SECURITIES AND EXCHANGE COMMISSION

                             WASHINGTON, D.C. 20549

                                    Form 10-Q

[X]  QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
     SECURITIES EXCHANGE ACT OF 1934.

         For the quarterly period ended July 31, 2000.

[ ]  TRANSITION REPORT PURSUANT TO SECTION 13 OR 15 (d) OF THE
     SECURITIES EXCHANGE ACT OF 1934

For the transition from________________ to________________

                         Commission file number 0-16158

                           TreeSource Industries, Inc.
--------------------------------------------------------------------------------
             (Exact name of Registrant as specified in its charter)


            Oregon                                          93-0832150
-------------------------------                  -------------------------------
(State or other jurisdiction of                  (I.R.S. Employer Identification
 incorporation or organization)                   No.)


          10260 S.W. Greenburg Road, Suite 900, Portland, Oregon 97223
--------------------------------------------------------------------------------
               (Address of principal executive offices) (Zip Code)

(Registrant's telephone number, including area code)   (503) 246-3440
                                                     ------------------

         Indicate by check mark  whether the  Registrant  (1) has filed  reports
required to be filed by Section 13 or 15 (d) of the  Securities  Exchange Act of
1934  during  the  preceding  12 months  (or for such  shorter  period  that the
Registrant was required to file such reports),  and (2) has been subject to such
filing requirements for the past 90 days. Yes X No
                                             ---  ---
         The number of shares  outstanding of Registrant's  Common Stock, no par
value, at August 31, 2000 was 11,162,874.




                                       1
<PAGE>

                           TREESOURCE INDUSTRIES, INC.

                                      INDEX
                                                                        Page
                                                                       Number



PART I.  FINANCIAL INFORMATION.............................................3

Item 1.    Financial Statements............................................3

Item 2.    Management's Discussion and Analysis of Financial Condition and
           Results of Operations..........................................14


PART II. OTHER INFORMATION................................................18

Item 1.    Legal Proceedings..............................................18

Item 3.    Defaults Upon Senior Securities................................18

Item 6.    Exhibits and Reports on Form 8-K...............................19


















                                       2
<PAGE>

                          PART I. FINANCIAL INFORMATION

Item 1.           Financial Statements

                  TREESOURCE INDUSTRIES, INC. AND SUBSIDIARIES
                      CONSOLIDATED STATEMENT OF OPERATIONS
                    (in Thousands, Except Per-Share Amounts)
                                   (Unaudited)

                                                 THREE MONTHS ENDED
                                                     JULY 31,
                                         ---------------------------------
                                             2000                 1999
                                         -----------         -------------

NET SALES                                $   46,132          $     67,633

COST OF SALES                                48,019                57,017
                                         -----------          ------------
GROSS PROFIT (LOSS)                          (1,887)               10,616

SELLING, GENERAL AND
  ADMINISTRATIVE EXPENSES                     2,867                 3,241
REORGANIZATION CHARGES                          652                    --
                                         -----------          ------------
OPERATING INCOME (LOSS)                      (5,406)                7,375

OTHER INCOME (EXPENSE)
     Interest expense                           (30)               (1,114)
     Miscellaneous                               87                    86
                                         -----------          ------------
                                                 57                (1,028)
                                         -----------          ------------
INCOME (LOSS) BEFORE INCOME TAXES            (5,349)                6,347

PROVISIONS FOR INCOME TAXES (BENEFIT)            --                    --
                                         -----------          ------------

NET INCOME (LOSS)                            (5,349)                6,347

PREFERRED DIVIDENDS                              --                    --
                                         -----------          ------------
NET INCOME (LOSS) APPLICABLE
  TO COMMON STOCKHOLDERS                 $   (5,349)          $     6,347
                                         ===========          ============

NET INCOME (LOSS) PER COMMON SHARE
   - BASIC                                   ($0.48)                $0.57
                                             =======                =====

   - DILUTED                                 ($0.48)                $0.57
                                             =======                =====


The accompanying  notes are an integral part of these consolidated financial
statements.

