<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 MARCH 31, 2004
                                -----------------

                        Commission file number: 333-80537

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

            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)

                  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 March 31, 2004, 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 MARCH 31, 2004

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

        ITEM 1. Financial Statements

                Balance Sheets  March 31, 2004 (Unaudited) and December 31, 2003 ...................      3

                Statements of Income (Unaudited) Quarter ended March 31, 2004 and March 31, 2003 ...      5

                Statements of Cash Flows (Unaudited) Three Months ended March 31, 2004
                  and March 31, 2003 ...............................................................      6

                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>
                                                                      3 months Ended          FYE
                                                                         3/31/2004        12/31/2003
                                                                        (unaudited)      (See Note 1)
                                                                      --------------    --------------
<S>                                                                   <C>               <C>
CURRENT ASSETS
  Cash and cash equivalents                                           $      301,978    $      547,096
  Accounts receivable
  Other Assets                                                               222,136           242,455
                                                                               1,933            28,370
  Vehicles held for sale                                                     149,772            41,132
                                                                      --------------    --------------
                                                                             675,819           859,053
                                                                      --------------    --------------
PROPERTY, at cost
  Vehicles leased                                                          3,479,584         3,511,983
  Less accumulated depreciation                                           (1,018,275)         (984,515)
                                                                      --------------    --------------
      Net Property                                                         2,461,309         2,527,468
                                                                      --------------    --------------
OTHER ASSETS
  Debt issuance costs, net of amortization of $643,847 and $603,105          122,227           162,969
  Due from Associates                                                            -0-               -0-
                                                                      --------------    --------------
      Total Other Assets                                                     122,227           162,969
                                                                      --------------    --------------
TOTAL ASSETS                                                          $    3,259,355    $    3,549,490
                                                                      ==============    ==============
</TABLE>

See accompanying notes to financial statements.

                                        3

<PAGE>

                        TRANSITION AUTO FINANCE III, INC.

                           BALANCE SHEETS (Continued)

                 LIABILITIES AND STOCKHOLDERS' EQUITY (DEFICIT)

<TABLE>
<CAPTION>
                                               3 Months Ended         FYE
                                                 3/31/2004         12/31/2003
                                                (Unaudited)       (See Note 1)
                                               --------------    --------------
<S>                                            <C>               <C>
CURRENT LIABILITIES
  Accounts Payable and Accrued liabilities     $       98,957    $      176,787
  Current portion of deferred revenue                 153,048            16,830
  Investor notes payable                            6,786,000         6,786,000
                                               --------------    --------------
      Total Current Liabilities                     7,038,006         7,127,617

OTHER LIABILITIES
  Due to affiliate                                     10,918            13,640
  Deferred revenue                                    243,246           194,158
                                               --------------    --------------
      Total Other Liabilities                         254,164           207,798
                                               --------------    --------------

TOTAL LIABILITIES                                   7,292,169         7,335,415
                                               --------------    --------------

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)                      (4,033,814)       (3,786,925)
                                               --------------    --------------
      Total Stockholders' Equity (Deficit)         (4,032,814)       (3,785,925)
                                               --------------    --------------

TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY
   (DEFICIT)                                   $    3,259,355    $    3,549,490
                                               ==============    ==============
</TABLE>

Note 1: The balance sheet at December 31, 2003, 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   Quarter Ended
                                      March 31, 2004  March 31, 2003
                                      --------------  --------------
<S>                                   <C>             <C>
REVENUES
  Vehicle monthly lease payments       $    258,101    $    320,259
  Amortization of down payments              73,317         103,291
                                       ------------    ------------

        Total Revenues                      331,418         423,550
                                       ------------    ------------

OPERATING EXPENSES

  Operating costs                            92,828          23,651
  General and administrative                 47,724          15,136
  Depreciation and amortization             203,122         239,749
                                       ------------    ------------
        Total Operating Expenses            343,674         278,536
                                       ------------    ------------

Operating Income (Loss)                     (12,256)        145,014
                                       ------------    ------------

OTHER INCOME (EXPENSE)

Investment income                               431             742
Other income (expense)                            4              18
Interest expense                           (186,729)       (186,766)
Loss on sale of inventory                   (48,340)       (118,144)
                                       ------------    ------------

        Total Other Income (Expense)       (234,634)       (304,150)
                                       ------------    ------------

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

Net Loss                               $   (246,890)   $   (159,136)
                                       ============    ============

Loss per share (basic and diluted)     $    (246.89)   $    (159.14)
                                       ============    ============
</TABLE>

         See accompanying notes to financial statements.

