<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, 2003

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



                        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 of September 30, 2003, 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, 2003

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

         ITEM 1. Financial Statements

                 Balance Sheets ..........................................          2
                   September 30, 2003 (Unaudited) and December 31, 2002

                 Statements of Income (Unaudited) ........................          4
                   Quarter and nine months ended September 30, 2003 and
                     September 30, 2002

                 Statements of Cash Flows (Unaudited) ....................          5
                   Nine Months ended September 30, 2003 and September 30,
                     2002

                 Notes to Consolidated Financial Statements (Unaudited) ..          6

         ITEM 2. Management's Discussion and Analysis of Financial
                   Condition and Results of Operations ...................         10

         ITEM 3. Controls and Procedures .................................         11

PART II. OTHER INFORMATION

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

         ITEM 2. Changes in Securities and Use of Proceeds ...............         12

         ITEM 3. Defaults Upon Senior Securities .........................         12

         ITEM 4. Submission of Matters to a Vote of Security Holders .....         12

         ITEM 5. Other Information .......................................         12

         ITEM 6. Exhibits and Reports on Form 8-K ........................         12

         Signatures ......................................................         13
</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.
<PAGE>
                          PART I. FINANCIAL INFORMATION

                          ITEM 1. FINANCIAL STATEMENTS

                        TRANSITION AUTO FINANCE III, INC.

                                 BALANCE SHEETS

                                     ASSETS

<TABLE>
<CAPTION>
                                                                      9 months ended         FYE
                                                                        9/30/2003         12/31/2002
                                                                        (unaudited)      (See Note 1)
                                                                        -----------      -----------
<S>                                                                   <C>                <C>
CURRENT ASSETS
    Cash and cash equivalents                                           $ 1,007,876      $   383,300
  Other Assets                                                                3,635            6,710
  Accounts receivable, net of allowance for doubtful accounts of
    $276,000 and $276,000 respectively                                      497,292          310,316
  Vehicles held for sale                                                    315,153          304,538
                                                                        -----------      -----------
      Total Current Assets                                                1,823,956        1,004,864

PROPERTY, at cost
  Vehicles leased                                                         3,285,459        4,711,054
  Less accumulated depreciation                                          (1,250,239)      (1,274,022)
                                                                        -----------      -----------
      Net Property                                                        2,035,220        3,437,032
                                                                        -----------      -----------

OTHER ASSETS
  Debt issuance costs, net of amortization of $562,363 and $277,170         203,710          325,936
  Due from Affiliates                                                        20,620           20,620
                                                                        -----------      -----------
      Total Other Assets                                                    224,330          346,556
                                                                        -----------      -----------

TOTAL ASSETS                                                            $ 4,083,506      $ 4,788,452
                                                                        ===========      ===========
</TABLE>


                                       2
<PAGE>
                        TRANSITION AUTO FINANCE III, INC.

                           BALANCE SHEETS (Continued)

                 LIABILITIES AND STOCKHOLDERS' EQUITY (DEFICIT)

<TABLE>
<CAPTION>
                                                            9 Months Ended         FYE
                                                               9/30/2003        12/31/2002
                                                              (Unaudited)      (See Note 1)
                                                              -----------      -----------
<S>                                                         <C>                <C>
CURRENT LIABILITIES
  Accrued liabilities                                         $   102,421      $    67,666
  Current portion of deferred revenue                             129,256          228,155
                                                              -----------      -----------
      Total Current Liabilities                                   231,677          295,821

OTHER LIABILITIES

  Due to affiliate                                                  6,729            2,700
  Deferred revenue                                                158,323          258,972
  Investor notes payable                                        6,786,000        6,786,000
                                                              -----------      -----------
      Total Other Liabilities                                   6,951,052        7,047,672

TOTAL LIABILITIES                                               7,182,729        7,343,493
                                                              -----------      -----------

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)                                 (3,100,223)      (2,556,041)
                                                              -----------      -----------
      Total Stockholders' Equity (Deficit)                     (3,099,223)      (2,555,041)
                                                              -----------      -----------

TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY
   (DEFICIT)                                                  $ 4,083,506      $ 4,788,452
                                                              ===========      ===========
</TABLE>

Note 1: The balance sheet at December 31, 2002, as presented, is derived from
the audited financial statements at that date.