                                       3

<PAGE>
<TABLE>
<CAPTION>

                  TREESOURCE INDUSTRIES, INC. AND SUBSIDIARIES
                           CONSOLIDATED BALANCE SHEET
                                     ASSETS
                                 (in Thousands)
                                   (Unaudited)


                                                                 JULY 31,         APRIL 30,
                                                                   2000             2000
                                                               -----------      -----------
<S>                                                            <C>              <C>
CURRENT ASSETS
   Cash and cash equivalents                                   $    3,437       $    1,871
   Restricted cash                                                    840            1,616
   Accounts receivable, net                                         6,465           12,462
   Inventories                                                     13,086           15,800
   Prepaid expenses                                                 2,795            2,535
   Income tax refund receivable                                        --               86
   Assets held for sale                                             5,490            5,433
   Timber, timberlands and timber-related assets                    3,145            2,196

                                                               -----------      -----------
      Total current assets                                         35,258           42,000


NOTES AND ACCOUNTS RECEIVABLE                                           4                5

PROPERTY, PLANT AND EQUIPMENT, at cost
   Land                                                             1,527            1,527
   Buildings and improvements                                       8,673            8,673
   Machinery and equipment                                         48,336           47,448
                                                               -----------      -----------

                                                                   58,536           57,648
      Less accumulated depreciation                                45,904           44,385

                                                               -----------      -----------
                                                                   12,632           13,263
   Construction in progress                                           206              101

                                                               -----------      -----------
                                                                   12,838           13,364

DEFERRED TAX ASSET                                                    750              750
OTHER ASSETS                                                        1,265            1,244

                                                               -----------      -----------
                                                               $   50,115       $   57,363
                                                               ===========      ===========





The accompanying  notes are an integral part of these consolidated financial
statements.


                                       4

<PAGE>

                  TREESOURCE INDUSTRIES, INC. AND SUBSIDIARIES
                           CONSOLIDATED BALANCE SHEET
                      LIABILITIES AND STOCKHOLDERS' EQUITY
                    (in Thousands, Except Share Information)
                                   (Unaudited)



                                                                 JULY 31,         APRIL 30,
                                                                   2000             2000
                                                               -----------      -----------

CURRENT LIABILITIES
   Accounts payable                                            $    5,436       $    5,476
   Accrued expenses                                                 7,333            7,902
   Timber contracts payable                                           147              147
   Current borrowings                                                  64              499

                                                               -----------      -----------
      Total current liabilities                                    12,980           14,025

LONG-TERM DEBT, less current maturities                               159              183

LIABILITIES SUBJECT TO COMPROMISE                                  49,129           49,959

COMMITMENTS AND CONTINGENCIES                                          --               --

STOCKHOLDERS' EQUITY
  Preferred Stock, 10,000,000 shares authorized
     Series A, 270,079 shares outstanding                          20,688           20,688
     Series B, 6,111 shares outstanding                               333              333
  Common Stock, no par value, 40,000,000 shares authorized,
     11,162,874 issued and outstanding                             28,761           28,761
  Additional paid-in capital                                           15               15
  Retained deficit                                                (61,950)         (56,601)

                                                               -----------      -----------
                                                                  (12,153)          (6,804)

                                                               -----------      -----------
                                                               $   50,115       $   57,363
                                                               ===========      ===========

</TABLE>







The accompanying  notes are an integral part of these consolidated financial
statements.


                                       5

<PAGE>
<TABLE>
<CAPTION>
                  TREESOURCE INDUSTRIES, INC. AND SUBSIDIARIES
                      CONSOLIDATED STATEMENT OF CASH FLOWS
                                 (in Thousands)
                                   (Unaudited)

                                                                THREE MONTHS ENDED JULY 31,
                                                               ----------------------------
                                                                   2000             1999
                                                               -----------      -----------
<S>                                                            <C>              <C>
CASH FROM OPERATING ACTIVITIES:
  Net income (loss)                                            $   (5,349)      $    6,347
  Adjustments to reconcile net income (loss) to
     cash provided by operating activities:
    Loss (gain) on sale of assets                                     (15)             --
    Depreciation, depletion and amortization                           714           1,141
    Accounts receivable                                              5,997            (866)
    Inventories                                                      2,714          (2,660)
    Prepaid expenses                                                 (260)            (529)
    Timber, timberlands and timber-related assets - current          (946)             186
    Payables and accruals                                            (700)           1,526
    Income taxes                                                       86               --

                                                               -----------      -----------
     Cash from operating activities                                 2,241            5,145
                                                               -----------      -----------

CASH FROM INVESTING ACTIVITIES:
  Notes and accounts receivable                                         1               14
  Acquisition of property, plant and equipment                       (291)            (325)
  Proceeds from the sale of fixed assets                               37               21

                                                               -----------      -----------
     Cash from investing activities                                  (253)            (290)
                                                               -----------      -----------

CASH FROM FINANCING ACTIVITIES:
  Proceeds (payments) from borrowings                                (459)              --
  Principal payments on long-term debt                               (738)              (5)
  Other assets                                                         (1)               5

                                                               -----------      -----------
     Cash from financing activities                                (1,198)              --
                                                               -----------      -----------

INCREASE (DECREASE) IN CASH AND CASH EQUIVALENTS                      790            4,855

CASH BALANCE AT BEGINNING OF PERIOD                                 3,487            2,131

                                                               -----------      -----------
CASH BALANCE AT END OF PERIOD                                  $    4,277       $    6,986
                                                               ===========      ===========

CASH PAID DURING THE PERIOD FOR:
  Interest                                                     $       36       $       --
  Income taxes                                                 $       --       $       --
</TABLE>

The accompanying  notes are an integral part of these consolidated financial
statements.


