<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 JUNE 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 June 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 JUNE 30, 2003


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

      ITEM 1.  Financial Statements

            Balance Sheets.....................................................................................3
              June 30, 2003 (Unaudited) and December 31, 2002

            Statements of Income (Unaudited)...................................................................5
             Quarter and six months ended June 30, 2003 and June 30, 2002

            Statements of Cash Flows (Unaudited)...............................................................6
              Six Months ended June 30, 2003 and June 30, 2002

            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>
                                                                               6 months ended         FYE
                                                                                  6/30/2003        12/31/2002
                                                                                 (unaudited)      (See Note 1)
                                                                               ---------------    ------------
<S>                                                                              <C>              <C>
CURRENT ASSETS
  Cash and cash equivalents                                                      $  1,126,594     $    383,300
  Other Assets                                                                          4,487            6,710
  Accounts receivable, net of allowance for doubtful accounts of $276,000 and
    $276,000 respectively                                                             456,630          310,316
  Vehicles held for sale                                                              149,300          304,538
                                                                                 ------------     ------------
      Total Current Assets                                                          1,737,011        1,004,864

PROPERTY, at cost
  Vehicles leased                                                                   3,582,212        4,711,054
  Less accumulated depreciation                                                    (1,268,757)      (1,274,022)
                                                                                 ------------     ------------
      Net Property                                                                  2,313,455        3,437,032
                                                                                 ------------     ------------

OTHER ASSETS
  Debt issuance costs, net of amortization of $521,621 and $277,170                   244,452          325,936
  Due from Affiliates                                                                  20,620           20,620
                                                                                 ------------     ------------
      Total Other Assets                                                              265,072          346,556
                                                                                 ------------     ------------

TOTAL ASSETS                                                                     $  4,315,538     $  4,788,452
                                                                                 ============     ============
</Table>



                                       3
<PAGE>

                        TRANSITION AUTO FINANCE III, INC.

                           BALANCE SHEETS (Continued)

                 LIABILITIES AND STOCKHOLDERS' EQUITY (DEFICIT)

<Table>
<Caption>
                                                           6 Months Ended        FYE
                                                             6/30/2003        12/31/2002
                                                            (Unaudited)      (See Note 1)
                                                           --------------    ------------
<S>                                                         <C>              <C>
CURRENT LIABILITIES
  Accrued liabilities                                       $    125,509     $     67,666
  Current portion of deferred revenue                            147,142          228,155
                                                            ------------     ------------
      Total Current Liabilities                                  272,651          295,821

OTHER LIABILITIES
  Due to affiliate                                                15,887            2,700
  Deferred revenue                                               164,578          258,972
  Investor notes payable                                       6,786,000        6,786,000
                                                            ------------     ------------
      Total Other Liabilities                                  6,966,465        7,047,672

TOTAL LIABILITIES                                              7,239,116        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)                                 (2,924,578)      (2,556,041)
                                                            ------------     ------------
      Total Stockholders' Equity (Deficit)                    (2,923,578)      (2,555,041)
                                                            ------------     ------------
TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY
  (DEFICIT)                                                 $  4,315,538     $  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.




                                       4
<PAGE>

                        TRANSITION AUTO FINANCE III, INC.

                              STATEMENTS OF INCOME

                                   (Unaudited)


<Table>
<Caption>
                                              Quarter Ended  Six Months Ended   Quarter Ended  Six Months Ended
                                              June 30, 2003    June 30, 2003    June 30, 2002    June 30, 2002
                                              -------------  ----------------   -------------  ----------------
<S>                                            <C>              <C>              <C>              <C>
REVENUES
  Vehicle monthly lease payments               $    290,974     $    611,233     $    406,775     $    828,613
  Amortization of down payments                      91,055          194,346          152,402          326,429
                                               ------------     ------------     ------------     ------------
      Total Revenues                                382,029          805,579          559,177        1,155,042
                                               ------------     ------------     ------------     ------------

OPERATING EXPENSES

  Operating costs                                    31,530           55,181          112,657          225,857
  General and administrative                         46,313           61,449           25,713           65,178
  Depreciation and amortization                     208,094          447,843          298,590          610,671
  Impairment loss                                       -0-              -0-              -0-              -0-
                                               ------------     ------------     ------------     ------------