See accompanying notes to financial statements.


                                       3
<PAGE>
                        TRANSITION AUTO FINANCE III, INC.

                              STATEMENTS OF INCOME

                                   (Unaudited)

<TABLE>
<CAPTION>
                                                  Quarter Ended       Nine Months Ended     Quarter Ended       Nine Months Ended
                                                September 30, 2003     Sept. 30, 2003       Sept. 30, 2002        Sept 30, 2002
                                                ------------------    --------------        --------------        -------------
<S>                                             <C>                   <C>                   <C>                 <C>
REVENUES
  Vehicle monthly lease payments                     $ 232,953           $   844,186           $ 397,488           $ 1,226,101
  Amortization of down payments                         87,719               282,065             163,187               489,616
                                                     ---------           -----------           ---------           -----------
      Total Revenues                                   320,672             1,126,251             560,675             1,715,717
                                                     ---------           -----------           ---------           -----------

OPERATING EXPENSES
  Operating costs                                       52,492               107,674              90,658               316,515
  General and administrative                            11,011                72,460              16,335                81,513
  Depreciation and amortization                        193,626               641,470             293,061               903,732
  Impairment loss                                          -0-                   -0-                 -0-                   -0-
                                                     ---------           -----------           ---------           -----------
      Total Operating Expenses                         257,129               821,604             400,054             1,301,760
                                                     ---------           -----------           ---------           -----------
Operating Income (Loss)                                 63,543               304,647             160,621               413,957
                                                     ---------           -----------           ---------           -----------

OTHER INCOME (EXPENSE)
Investment income                                        1,359                 3,081                 309                   720
Other income (expense)                                      18                    45                  17                    78
Interest expense                                      (186,729)             (560,187)           (186,729)             (560,099)
Loss on sale of inventory                              (53,837)             (291,767)           (163,346)             (383,410)
                                                     ---------           -----------           ---------           -----------
      Total Other Income (Expense)                    (239,189)             (848,828)           (349,749)             (942,711)
                                                     ---------           -----------           ---------           -----------
Provision for Federal Income Taxes                         -0-                   -0-                 -0-                   -0-
                                                     ---------           -----------           ---------           -----------
Net Loss                                             $(175,646)          $  (544,181)          $(189,128)          $  (528,754)
                                                     =========           ===========           =========           ===========
Profit (Loss) per share (basic and diluted)          $ (175.65)          $   (544.18)          $ (189.13)          $   (528.75)
</TABLE>

See accompanying notes to financial statements.


                                       4
<PAGE>
                        TRANSITION AUTO FINANCE III, INC.

                            STATEMENTS OF CASH FLOWS

                                   (Unaudited)


<TABLE>
<CAPTION>
                                                                    9 Months Ended           9 Months Ended
                                                                   September 30, 2003      September 30, 2002
                                                                   ------------------      ------------------
<S>                                                                <C>                     <C>
CASH FLOWS FROM OPERATING ACTIVITIES
Net loss                                                               $  (544,181)            $  (528,754)
Adjustments to reconcile net income to net cash provided by
  operating activities:
     Depreciation and amortization                                         641,470                 903,732
     Amortization of down payments                                        (282,065)               (489,616)
     Impairment loss                                                           -0-                     -0-
     Provision for allowance for doubtful accounts                             753                     -0-
     (Gain) loss on sale of property                                       291,767                 383,410
Net changes in operating assets and liabilities:
     Accounts receivable                                                  (186,976)                (75,922)
     Other Assets                                                            3,075                  (1,047)
     Accrued liabilities                                                    34,755                 101,257
     Deferred revenue                                                       82,517                 357,814
                                                                       -----------             -----------
NET CASH PROVIDED BY OPERATING ACTIVITIES                                   41,115                 650,874
                                                                       -----------             -----------