                                       6
<PAGE>

                  TREESOURCE INDUSTRIES, INC. AND SUBSIDIARIES
                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
                                  (Unaudited)


NOTE 1 - SUMMARY OF FINANCIAL STATEMENT PREPARATION

         On September 27, 1999 the Company  filed for  voluntary  reorganization
under chapter 11 of the U.S. Bankruptcy Code (the "Code"). The Company continues
to operate its  business as a  debtor-in-possession.  As a  debtor-in-possession
under the Code, the Company is authorized to operate its business subject to the
terms of a cash collateral order, but may not engage in transactions  outside of
the ordinary course of business without Court approval.

         On  April  12,  2000  the  Company  filed  an  Amended  Joint  Plan  of
Reorganization  (the "Plan") in U.S.  Bankruptcy  Court (the  "Court")  that, if
confirmed  by the  Court,  would  result in the  cancellation  of the  Company's
current  classes of common and preferred stock and eliminate any value remaining
in these equity securities. The Company's senior secured lenders have a security
interest in  substantially  all the assets of the  Company.  Under the  proposed
Plan,  these senior  secured  lenders  would  exchange a portion of their claims
against  the  Company  for new  equity  securities  to be issued by the  Company
pursuant to the Plan.  The  proposed  Plan also sets up a defined  pool of funds
from which unsecured trade creditors would be paid. The percentage  recovery for
unsecured  trade  creditors  would depend on a number of factors,  including the
resolution  of  disputed  claims.  On May 17,  2000,  the  Company  successfully
petitioned the Court to delay the Plan confirmation  hearing for 120 days due to
current lumber market conditions.  The Company may, at its option, further amend
or withdraw the Plan.

         In the opinion of management,  the consolidated financial statements of
TreeSource  Industries,   Inc.  and  subsidiaries  presented  herein,   assuming
continued  operations  under  chapter 11 , include  all  adjustments,  which are
solely of a normal recurring nature or related to the bankruptcy,  necessary for
a fair  presentation of the financial  position,  results of operations and cash
flows for the interim periods presented. Certain reclassifications may have been
made to the prior period  results and balances to conform to the current  period
classifications.  Most  obligations  outstanding  at the time of the  chapter 11
filing  have been  reclassified  as  non-current  liabilities  under the caption
"Liabilities  Subject to Compromise".  No adjustments  have been made to reflect
any settlement of obligations resulting from the reorganization proceedings.

         The financial statements should be read with reference to "Management's
Discussion  and  Analysis of  Financial  Condition  and  Results of  Operations"
contained in this report, and the "Notes to Consolidated  Financial  Statements"
set forth in the  Company's  Annual Report on Form 10-K for the year ended April
30, 2000,  filed with the  Securities  and Exchange  Commission.  The results of
operations for the current


                                       7
<PAGE>

interim periods are not necessarily indicative of the results to be expected for
the current year.

         Restricted  cash  represents  proceeds from the sale of certain  assets
that would normally be remitted to the secured lenders to pay down debt. Because
of the  bankruptcy  filing,  these funds cannot be paid until the Court approves
such  payment.  On July 18, 2000,  $738  thousand in proceeds from the equipment
sale at Sedro-Woolley were paid from restricted cash to the secured pre-petition
lenders as ordered by the Court.

         Due to the  filing  for  protection  under  chapter  11,  there  exists
substantial  doubt about the Company's  ability to continue as a going  concern.
The financial  statements do not include any adjustment  related to the carrying
value of assets or  liabilities  should the  Company be unable to  continue as a
going concern.


NOTE 2 - INVENTORIES

         Inventories  are  valued  at the  lower  of  cost  or  market.  Cost is
determined  using the average cost and first-in,  first-out  (FIFO)  methods.  A
summary of inventory by principal product classification follows (in thousands):


                                July 31,            April 30,
                                  2000                2000
                               ----------          ----------
         Logs                  $   6,618           $   6,571
         Lumber                    5,343               8,109
         Supplies and Other        1,125               1,120
                               ----------          ----------
                               $  13,086           $  15,800
                               ==========         ===========













                                       8
<PAGE>

NOTE 3 - STOCKHOLDERS' EQUITY

Stockholders' equity at July 31, 2000 consists of the following:

