash equivalents.

                  The Company maintains cash balances at financial institutions
                  in Dallas, Texas. Accounts at the institutions are insured by
                  the Federal Deposit Insurance Corporation up to $100,000. The
                  Company has not experienced any losses in such accounts and
                  believes it is not exposed to any significant credit risk on
                  cash and cash equivalents.

         REVENUE

                  The vehicles are leased to individuals under leases with terms
                  ranging from thirty-six to forty-eight months. The leases are
                  considered to be operating leases. At the end of the lease
                  period, the lessee may purchase the equipment at the
                  contractual residual value plus any other outstanding items
                  due. Monthly lease payments are recognized as revenue in the
                  month that the payments are due. The vehicle leases require a
                  down payment from the lessee at the inception of the lease.

                  The down payments are initially recorded as deferred revenue
                  and then recognized as income over the term of the leases on a
                  straight-line basis.

         VEHICLES HELD FOR SALE

                  Vehicles held for sale are leased vehicles in which the lease
                  term has expired or that have been repossessed. Vehicles held
                  for sale are valued at the lower of book value or market
                  value. Generally these vehicles will be sold at auction by the
                  Company.



                                       7
<PAGE>

                        TRANSITION AUTO FINANCE III, INC.

                          NOTES TO FINANCIAL STATEMENTS
                                   (Unaudited)

                               SEPTEMBER 30, 2002


NOTE 2:  SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)

         EQUIPMENT AND LEASED VEHICLES

                  Equipment and leased vehicles are stated at cost less
                  accumulated depreciation. Depreciation is provided in amounts
                  sufficient to relate the cost of depreciable assets to
                  operations over their estimated service lives using the
                  straight-line-method. Leased vehicle depreciation is
                  calculated over the term of the vehicle lease, using the cost
                  of the vehicle less the estimated residual value of the
                  vehicle at the end of the lease. Present leases have terms
                  ranging from thirty-six to forty-eight 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 mature on December 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-eight months.

         FAIR VALUE OF FINANCIAL INSTRUMENTS

                  Fair values of financial instruments are estimated to
                  approximate the related book value, unless otherwise
                  indicated, based on market information available to the
                  Company.

         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.



                                       8
<PAGE>

                        TRANSITION AUTO FINANCE III, INC.

                          NOTES TO FINANCIAL STATEMENTS
                                   (Unaudited)

                               SEPTEMBER 30, 2002

NOTE 2:  SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)

         CONCENTRATION OF CREDIT RISK

                  A majority of the lessees are residents of the Dallas/Fort
                  Worth Metroplex. Vehicles are used as collateral for leases.

         ACCOUNTING PRONOUNCEMENTS

                  During 2001, the Financial Accounting Standards Board (FASB)
                  issued SFAS No. 143, "Accounting for Asset Retirement
                  Obligations," which is effective for financial statements
                  issued for fiscal years beginning after June 15, 2002. The
                  pronouncement addresses the recognition and remeasurement of
                  obligations associated with the retirement of tangible
                  long-lived assets. In 2001, the FASB issued SFAS No. 144,
                  "Accounting for the Impairment or Disposal of Long-Lived
                  Assets," which is effective for financial statements issued
                  for fiscal years beginning after December 15, 2001. SFAS No.
                  144 supersedes SFAS No. 121, "Accounting for the Impairment of
                  Long-Lived Assets and for Long-Lived Assets to be Disposed
                  Of," and applies to all long-lived assets (including
                  discontinued operations). The Company does not expect these
                  standards to have a material impact on future financial
                  statements or results of operations.

                  In April 2002, the FASB issued Statement 145, Rescission of
                  FASB Statements 4, 44 and 64 and Amendment of FASB 13. This
                  Statement addresses financial accounting and reporting
                  associated with the extinguishment of certain debts and
                  leases. The Company does not believe that the adoption of this
                  pronouncement will have a material effect on its financial
                  statements.

                  In June 2002, the FASB issued Statement 146, Accounting for
                  Costs Associated with Exit or Disposal Activities. This
                  Statement will be effective after December 31, 2002. The
                  Company does not believe that the adoption of this
                  pronouncement will have a material effect on its financial
                  statements.

                  In October 2002, the FASB issued Statement 147, Acquisitions
                  of Certain Financial Institutions. This Statement will be
                  effective October 1, 2002, but will have no effect on the
                  Company's financial statements.




                                       9
<PAGE>

                        TRANSITION AUTO FINANCE III, INC.