CASH FLOWS FROM INVESTING ACTIVITIES
   Purchase of fixed assets                                               (422,318)             (1,718,939)
   Cash proceeds from sale of property                                   1,001,749               1,238,167
                                                                       -----------             -----------
NET CASH PROVIDED BY INVESTING ACTIVITIES                                  579,431                (480,772)
                                                                       -----------             -----------

CASH FLOWS FROM FINANCING ACTIVITIES
   Net advances (payments) to affiliates                                     4,030                    (802)
   Debt issuance costs                                                         -0-                      (1)
   Proceeds from notes payable                                                 -0-                      -0-
                                                                       -----------             -----------
NET CASH PROVIDED BY FINANCING ACTIVITIES                                    4,030                    (803)
                                                                       -----------             -----------

NET INCREASE  IN CASH                                                      624,576                 169,299

CASH AND CASH EQUIVALENTS, beginning of period                             383,300                 181,867
                                                                       -----------             -----------


CASH AND CASH EQUIVALENTS, end of period                               $ 1,007,876             $   351,166
                                                                       ===========             ===========
CASH PAID DURING THE YEAR FOR
   Interest                                                            $   560,187             $   498,553
                                                                       ===========             ===========
   Income taxes                                                        $       -0-             $       -0-
                                                                       ===========             ===========
</TABLE>

See accompanying notes to financial statements.

NON-CASH INVESTING ACTIVITIES
Vehicles with a net book value of $168,853 were reclassified from vehicles
leased to vehicles held for resale as of September 30, 2003.

NON-CASH INVESTING ACTIVITIES
Vehicles with a net book value of $10,615 were reclassified from vehicles leased
to vehicles held for resale as of September 30, 2002.


                                       5
<PAGE>
                        TRANSITION AUTO FINANCE III, INC.

                          NOTES TO FINANCIAL STATEMENTS


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. (Transition Leasing) 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 these 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.

      ACCOUNTS RECEIVABLE

            The Company provides for uncollectible accounts receivable using the
            allowance method of accounting for bad debts. Under this method of
            accounting, a provision for uncollectible accounts is charged to
            earnings. The allowance account is increased or decreased based on
            past collection history and management's evaluation of accounts
            receivable. All amounts considered uncollectible are charged against
            the allowance account and recoveries of previously charged-off
            accounts are added to the allowance.


                                       6
<PAGE>
                        TRANSITION AUTO FINANCE III, INC.

                          NOTES TO FINANCIAL STATEMENTS
                                   (Continued)


NOTE 2: SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)


      VEHICLES HELD FOR SALE

            Vehicles held for sale are leased vehicles in which the lease term
            has expired or that have been repossessed. Vehicles held for sale
            are valued at the lower of cost or fair value. The cost is the net
            book value of the vehicle after it has been returned to the Company
            either through repossession or early termination of the lease.
            Generally these vehicles will be released or sold at auction by the
            Company with in a year.

      PROPERTY

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


                                       7
<PAGE>
                        TRANSITION AUTO FINANCE III, INC.

                          NOTES TO FINANCIAL STATEMENTS
                                   (Continued)


NOTE 2: SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
        (CONTINUED)

      USE OF ESTIMATES

            In preparing the Company's financial statements, management is
            required to make estimates and assumptions that affect the reported
            amounts of assets and liabilities, the disclosure of contingent
            assets and liabilities at the date of the financial statements, and
            the reported amounts of revenues and expenses during the reporting
            period. Actual results could differ from these estimates.

      CONCENTRATION OF CREDIT RISK

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

NOTE 3: 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 $678,000 as of December
            31, 2002 (primarily from net operating loss carry-forward), which
            has been completely offset by recognition of a valuation allowance.

            The Company has a net operating loss (NOL) carry-forward of
            approximately $2,349,000 as of December 31, 2002. The Company's NOL
            carry-forward expires between December 31, 2020 and 2022.

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, 2003 and
            December 31, 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.


                                       8
<PAGE>
                        TRANSITION AUTO FINANCE III, INC.