      Total Operating Expenses                      285,937          564,473          436,960          901,706
                                               ------------     ------------     ------------     ------------

Operating Income (Loss)                              96,092          241,106          122,217          253,336
                                               ------------     ------------     ------------     ------------

OTHER INCOME (EXPENSE)

Investment income                                       980            1,722              227              411
Other income (expense)                                    6               26               22               61
Interest expense                                   (186,692)        (373,458)        (186,667)        (373,370)
Loss on sale of inventory                          (119,787)        (237,931)        (110,976)        (220,064)
                                               ------------     ------------     ------------     ------------
      Total Other Income (Expense)                 (305,493)        (609,641)        (297,394)        (592,962)
                                               ------------     ------------     ------------     ------------

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

Net Loss                                       $   (209,401)    $   (368,537)    $   (175,177)    $   (339,626)
                                               ============     ============     ============     ============


Profit (Loss) per share (basic and diluted)    $    (209.40)    $    (368.54)    $    (175.18)    $    (339.63)
</Table>


See accompanying notes to financial statements.



                                       5
<PAGE>

                        TRANSITION AUTO FINANCE III, INC.

                            STATEMENTS OF CASH FLOWS

                                   (Unaudited)

<Table>
<Caption>
                                                              6 Months Ended   6 Months Ended
                                                               June 30, 2003    June 30, 2002
                                                              --------------   --------------
<S>                                                            <C>              <C>
CASH FLOWS FROM OPERATING ACTIVITIES
Net loss                                                       $   (368,537)    $   (339,626)
Adjustments to reconcile net income to net cash provided by
 operating activities:
   Depreciation and amortization                                    447,843          610,671
   Amortization of down payments                                   (194,346)        (326,429)
   Impairment loss                                                      -0-              -0-
   Provision for allowance for doubtful accounts                        753              -0-
   (Gain) loss on sale of property                                  237,931          220,064
Net changes in operating assets and liabilities:
   Accounts receivable                                             (146,314)         (96,147)
   Other Assets                                                       2,223           (2,343)
   Accrued liabilities                                               57,843            9,060
   Deferred revenue                                                  18,939          259,656
                                                               ------------     ------------
NET CASH PROVIDED (USED) BY OPERATING ACTIVITIES                     56,339          334,906
                                                               ------------     ------------

CASH FLOWS FROM INVESTING ACTIVITIES
   Purchase of fixed assets                                         (93,123)      (1,151,200)
   Cash proceeds from sale of property                              766,891          777,543
                                                               ------------     ------------
NET CASH (USED) BY INVESTING ACTIVITIES                             673,768         (373,657)
                                                               ------------     ------------

CASH FLOWS FROM FINANCING ACTIVITIES
   Net advances (payments) to affiliates                             13,187           41,911
   Debt issuance costs                                                  -0-              -0-
   Proceeds from notes payable                                          -0-              -0-
                                                               ------------     ------------

NET CASH PROVIDED BY FINANCING ACTIVITIES                            13,187           41,911
                                                               ------------     ------------

NET INCREASE (DECREASE) IN CASH                                     743,294            3,160

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

CASH AND CASH EQUIVALENTS, end of period                       $  1,126,594     $    185,027
                                                               ============     ============

CASH PAID DURING THE YEAR FOR
   Interest                                                    $    186,729     $    311,824
                                                               ============     ============
   Income taxes                                                $        -0-     $        -0-
                                                               ============     ============
</Table>


See accompanying notes to financial statements.

NON-CASH INVESTING ACTIVITIES
Vehicles with a net book value of $230,893 were reclassified from vehicles
leased to vehicles held for resale as of June 30, 2003.

NON-CASH INVESTING ACTIVITIES
Vehicles with a net book value of $275,544 were reclassified from vehicles
leased to vehicles held for resale as of June 30, 2002.



                                       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
                  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.


                                       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 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.


                                       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 $678,000 as of
                  December 31, 2002 (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 $2,349,000 as of December 31, 2002. The
                  Company's NOL carryforward 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 June 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.