                          NOTES TO FINANCIAL STATEMENTS
                                   (Unaudited)

                               SEPTEMBER 30, 2002


NOTE 3:  INCOME TAXES

         The Company is a corporation subject to federal and state income taxes.
         The Company and its parent intend to file a consolidated tax return.
         Each company in the consolidated group determines its taxable income or
         loss, on a separate company basis, and the consolidated tax liability
         is allocated to each company with taxable income in proportion to the
         total of the taxable income amounts.

         The Company has a deferred tax asset as of December 31, 2001 (primarily
         from net operating loss carryforward), which has been completely offset
         by recognition of a valuation allowance.

         The Company has a net operating loss (NOL) carryforward of
         approximately $951,992 and $382,000 as of December 31, 2001 and 2000
         respectively. The Company's NOL carryforward expires on December 31,
         2021.

NOTE 4:  INVESTOR NOTES PAYABLE

         The Company has issued $6,786,000 of fixed rate redeemable asset-backed
         notes (Investor Notes) as of September 30, 2002.

         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 2001 and 2000,
         however the maturity date for all of the Investor Notes is December 31,
         2004. The Investor Notes, are collateralized by the following:

                  1.       Automobile contracts for the leasing of new or late
                           model automobiles.

                  2.       The leased vehicles.

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.



                                       10
<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 September
30, 2002. The balance sheet at December 31, 2001, as presented, is derived from
the audited financial statements at that date.

General.

         As of September 30, 2002, the Company had sold $6,786,000 of its 11%
Redeemable Secured Notes and had 248 active leases with a net book value of
$3,944,716.

Results of Operations: Three months ended September 30, 2002, compared to three
months ended September 30, 2001.

         For the three months ended September 2002, the company had received
monthly contract lease payments of $397,488 and amortization of down payments of
$163,187. This compares to contract lease payments of $402,803 and amortization
of down payments of $208,950 for the same period in 2001. The decrease in
monthly contract lease payments for the third quarter of 2002 was primarily the
result of fewer active leases for the 2002 period.

         Operating costs including general and administrative expenses were
$106,993 for the three-month period ended September 30, 2002. This compares to
$198,863 for the same period in 2001. The decrease in operating expenses for the
third quarter of 2002, compared to the same period for 2001, was due to higher
bad debt expense in 2001 and lower marketing fees in 2002.

         Depreciation and amortization was $293,061 for the three months ended
September 30, 2002 compared to $312,382 for the third quarter of 2001.

         Interest expense for the three months ended September 30, 2002, was
$186,729 compared to $186,743 for the same period in 2001.

         Loss on sale of inventory for the quarter ended September 30, 2002, was
$163,346 compared to $86,377 for the third quarter of 2001. The increased loss
on sale of inventory was due to an increase in the number of defaults early in
the lease term when losses are greater, and the decrease in used car prices.

         The net loss for the quarter ended September 30, 2002, was $189,128
compared to $169,275 for the same period in 2001. The increase in loss for the
quarter ended September 30, 2002, was due to lower lease payments as described
above.

         On June 30, 2002, Transition Auto Finance II, Inc. defaulted on
$6,280,000 of its 11% Redeemable Secured Notes. Due to the recession and
September 11 events, TAF II and TAF III experienced a larger than normal number
of repossessions. The amount of time necessary to reinvest TAF III proceeds from
repossessions substantially reduced the positive impact of leverage. Leverage in
this context is the ability to turn cash into performing assets by investing in
new leases.

Proposed Extension of Reinvestment Period

         In an attempt to offset this loss of leverage and to minimize the
possibility of a default, the Company will likely request that the note-holders
agree to extend the reinvestment period for 1-2 years. It is the Company's
belief that extending the leverage period should increase the amount of funds
available for note repayment.

Results of Operations: Nine- month period ended September 30, 2002, compared to
nine months ended September 30, 2001.

         Total revenue for the nine-months ended September 30, 2002 was
$1,715,717 compared to $1,625,619 for the same period in 2001. The nominal
increase in 2002 revenue was due to larger amount of late payment fees and an
increase in lease payments in the first six months of 2002.



                                       11
<PAGE>

         Operating costs and expenses were $398,028 for the nine-month period
ended September 30, 2002 compared to $503,996 for the same period in 2001. The
reduction was primarily the result of less marketing fee expense and less bad
debt expense for the 2002 period.

         Depreciation and amortization for the nine-months ended September 30,
2002 was $903,732 compared to $894,398 for the same period in 2001.

         Interest expense for the nine months ended September 30, 2002 was
$560,099 compared to $562,894 for the same period in 2001.

         Loss on sale of inventory for the nine-months ended September 30, 2002
was $383,410 compared to $233,580 loss for the same period in 2001. The increase
in loss on sale of inventory for the nine-months ended September 30, 2002 was
the result of an increase in repossessions. If the economy continues to weaken,
the Company anticipates that repossessions will continue to increase.