                          NOTES TO FINANCIAL STATEMENTS
                                   (Continued)


NOTE 4: INVESTOR NOTES PAYABLE (CONTINUED)

            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.


            The following table represents Investor Notes outstanding at
            December 31, 2002 and September 30, 2003:

<TABLE>
<CAPTION>
Origination Date      Number of Notes      Note Amount
----------------      ---------------      -----------
<S>                   <C>                  <C>
February 2000                  53          $   827,000
March 2000                    136            1,453,000
April 2000                     57              622,000
May 2000                       35              354,000
June 2000                      37              427,000
July 2000                      53              722,000
August 2000                    40              332,000
September 2000                 28              290,000
October 2000                   33              311,000
November 2000                  59              509,000
December 2000                  72              644,000
January 2001                   30              295,000
                                           -----------
                                           $ 6,786,000
                                           ===========
</TABLE>

NOTE 5: RELATED PARTIES

            The Company has entered into a Servicing Agreement with Transition
            Leasing. Transition Leasing will be entitled to a servicing fee of
            $20 per month per contract and a payment of $150 per contract
            purchased. Transition Leasing will receive, as a marketing fee,
            57.5% of the down payment made by the customers with respect to
            contracts it originates. Transition Leasing 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.


                                       9
<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, 2003. The balance sheet at December 31, 2002, as presented, is derived from
the audited financial statements at that date.

General.

      As of September 30, 2003, the Company had sold $6,786,000 of its 11%
Redeemable Secured Notes and had 158 active leases with a net book value of
$2,035,219.

Results of Operations: Three months ended September 30, 2003, compared to three
months ended September 30, 2002.

      For the three months ended September 2003, the company had received
monthly contract lease payments of $232,953 and amortization of down payments of
$87,719. This compares to contract lease payments of $397,488 and amortization
of down payments of $163,187 for the same period in 2002. The decrease in
monthly contract lease payments for the third quarter of 2003 was primarily the
result of fewer active leases for the 2003 period.

      Operating costs including general and administrative expenses were $63,503
for the three-month period ended September 30, 2003. This compares to $106,993
for the same period in 2002. The decrease in operating expenses for the third
quarter of 2003, compared to the same period for 2002, was due to lower
marketing fees because fewer vehicles were leased.

      Depreciation and amortization was $193,626 for the three months ended
September 30, 2003 compared to $293,061 for the third quarter of 2002. The fewer
number of active leases in the 2003 period resulted in lower rates of
depreciation.

      Interest expense for the three months ended September 30, 2003, was
$186,729 compared to $186,729 for the same period in 2002.

      Loss on sale of inventory for the quarter ended September 30, 2003, was
$53,387 compared to $163,346 for the third quarter of 2002. The decreased loss
on sale of inventory for the 2003 period was due to a decrease in the number of
repossessions.

      The net loss for the quarter ended September 30, 2003, was $175,646
compared to $189,128 for the same period in 2002.

      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.

Extension of Reinvestment Period

      In an attempt to offset this loss of leverage and to minimize the
possibility of a default, the Company requested that the note-holders agree to
extend the reinvestment period from December 31, 2002 to December 31, 2004. The
consent solicitation was approved by a majority of the note-holders and the
indenture was amended to reflect the extended reinvestment period. Between
January 2003 and May 2003, no new leases were contracted, pending the approval
of the consent solicitation.

Results of Operations: Nine-month period ended September 30, 2003, compared to
nine months ended September 30, 2002.

      Total revenue for the nine-months ended September 30, 2003 was $1,126,251
compared to $1,715,717 for the same period in 2002. The decrease in 2003 revenue
was due to lower lease volume in that period.


                                       10
<PAGE>
      Operating costs and expenses were $180,134 for the nine-month period ended
September 30, 2003 compared to $398,028 for the same period in 2002. The
reduction in expenses for the 2003 period was primarily due to lower marketing
fees paid due to lower lease volume.

      Depreciation and amortization for the nine-months ended September 30, 2003
was $641,470 compared to $903,732 for the same period in 2002. The lower
depreciation and amortization for the 2003 period was due to a smaller lease
portfolio than for the 2002 period.