                                       5

<PAGE>

                        TRANSITION AUTO FINANCE III, INC.

                            STATEMENTS OF CASH FLOWS

                                   (Unaudited)

<TABLE>
<CAPTION>
                                                              3 Months Ended  3 Months Ended
                                                              March 31, 2004  March 31, 2003
                                                              --------------  --------------
<S>                                                           <C>             <C>
CASH FLOWS FROM OPERATING ACTIVITIES
Net loss                                                      $     (246,890) $     (159,136)
Adjustments to reconcile net income to net cash provided by
  operating activities:
     Depreciation and amortization                                   203,122         239,749
     Amortization of down payments                                   (73,317)       (103,291)
     Impairment loss                                                     -0-             -0-
     Provision for allowance for doubtful accounts                       -0-             753
     (Gain) loss on sale of property                                  48,340         118,144
Net changes in operating assets and liabilities:
     Accounts receivable                                              20,319         (70,648)
     Other Assets                                                     26,437           5,002
     Accrued liabilities                                             (77,830)           (782)
     Deferred revenue                                                110,623           5,306
                                                              --------------  --------------
NET CASH PROVIDED BY OPERATING ACTIVITIES                             10,804          35,097
                                                              --------------  --------------
CASH FLOWS FROM INVESTING ACTIVITIES
   Purchase of fixed assets                                         (432,478)            -0-
   Cash proceeds from sale of property                               179,278         436,612
                                                              --------------  --------------
NET CASH USED BY INVESTING ACTIVITIES                               (253,200)       (436,612)
                                                              --------------  --------------
CASH FLOWS FROM FINANCING ACTIVITIES
   Net advances (payments) to affiliates                              (2,722)         23,384
   Debt issuance costs                                                   -0-             -0-
   Proceeds from notes payable                                           -0-             -0-
                                                              --------------  --------------
NET CASH PROVIDED BY FINANCING ACTIVITIES                             (2,722)         23,384
                                                              --------------  --------------

NET INCREASE (DECREASE) IN CASH                                     (245,118)        495,093

CASH AND CASH EQUIVALENTS, beginning of period                       547,096         383,300
                                                              --------------  --------------

CASH AND CASH EQUIVALENTS, end of period                      $      301,978  $      878,393
                                                              ==============  ==============

CASH PAID DURING THE YEAR FOR
   Interest                                                   $      186,729  $      186,729
                                                              ==============  ==============
   Income taxes                                               $          -0-  $          -0-
                                                              ==============  ==============
</TABLE>

See accompanying notes to financial statements.

NON-CASH INVESTING ACTIVITIES

Vehicles with a net book value of $108,640 were reclassified from vehicles
leased to vehicles held for resale as of March 31, 2004.

Vehicles with a net book value of $2,082 were reclassified from vehicles leased
to vehicles held for resale as of March 31, 2003.

                                        6

<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 to
                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.

                                        7

<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
                thity-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.

                                        8

<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 approximately
                $1,288,000 and $678,000 December 31, 2003 and 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 $3,787,000 and $2,349,000 as of December 31, 2003
                and 2002 respectively. 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 March 31, 2004 and
                December 31, 2003.

                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.

                                        9

<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, 2003 and March 31, 2004:

<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. The Company paid Transition Leasing $217,310
                in 2003 and $83,774 in the Quarter ending March 31, 2004 for
                servicing, documentation and marketing fees. The Company has a
                payable to an affiliate for $13,640 at December 31, 2003 and
                $10,918 at March 31, 2004.