         Series A  Preferred  Stock,  $100  per  share  liquidation  preference;
500,000 shares authorized; 270,079 shares issued and outstanding, limited voting
rights;  cumulative  dividends  payable  quarterly in advance at the prime rate,
with a minimum  rate of 6% and a maximum  rate of 9%;  convertible  into  Common
Stock at $7.50 per share  after April 30,  1999;  redeemable  at original  issue
price plus any accrued dividends at the option of the Board of Directors, in the
form of cash or in exchange for senior unsecured debt with a 12% coupon. Subject
to certain  conditions,  the  holders of the Series A  Preferred  Stock have the
right to obtain voting control of the Company's  Board of Directors in the event
the Company misses three consecutive quarterly dividend payments, four quarterly
dividend  payments  within  twenty-four  months  or a total of  eight  quarterly
dividend  payments.  As of July  31,  2000 the  Company  was in  arrears  on six
consecutive quarterly dividend payments totaling approximately $3,325,000.

         Series B  Preferred  Stock,  $100  per  share  liquidation  preference;
500,000 shares authorized;  6,111 shares issued and outstanding;  limited voting
rights;  convertible into 212,693 shares of Common Stock; dividends payable only
if paid on the Company's  Common Stock;  redeemable at original issue price plus
accrued  dividends  at the option of the Board of  Directors  after all Series A
Preferred Stock has been redeemed.

         Series  C  Junior   Participating   Preferred  Stock,  $100  per  share
liquidation  preference;   400,000  shares  authorized;   no  shares  issued  or
outstanding;  each share has 100  votes,  voting  together  with  Common  Stock;
dividends  payable only if paid on the  Company's  Common Stock at 100 times the
Common Stock  dividend  rate.  This class of Preferred  Stock was  authorized in
connection with the  Shareholder  Rights Plan adopted by the Company on March 4,
1998.

         Common Stock, no par value;  40,000,000 shares  authorized;  11,162,874
shares issued and outstanding.  Before giving effect to any shares that might be
issued  pursuant to the management  incentive Stock Option Plan or conversion of
any Series A Preferred  Stock,  the total number of common shares would increase
to  11,373,589  shares  if the  shares  of Series B  Preferred  Stock  remaining
outstanding at July 31, 2000 were converted to Common Stock.

         The Company's  current  classes of common and  preferred  stock will be
cancelled and any value remaining in these equity  securities will be eliminated
if the proposed Plan is confirmed by the Court.


                                       9
<PAGE>

NOTE 4 - NET INCOME (LOSS) PER SHARE

         The  calculations  of net income  (loss) per share for the  three-month
period ended July 31, 2000 and 1999 are summarized  below (in thousands,  except
per-share data):
                                                     Three Months Ended July 31,
                                                     ---------------------------
                                                          2000          1999
                                                       ---------     ---------
Net income (loss) applicable to common shareholders    $ (5,349)     $  6,347
                                                       =========     =========

Weighted average shares outstanding
     - Basic                                             11,163        11,163

Additional shares assumed from:
     - Conversion of Series B Preferred Stock               --          --
     - Exercise of stock options                            --          --
                                                       ---------     ---------

Average number of shares and equivalents outstanding
     - Diluted                                           11,163        11,163
                                                       =========     =========

Net income (loss) per common share
     - Basic                                           $  (0.48)     $    0.57
                                                       =========     =========

     - Diluted                                         $  (0.48)     $    0.57
                                                       =========     =========

NOTE 5 - LIABILITIES SUBJECT TO COMPROMISE

         Under the Code,  a claim is treated  as  secured  only to the extent of
such  creditor's  collateral,  and  the  balance  of the  claim  is  treated  as
unsecured.  Generally, unsecured and under-secured debt does not accrue interest
after the filing,  while a fully  secured  claim  continues to accrue  interest.
Accordingly,  interest expense totaling approximately $1,102,000 was not accrued
during the quarter  ended July 31, 2000 as management  believes  these debts are
under-secured. See Note 6 for additional information.

         Amounts included under the caption  "Liabilities Subject to Compromise"
represent claims that are unsecured or where, in the opinion of management,  the
value of the corresponding collateral is estimated to be less than the amount of
the debt.  Included under this caption at July 31, 2000, and April 30, 2000, are
the following (in thousands):
                                                        July 31,      April 30,
                                                          2000          2000
                                                       ---------     ---------
         Trade, interest and
               other miscellaneous claims              $  6,150      $  6,242
         Secured notes                                      261           261
         Unsecured notes                                  1,007         1,007
         Senior secured debt                             41,711        42,449
                                                       ---------     ---------

                                                       $ 49,129      $ 49,959
                                                       =========     =========



                                       10
<PAGE>

         Unsecured and under-secured  claims may be liquidated and discharged at
less than their face value.  It is impossible at this time to predict the actual
amount of recovery  that each  creditor may realize,  since the valuation of the
Company's  assets and its claims  may be  subject to  adjustment  as part of the
bankruptcy proceedings.