                                       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, 2002 and June 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.


                                       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 June 30,
2003. The balance sheet at December 31, 2002, as presented, is derived from the
audited financial statements at that date.

General.

         As of June 30, 2003, the Company had sold $6,786,000 of its 11%
Redeemable Secured Notes and had 162 active leases with a net book value of
$2,313,456.

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

         For the three months ended June 30, 2003, the company had received
monthly contract lease payments of $290,974 and amortization of down payments of
$91,055. This compares to contract lease payments of $406,775 and amortization
of down payments of $152,402 for the same period in 2002. The decrease in
monthly contract lease payments for the second quarter of 2003 was primarily the
result of fewer active leases than in the second quarter of 2002.

         Operating costs including general and administrative expenses were
$77,843 for the three-month period ended June 30, 2003. This compares to
$138,370 for the same period in 2002. The decrease in operating expenses for the
second 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 $208,094 for the three months ended
June 30, 2003 compared to $298,590 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 June 30, 2003, was $186,692
compared to $186,667 for the same period in 2002.

         Loss on sale of inventory for the quarter ended June 30, 2003, was
$119,787 compared to $110,976 for the second quarter of 2002.

         The net loss for the quarter ended June 30, 2003 was $209,401 compared
to $175,177 for the same period in 2002. The increase in loss for the quarter
ended June 30, 2003 was primarily due to a decrease in lease payments and
amortization of deferred revenue compared to the 2002 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.

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
note-holders 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. Between January 2003
and May 2003, no new leases were contracted, pending the approval of the consent
solicitation.


Results of Operations: Six-month period ended June 30, 2003, compared to
six-months ended June 30, 2002

         Total revenue for the six months ended June 30, 2003 was $805,579
compared to $1,155,042 for the same period in 2002. The decrease in 2003 revenue
was due to lower lease volume in that period.



                                       11
<PAGE>

         Operating costs and expenses were $116,630 for the six month period
ended June 30, 2003 compared to $291,035 for the same period in 2002. The
reduction in expenses for the 2003 period was primarily caused by lower
marketing fees paid due to lower lease volume.

         Depreciation and amortization for the six months ended June 30, 2003
was $447,843 compared to $610,671 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.

         Loss on sale of inventory for the six months ended June 30, 2003 was
$237,931 compared to $220,064 for the same period in 2002.

         The Company had a loss of $368,537 for the six months ended June 30,
2003 compared to a loss of $339,626 for the same period in 2002.


Liquidity and Capital Resources

         During the six months ended June 30, 2003, the Company provided cash of
$673,770 in its investing activities and received $13,186 from its financing
activities. For the same period in 2002, the Company used $373,657 in its
investing activities and received $41,911 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 423 leases, included 304
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    242     $5,579,660  $140,749  $1,529,806  $1,069,239  $2,942,413
Early Payoff     62     $1,250,337    $1,223    $539,599    $245,857    $909,580
                ---     ----------  --------  ----------  ----------  ----------
Total           304     $6,829,997  $141,972  $2,069,405  $1,315,096  $3,851,993
<Caption>
                                                Total
              Sales Tax  Warranty  Marketing    Amount     Profit
                Credit    Rebate   Fee Paid    Received    (Loss)
<S>            <C>       <C>       <C>        <C>         <C>
Repossession   $127,391  $60,436   $615,733   $5,113,550  ($606,859)
Early Payoff    $35,502   $1,399   $141,175   $1,590,762   $339,202
               --------  -------   --------   ----------  ---------
Total          $162,893  $61,835   $756,908   $6,704,312  ($267,657)
</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 second 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 three months
                  ended June 30, 2003



                                       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: August 12, 2003                          /s/ KENNETH C. LOWE
                                     ------------------------------------------
                                            Kenneth C. Lowe, President/
                                            Chief Executive Officer


Date: August 12, 2003                          /s/ KENNETH C. LOWE
                                     ------------------------------------------
                                            Kenneth C. Lowe, President/
                                            Chief Operating Officer


Date: August 12, 2003                          /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.