                                       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 March 31,
2004. The balance sheet at December 31, 2003, as presented, is derived from the
audited financial statements at that date.

General.

         As of March 31, 2004, the Company had sold $6,786,000 of its 11%
Redeemable Secured Notes and had 158 active leases with a net book value of
$2,132,761.

Results of Operations: Three months ended March 31, 2004, compared to three
months ended March 31, 2003.

         For the three months ended March 31, 2004, the company had received
monthly contract lease payments of $258,101 and amortization of down payments of
$73,317. This compares to contract lease payments of $320,259 and amortization
of down payments of $103,291 for the same period in 2003. The decrease in
monthly contract lease payments for the first quarter of 2004 was primarily the
result of fewer active leases for the 2004 period.

         Operating costs including general and administrative expenses were
$140,552 for the three-month period ended March 31, 2004. This compares to
$38,787 for the same period in 2003. The increase in operating expenses for the
first quarter of 2004, compared to the same period for 2003, was due to an
increase in marketing fees in the 2004 quarter.

         Depreciation and amortization was $203,122 for the three months ended
March 31, 2004, compared to $239,749 for the first quarter of 2003. The decrease
in depreciation for the 2004 period was due to fewer active leases than in the
2003 period.

         Interest expense for the three months ended March 31, 2004, was
$186,729 compared to $186,766 for the same period in 2003.

         Loss on sale of inventory for the quarter ended March 31, 2004, was
$48,340 compared to $118,144 for the first quarter of 2003. The decreased loss
on sale of inventory was primarily due to fewer vehicles sold and the fact that
repossessions that were sold had been on the books longer and consequently were
generally sold at smaller losses per vehicle in the 2004 period.

         The net loss for the quarter ended March 31, 2004, was $ 246,890
compared to $159,136 for the same period in 2003. The increase in loss for the
2004 period was primarily due to lower revenue and higher marketing fees for the
2004 period.

         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. Due to the sinking fund trigger date, TAF II was prohibited from
reinvesting proceeds from sale of repossessions.

Extension of Reinvestment Period

         In an attempt to offset this loss of leverage in TAF III and to
minimize the possibility of a default, the Company requested that the
Noteholders consent to an amendment to the Indenture which would extend the
reinvestment period from December 31, 2002 to December 31, 2004. The Consent
solicitation was approved by a majority of the Noteholders and the Indenture was
amended to reflect the extended reinvestment period.

Liquidity and Capital Resources

         During the three months ended March 31, 2004, the Company used cash of
$253,200 in its investing activities and used $2,722 from its financing
activities. For the same period in 2003, the Company used $436,612 in its
investing activities and received $23,384 from its financing activities.

                                       11

<PAGE>

         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 535 leases, included 377
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                                     Total
                # of     Gross Cost   Misc.     Total      Down        Sale     Sales 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    294      $6,751,060 $176,089 $2,137,798 $1,305,954  $3,409,758  $ 149,103  $ 69,568  $ 751,458 $6,320,723 ($606,426)
Early Payoff     83      $1,751,577 $  1,793 $  881,289 $  353,935  $1,177,256  $  47,800  $  1,399  $ 203,320 $2,258,359  $504,989
                ---      ---------- -------- ---------- ----------  ----------  ---------  --------  --------- ----------  --------
Total           377      $8,502,637 $177,882 $3,019,087 $1,659,889  $4,587,014  $ 196,903  $ 70,967  $ 954,778 $8,579,083 ($101,437)
</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 first quarter of 2004.

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 three months
                  ended March 31, 2004

                                       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: April 30, 2004                            /s/ Kenneth C. Lowe
                                         ---------------------------------
                                            Kenneth C. Lowe, President/
                                              Chief Executive Officer

Date: April 30,2004                             /s/ Kenneth C. Lowe
                                         ---------------------------------
                                            Kenneth C. Lowe, President/
                                              Chief Operating Officer

Date: April 30, 2004                            /s/ Kenneth C. Lowe
                                         ---------------------------------
                                            Kenneth C. Lowe, President/
                                              Chief Financial Officer

                                       14

<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.

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