         As a result of the chapter 11 proceedings,  TreeSource Industries, Inc.
and its subsidiaries are in default on substantially  all of their  pre-petition
debt  agreements.  Acceleration of this debt is stayed subject to the chapter 11
proceedings.  Such debt cannot be paid or  restructured  until the conclusion of
the proceedings, unless ordered by the Court.

NOTE 6 - BORROWINGS

         Long-term  borrowings  and the Line of Credit  consist of the following
(in thousands):
<TABLE>
<CAPTION>
                                                                 July 31,           April 30,
                                                                   2000                2000
                                                               -----------      -----------
<S>                                                            <C>              <C>
Senior secured debt, bearing interest at 10%; principal
payable in quarterly installments of $1 million beginning
March 15, 1999, and a final payment in December 2004;
secured by substantially all assets of the Company.            $   41,711       $   42,449

Secured notes, interest at 9% and 10%; payable on
various dates; secured by various assets.                             261              261

Unsecured  senior  subordinated  notes, net of discount
of $264 at July 31, 2000 and April 30, 2000;
8% coupon, effective interest rate of 13.3%; semi-
annual interest payments due each June 30 and
December 31; principal due in full June 30, 2005.                   1,007            1,007

Obligations under capital leases.                                     223              243
                                                               -----------     ------------
                                                                   43,202           43,960

Less current maturities.                                              (64)             (60)
Less liabilities subject to compromise.                           (42,979)         (43,717)
                                                               -----------     ------------
                                                               $      159      $       183
                                                               ===========     ============
</TABLE>

         As  discussed  in  Note  5,   TreeSource   Industries,   Inc.  and  its
subsidiaries  are in default on  substantially  all of their  pre-petition  debt
agreements as a result of the chapter 11 filing.  Acceleration of these debts is
stayed  subject  to the  chapter  11  proceedings.  Such debt  cannot be paid or
restructured until the conclusion of the chapter 11 proceedings,  unless ordered
by the  Court.  All of the  Company's  borrowings,  with  the  exception  of any
borrowings  against the  debtor-in-possession  working capital secured revolving
line of credit (the "Line of Credit")  and certain  capital  lease  obligations,
have been reclassified to "Liabilities Subject to Compromise".



                                       11
<PAGE>

         The Company  obtained a $16 million Line of Credit in October 1999 that
matures  upon the  earliest  of April 5, 2001 or the  effective  date of a final
order of  reorganization.  Borrowings  under the Line of Credit  fluctuate daily
based on cash  needs and are  subject  to  customary  covenants  and  collateral
reserves.  The  weighted  average  rate of  interest on  outstanding  short term
borrowings on the Line of Credit was 9.5%. The Line of Credit allows the Company
to borrow  from time to time up to $14  million  (the  remaining  $2  million is
reserved  pursuant  to the  terms of the  Line of  Credit),  including  up to $5
million in letters of credit.  As of July 31, 2000 there were no  borrowings  on
the Line of Credit and $2,225,000 in letters of credit outstanding.

NOTE 7 - PROVISION  FOR INCOME  TAXES

         The income tax provision is based on the estimated effective annual tax
rate for each fiscal year.  The provision  includes  anticipated  current income
taxes payable,  the tax effect of anticipated  differences between the financial
reporting and tax basis of assets and liabilities,  and the expected utilization
of net operating loss (the "NOL")  carry forwards.

         The federal and state income tax  provision  consists of the  following
(in thousands):

                                      Three Months Ended July 31,
                                      ---------------------------
                                         2000             1999
                                      ----------       ----------
Income (loss) before income taxes     $  (5,349)      $    6,347
                                      ==========       ==========
Provision for income taxes:
   Federal                            $      --        $      --
   State                                     --               --
                                      ----------       ----------
                                      $      --        $      --
                                      ==========       ==========

   Current                            $      --        $      --
   Deferred                                  --               --
                                      ----------       ----------
                                      $      --        $      --
                                      ==========       ==========

         The   Company's   remaining   adjusted   NOL  at  April  30,  2000  was
approximately  $40  million  for  federal  income tax and $28  million for state
income tax purposes. These carry forwards expire in 2007 and 2012, respectively.
As discussed in Note 1, the Company has filed for voluntary reorganization under
chapter 11 of the Code,  which could impact the  availability  of the NOLs to be
used to offset future income.  The Company may use a substantial  portion of the
NOLs  prior  to  emerging  from  bankruptcy  due to  debt  forgiveness  and  the
conversion  of debt to equity  proposed  in the plan of  reorganization.  Due to
potential significant limitations of the NOLs associated with the bankruptcy and
potential reorganization plans, the Company has fully reserved for its available
NOLs at July 31, 2000. Management periodically


                                       12
<PAGE>

reviews the above  factors and may change the amount of  valuation  allowance as
facts and circumstances dictate.