         The Company had a loss of $528,754 for the nine-months ended September
30, 2002 compared to a loss of $543,534 for the same period in 2001.

Liquidity and Capital Resources

         During the nine months ended September 30, 2002, the Company used cash
of $480,772 in its investing activities and received $(803) from its financing
activities. For the same period in 2001, the Company used $1,861,887 in its
investing activities and received $148,102 from its financing activities.

         The Company's only source of liquidity in the future will be from
proceeds from the sale of repossessed vehicles, early terminations, and its
monthly lease payments after interest and other allowed expenses.

         The Company's portfolio, which consisted of 452 leases, included 204
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
                    Contracts       Of Vehicle       Expenses        Payments        Payment          Amount
                   ------------    ------------    ------------    ------------    ------------    ------------
<S>                <C>             <C>             <C>             <C>             <C>             <C>
Repossession                165    $  3,845,668    $     94,730    $    925,636    $    754,922    $  2,134,963
Early Payoff                 39    $    844,120    $        817    $    293,008    $    179,165    $    651,050
                   ------------    ------------    ------------    ------------    ------------    ------------
Total                       204    $  4,689,788    $     95,547    $  1,218,644    $    934,087    $  2,786,013

<Caption>
                                                                      Total
                    Sales Tax       Warranty        Marketing         Amount         Profit
                      Credit          Rebate         Fee Paid        Received        (Loss)
                   ------------    ------------    ------------    ------------    ------------
<S>                <C>             <C>             <C>             <C>             <C>
Repossession       $     91,187    $     34,394    $    434,252    $  3,506,850    $   (433,548)
Early Payoff       $     22,257    $      1,399    $    102,827    $  1,044,051    $    199,114
                   ------------    ------------    ------------    ------------    ------------
Total              $    113,444    $     35,793    $    537,079    $  4,550,901    $   (234,434)
</Table>

Note:    The above results on early termination does not include any allowance
         for interest expense

         This report contains various forward looking statements and information
that are based on management's belief as well as assumptions made by and
information currently available to management. Although the Company believes
that the expectations reflected in such forward-looking statements are
reasonable, it can give no assurance that such expectations will prove to have
been correct. Such statements are subject to certain risks, uncertainties and
assumptions. Should one or more of these risks or uncertainties materialize, or
should underlying assumptions prove incorrect, actual results may vary
materially from those expected. Among the key factors that may have a direct
bearing on the Company's operating results are fluctuations in the economy and
in the level of activity in the automobile and consumer finance industry, demand
for the Company's products, the impact of competition and interest rate
fluctuations.

PART II. OTHER INFORMATION

ITEM 1. LEGAL PROCEEDINGS

         The Company is not a party to any material legal proceedings, and no
material legal proceedings have been threatened by or, to the best of the
Company's knowledge, instituted against the Company.



                                       12
<PAGE>

ITEM 2. CHANGES IN SECURITIES AND USE OF PROCEEDS

         (a) Not Applicable

         (b) Not Applicable

         (c) Not Applicable

         (d) The company applied 90% of the gross proceeds from the sale of the
         Notes to the purchase or acquisition of the Leased Vehicles and the
         contracts. The Company paid to the Underwriter sales commissions of 6%
         of the principal amount of the Notes sold by the Underwriter.
         Additionally, the Company reimbursed the Underwriter for certain
         expenses incurred in connection with its due diligence activities with
         regard to the Offering of 2% of the aggregate principal amount of the
         Notes sold. The Company also used 2% of the gross proceeds from the
         sale of the Notes to pay offering and organizational expenses,
         including filing and registration fees, legal fees of the Company's
         counsel, accounting fees, trustee's fees, escrow agent's fees, "blue
         sky" expenses and printing expenses.

ITEM 3. DEFAULTS UPON SENIOR SECURITIES

None

ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS

         No matters were submitted to a vote of the Company's sole stockholder
during the third quarter of 2002.

ITEM 5. OTHER INFORMATION

None

ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K

(a)      Financial Statements

         The following financial statements are filed as a part of this Form
         10-KSB:

                  The Index to Financial Statements is set out in Item 7 herein.

         Exhibits

         The following exhibits are filed as exhibits to this report on Form
         10-KSB:

                  The information required is set forth in the Index to Exhibits
                  accompanying this Form 10-QSB.

(b)      Reports on Form 8-K

         No reports on Form 8-K were filed during the nine months ended
         September 30, 2002



                                       13
<PAGE>

                                   SIGNATURES

         In accordance with section 13 or 15(d) of the Exchange Act, the
registrant has duly caused this report to be signed on its behalf by the
undersigned, thereunto duly authorized.