      Interest expense for the nine months ended September 30, 2003 was $560,187
compared to $560,099 for the same period in 2002.

      Loss on sale of inventory for the nine-months ended September 30, 2003 was
$291,767 compared to $383,410 loss for the same period in 2002. The decrease in
loss on sale of inventory for the nine-months ended September 30, 2003 was the
result of a lower number of outstanding leases and fewer repossessions for that
period.

      The Company had a loss of $544,181 for the nine-months ended September 30,
2003 compared to a loss of $528,754 for the same period in 2002.


Liquidity and Capital Resources

      During the nine months ended September 30, 2003, the Company used $579,431
in its investing activities and received $4,030 from its financing activities.
For the same period in 2002, the Company used $480,772 in its investing
activities and $(803) in 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 481 leases, included 323
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    Sales                          Total
                 # of    Gross Cost    Misc.      Total       Down        Sale      Tax    Warranty  Marketing   Amount     Profit
              Contracts  Of Vehicle  Expenses   Payments     Payment     Amount    Credit   Rebate   Fee Paid   Received    (Loss)
              ---------  ----------  --------   --------     -------     ------    ------   ------   --------   --------    ------
<S>                <C>   <C>         <C>       <C>         <C>         <C>        <C>      <C>       <C>       <C>        <C>
Repossession       255   $5,862,404  $147,345  $1,642,858  $1,131,003  $3,066,763 $133,254 $66,153   $651,248  $5,388,783 ($620,966)
Early Payoff        68   $1,426,547  $  1,223  $  635,331  $  284,596  $1,023,171 $ 39,433 $ 1,399   $163,450  $1,820,480  $392,710
              --------   ----------  --------  ----------  ----------  ---------- -------- -------   --------  ---------- ---------
Total              323   $7,288,951  $148,568  $2,278,189  $1,415,599  $4,089,934 $172,687 $67,552   $814,698  $7,209,263 ($228,256)
</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.

ITEM 3. CONTROLS AND PROCEDURES

      Under the supervision and with the participation of our management,
including our principal executive officer and principal financial officer, we
conducted an evaluation of the effectiveness of the design and operation of our
disclosure controls and procedures, as defined in Rules 13a-14(C) and 15d under
the Securities Exchange Act of 1934, within 90 days of the filing date of this
report (the "Evaluation Date"). Based upon this evaluation, our principal
executive and principal financial officers concluded as of the Evaluation Date
that our disclosure controls and procedures were effective such that the
material information required to be included in our Securities and


                                       11
<PAGE>
Exchange Commission ("SEC") reports is recorded, processed, summarized and
reported within the time periods specified in SEC rules and forms relating to
the Company.

      In addition, there were no significant changes in our internal controls or
in other factors that could significantly affect these controls subsequent to
the Evaluation Date. We have not identified any significant deficiencies or
material weaknesses in our internal controls and therefore, there were no
corrective actions taken.

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.

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 2003.

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, 2003


                                       12
<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.

<TABLE>
<S>                                     <C>
                                        TRANSITION AUTO FINANCE III, INC.
                                        ---------------------------------------
                                        (Registrant)


Date: October 31, 2003                  /s/ Kenneth C. Lowe
                                        ---------------------------------------
                                        Kenneth C. Lowe, President/
                                        Chief Executive Officer

Date: October 31, 2003                  /s/ Kenneth C. Lowe
                                        ---------------------------------------
                                        Kenneth C. Lowe, President/
                                        Chief Operating Officer

Date: October 31, 2003                  /s/ Kenneth C. Lowe
                                        ---------------------------------------
                                        Kenneth C. Lowe, President/
                                        Chief Financial Officer
</TABLE>


                                       13
<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. **

31          Certification of Reporting Officer pursuant to Section 302 of the
            Sarbanes-Oxley Act of 2002

32          Certification of Reporting Officer pursuant to Section 906 of the
            Sarbanes-Oxley Act of 2002
</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.


                                       14