NOTE 8 - COMMITMENTS AND CONTINGENCIES

         The Company is involved in certain litigation  primarily arising in the
normal  course of its  business.  The Company's  liability,  if any,  under such
pending litigation could have a material impact upon the Company's  consolidated
financial condition or results of operations. See "Legal Proceedings".

         The  Company is subject to many  federal,  state and local  regulations
regarding waste disposal and pollution control.  Various  governmental  agencies
have  enacted,   or  are   considering,   regulations   regarding  a  number  of
environmental issues that may require material expenditures in the future. These
include regulations  regarding log yard management,  disposal of log yard waste,
kiln process waste water,  and air emissions  from hog fuel fired  boilers.  The
potential  expenditures  required  for the  Company  to  comply  with  any  such
regulations  could have a material adverse impact on its consolidated  financial
condition and results of operations.

























                                       13
<PAGE>

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

Results of Operations
---------------------

         On a quarter-to-quarter basis, the Company's financial results have and
will vary widely, due to seasonal  fluctuations and market factors affecting the
demand for logs,  lumber, and other wood products.  Therefore,  past results for
any given year or quarter are not necessarily indicative of future results.

         Domestic lumber market conditions  continued to weaken during the first
quarter of fiscal  2001 due to industry  overproduction  and the decline in U.S.
housing  starts.  The  average  price of the  industry  benchmark  green fir 2x4
standard  and better  lumber  decreased  11%,  from $333 per unit in the quarter
ended April 30, 2000, to $296 per unit in the quarter  ended July 31, 2000.  The
average  price of the industry  benchmark #2 fir saw log also  decreased 4% from
$640 to $612 per unit  during  these  periods.  Because  the  decrease in lumber
prices  outpaced the decrease in log costs,  industry  margins and the Company's
profits  decreased.  In response to the deterioration of the market, the Company
curtailed production  indefinitely at its facility in Burke, Vermont,  which had
net sales of $0.3 million, $7.3 million, and $4.6 million in fiscal years ending
2001, 2000, and 1999, respectively.

         On September 27, 1999,  the Company filed for voluntary  reorganization
under chapter 11 of the U.S. Bankruptcy Code ("the Code"). The Company continues
to operate its  business as a  debtor-in-possession.  As a  debtor-in-possession
under the Code, the Company is authorized to operate its business subject to the
terms of a cash collateral order, but may not engage in transactions  outside of
the ordinary  course of business  without Court approval.  The costs  associated
with the reorganization totaled $652,000 during the quarter ended July 31, 2000.
Interest  expense  for the quarter was  approximately  $1,102,000  lower than it
otherwise  would  have been due to the  filing  for  reorganization.  During the
reorganization  period,  the Company is allowed  relief from payment of interest
charges on all pre-petition  debt, but is required to accrue interest expense on
claims  that are,  in the  opinion of  management,  fully  secured.  No interest
expense has been  recorded  since  September  27, 1999 on the  Company's  senior
secured debt or unsecured senior  subordinated notes because management believes
these claims are under-secured. (See "Legal Proceedings"). The Company filed for
reorganization  in  response  to a  protracted  period  of weak  lumber  markets
combined with the Company's high level of debt and  substantial  preferred stock
dividend  obligations.  The cash  generated by operations  was not sufficient to
enable the Company to pay its commitments and continue operating.

         On  April  12,  2000  the  Company  filed  an  Amended  Joint  Plan  of
Reorganization  (the  "Plan") in U.S.  Bankruptcy  Court (the  "Court")  that if
confirmed  by the  Court,  would  result in the  cancellation  of the  Company's
current  classes of


                                       14
<PAGE>

common and preferred  stock and  eliminate  any value  remaining in these equity
securities.  The Company's  senior secured  lenders have a security  interest in
substantially  all the assets of the  Company.  Under the proposed  Plan,  these
senior  secured  lenders  would  exchange a portion of their claims  against the
Company for new equity  securities  to be issued by the Company  pursuant to the
Plan.  The  proposed  Plan  also  sets up a  defined  pool of funds  from  which
unsecured trade  creditors would be paid. The percentage  recovery for unsecured
trade creditors would depend on a number of issues,  including the resolution of
disputed  claims.  On May 17, the Company  successfully  petitioned the Court to
delay the Plan  confirmation  hearing for 120 days due to current  lumber market
conditions. The Company may, at its option, further amend or withdraw the Plan.