                                        TRANSITION AUTO FINANCE III, INC.
                                   --------------------------------------------
                                                  (Registrant)


Date:  November 14, 2002                      /s/ KENNETH C. LOWE
      ----------------------       --------------------------------------------
                                             Kenneth C. Lowe, President/
                                             Chief Executive Officer


Date:  November 14, 2002                      /s/ KENNETH C. LOWE
      ----------------------       --------------------------------------------
                                             Kenneth C. Lowe, President/
                                             Chief Operating Officer


Date:  November 14, 2002                      /s/ KENNETH C. LOWE
      ----------------------       --------------------------------------------
                                             Kenneth C. Lowe, President/
                                             Chief Financial Officer



                                       14
<PAGE>



           CERTIFICATE OF CHIEF EXECUTIVE AND CHIEF FINANCIAL OFFICER

I, Kenneth C. Lowe, certify that:

1. I have reviewed this quarterly report on Form 10-Q of Transition Auto Finance
III (TAF III).

2. Based on my knowledge, this quarterly report does not contain any untrue
statement of a material fact or omit to state a material fact necessary to make
the statements made, in light of the circumstances under which such statements
were made, not misleading with respect to the period covered by this quarterly
report.

3. Based on my knowledge, the financial statements and other financial
information included in this quarterly report fairly present, in all material
respects, the financial condition, results of operations and cash flows of TAF
III as of, and for, the periods presented in this quarterly report.

4. TAF III's other certifying officers and I are responsible for establishing
and maintaining disclosure controls and procedures (as defined in the Exchange
Act Rules 13a-14 and 15d-14) for TAF III and we have:

         a. designed such disclosure controls and procedures to ensure that
         material information relating to TAF III, including its consolidated
         subsidiaries, is made known to us by others within those entities,
         particularly during the period in which this quarterly report is being
         prepared;

         b. evaluated the effectiveness of TAF III's disclosure controls and
         procedures as of a date within 90 days prior to the filing date of this
         quarterly report (the "Evaluation Date"); and

         c. presented in this quarterly report our conclusions about the
         effectiveness of the disclosure controls and procedures based on our
         evaluation as of the Evaluation Date.

5. TAF III's other certifying officers and I have disclosed, based on our most
recent evaluation, to our auditors and TAF III's Board of Directors:

         a. all significant deficiencies in the design or operation of internal
         controls which could adversely affect TAF III's ability to record,
         process, summarize and report financial data and have identified for
         TAF III's auditors any material weaknesses in internal controls; and

         b. any fraud, whether or not material, that involves management or
         other employees who have a significant role in TAF III's internal
         controls.

6. TAF III's other certifying officers and I have indicated in this quarterly
report whether or not there were significant changes in internal controls or in
other factors that could significantly affect internal controls subsequent to
the date of our most recent evaluation, including any corrective actions with
regard to significant deficiencies and material weaknesses.

Date:

/s/ KENNETH C. LOWE
-------------------------------------------
Kenneth C. Lowe,
Chief Executive and Chief Financial Officer


<PAGE>

                                INDEX TO EXHIBITS

<Table>
<Caption>
EXHIBIT
NUMBER                                   DESCRIPTION
<S>           <C>

3.1           Articles of Incorporation of Transition Auto Finance III, Inc. *

3.2           Bylaws of Transition Auto Finance III, Inc. *

4.1           Form of Indenture between Transition Auto Finance III, Inc. and
              Trust Management, Inc., as Trustee ***

4.2           Form of Secured Note Due December 31, 2004 (included in Article
              Two of Indenture filed as Exhibit 4.1)

10.1          Form of Master Contract Purchase Agreement between Transition Auto
              Finance III, Inc. and Transition Leasing Management, Inc.**

10.2          Form of Servicing Agreement between Transition Leasing Management,
              Inc. and Transition Auto Finance III, Inc. **

99.1          Certification of Reporting Officer

</Table>


*        Incorporated by reference from Registration Statement on Form SB-2 of
         Transition Auto Finance III, Inc. Registration No. 333-80537, filed
         January 24, 2000.

**       Incorporated by reference from Amendment No. 1 to Registration
         Statement on Form SB-2 of Transition Auto Finance III, Inc.
         Registration No. 333-80537 filed January 24, 2000.

***      Incorporated by reference from Amendment No. 3 to Registration
         Statement on Form SB-2 of Transition Auto Finance III, Inc.
         Registration No. 333-80537 filed January 24, 2000.