         The following  table sets forth the percentages  that certain  expenses
bear to net sales, and the period-to-period percentage change for each item:

                                    INCOME AND EXPENSE ITEMS     PERCENTAGE
                                               AS                 INCREASE
                                     A PERCENT OF NET SALES      (DECREASE)
                                   --------------------------- ---------------
                                                                   Three
                                         Three Months Ended       Months
                                              July 31,             Ended
                                   ---------------------------  ------------
                                         2000          1999       7/31/00
                                                                    to
                                                                  7/31/99
                                   -------------- ------------  ------------
Net sales                              100.0   %     100.0  %       (31.8)  %
Cost of sales                          104.1          84.3          (15.8)
                                   -----------    ----------    ------------
Gross Profit                           (4.1)          15.7         (117.8)

 Selling, general and
    administrative expense               6.2           4.8          (11.5)
Reorganization charges                   1.4           0.0              NM
                                   -----------    ----------    ------------

  Operating income (loss)              (11.7)         10.9         (173.3)

Interest expense                        (0.1)         (1.6)         (97.3)
Miscellaneous                            0.2           0.1            1.2
                                   -----------    ----------    ------------

Income (loss) before income taxes      (11.6)          9.4         (184.3)

Provision for income taxes               0.0           0.0              NM
                                   -----------    ----------    ------------

Net income (loss)                      (11.6)  %       9.4  %      (184.3)  %
                                   ===========    ==========    ============

NM - Not Meaningful
Note - percentages may not add due to rounding.










                                       15
<PAGE>

Comparison  of Three Months Ended July 31, 2000 and 1999
--------------------------------------------------------

         Net sales for the three  months  ended July 31,  2000  decreased  $21.5
million  (32%),  as  compared  to the three  months  ended July 31,  1999.  This
decrease was principally  caused by an 18% decrease in lumber sales volume and a
16% decrease in the weighted  average net lumber sales price. In response to the
relativley  weak lumber market during the three months ended July 31, 2000,  the
Company  either  reduced  operating  hours  or took  extended  downtime  at most
facilities.

         Gross  profit for the  quarter  ended  July 31,  2000 was (4.1%) of net
sales,  compared to 15.7% of net sales for the quarter ended July 31, 1999. Unit
manufacturing  costs in the three  months  ended July 31, 2000  increased  4% as
compared  to  the  three  months  ended  July  31,   1999,   primarily   due  to
market-related production curtailments.

         Selling, general and administrative expenses for the quarter ended July
31, 2000  decreased  by (11.5%) as compared to the quarter  ended July 31, 1999,
excluding   reorganization   charges.   This  decrease  has  resulted  from  the
implementation  of a number of  cost-saving  measures,  such as corporate  staff
reductions,  reduction  in  office  lease  space,  and the  closure  of  certain
facilities.

         Reorganization  charges  for  the  quarter  ended  July  31,  2000  are
comprised primarily of fees for professional services related to the bankruptcy.

         As of July 31, 2000, the Company had available an estimated $45 million
in federal net operating losses and $33 million in state net operating losses to
offset future taxable income.  Due to the bankruptcy,  substantial  doubt exists
regarding  the Company's  ability to fully utilize these NOLs. As a result,  the
Company fully reserved for the NOLs generated during the three months ended July
31, 2000 and 1999.  The Company  periodically  reviews the above factors and may
change the amount of valuation allowance as facts and circumstances dictate.

Liquidity and Capital Resources
-------------------------------

         The Company is currently  operating as a  debtor-in-possession  under a
cash collateral order approved by the Court, pursuant to a number of conditions.
The cash  collateral  order allows the Company to use funds from  operations and
its $16 million  debtor-in-possession  working capital secured revolving line of
credit (the "Line of Credit") for normal operating purposes. The cash collateral
order also  grants a security  interest in  substantially  all the assets of the
Company to the  pre-petition  senior secured lenders and  post-petition  secured
debtor-in-possession   lenders.   The  current  cash  collateral  order  expires
September  30,  2000.  If the Company is unable to obtain a new cash  collateral
order by  October 1, 2000,  the  Company  may not be able to meet its short term
liquidity needs. The Company's pre-petition senior secured creditors have in the
past  agreed  to  such a new  cash  collateral  order  during  these  bankruptcy
proceedings.  However,  there is no guarantee the pre-petition secured creditors
will agree to a new court collateral order.



                                       16
<PAGE>

         Cash and cash  equivalents  increased  by  approximately  $1.6  million
during the three months ended July 31, 2000,  to $3.4  million,  excluding  $0.8
million in restricted cash. On July 18, 2000, the $738 thousand in proceeds from
the  equipment  sale at  Sedro-Woolley  were  paid from  restricted  cash to the
secured pre-petition lenders as ordered by the Court. Approximately $2.2 million
of cash was generated  from  operations  due to the continued  reduction in both
accounts receivable and inventory from seasonal  adjustments and curtailments of
certain  operations.  The  decrease in  payables  and  accruals of $0.7  million
resulted from the  deterioration of the domestic lumber market. To conserve cash
prior to  filing  for  reorganization,  the  Company  has not paid  interest  or
principal on its senior secured debt and subordinated  debentures,  or dividends
on its Series A Preferred Stock since March 1999.

         The  Company  historically  has  not had a line of  credit  or  working
capital financing available to it, and,  therefore,  has relied on cash provided
by its  operations  to fund its working  capital  needs.  In October of 1999, in
connection with filing for voluntary  reorganization,  the Company  obtained the
Line of Credit  provide for  day-to-day  liquidity  and seasonal  log  inventory
increases. As of July 31, 2000 there was no borrowings on the Line of Credit and
$2,225,000 in letters of credit outstanding.

         For the three  months  ended  July 31,  2000,  the  Company  spent $0.3
million for capital improvements to its facilities.  The Company had no material
commitments for capital spending at July 31, 2000.

         The Company does not invest in market risk sensitive instruments.


Factors Affecting  Forward-Looking Statements
---------------------------------------------

         The  statements  contained  in this report that are not  statements  of
historical  fact may include  forward-looking  statements (as defined in Section
27A of the  Securities  Act of 1933,  as amended) that involve a number of risks
and  uncertainties.  Moreover,  from time to time the  Company  may issue  other
forward-looking  statements.  The  following  factors are among the factors that
could  cause  actual  results  to  differ  materially  from the  forward-looking
statements   and  should  be  considered  in  evaluating   any   forward-looking
statements:  the  uncertain  outcome of the  Company's  chapter  11 filing;  the
approval of the Company's plan of  reorganization;  court approval of a new cash
collateral  order;  adverse  operating  conditions;  fluctuations  in  quarterly
results;  availability  of  logs;  technological  change;  manufacturing  risks;
federal and state  regulations;  ability to utilize the NOLs; and the additional
factors  listed from time to time in the Company's SEC reports,  including,  but
not  limited  to, the  Company's  annual  report on Form 10-K for the year ended
April 30, 2000.







                                       17
<PAGE>

                           PART II. OTHER INFORMATION

Item 1.  Legal Proceedings

         On September 27, 1999,  TreeSource  Industries,  Inc. and a majority of
its subsidiaries filed a voluntary petition for reorganization  under chapter 11
of the U.S.  Bankruptcy  Code. The  proceeding was filed in the U.S.  Bankruptcy
Court for the  Western  District  of  Washington  in  Seattle  (the  "Bankruptcy
Court"). The jointly administered proceeding is titled:  "TreeSource Industries,
Inc., et al.", Case Numbers 99-10932, 99-10937 through 99-10961.

         The Company and its Trask River Lumber subsidiary were named defendants
in a claim for wages and penalties filed in U.S. District Court for the District
of Oregon on February 17, 1999 (Allen, Blount, et al., vs. WTD Industries, Inc.,
Trask  River  Lumber and Bruce L.  Engel).  Although  the case was stayed by the
Company's  chapter 11 filing,  the plaintiffs  filed a class Proof of Claim. The
Court granted limited relief from stay to allow plaintiffs to attempt to certify
their class and, if successful, to liquidate their claim in the District Court.

         The  Company  and  its  Central  Point  Lumber  subsidiary  were  named
defendants  in a claim for damages filed in Circuit Court of the State of Oregon
for  Jackson  County on August  27,  1999.  The  plaintiff  alleges  retaliatory
wrongful  discharge  and  loss  of  wages  as a  result  of  filing  a  worker's
compensation  claim.  (Donald D. Leiter II vs. TreeSource  Industries,  Inc. and
Central  Point  Lumber).  This action is currently  stayed due to the  Company's
chapter 11 filing.

         The Company was named as a  defendant  in a claim for damages  filed in
U.S.  District Court for Eastern  District of Louisiana on January 26, 2000. The
plaintiff is an employee of one of the  Company's  customers who alleges that he
was injured while unloading a boxcar of lumber.  (Alvin Robertson vs. TreeSource
Industries,  Inc., et al.). The suit,  which was being defended by the Company's
insurance carrier, has been settled by the insurance carrier.



Item 3.    Defaults Upon Senior Securities

           Due to the  Company's  inability  to meet  certain  of its  financial
covenants  and its filing for  reorganization,  the Company is not in compliance
with its  obligations  under its senior secured debt agreement and ceased making
interest and  principal  payments on its senior  secured debt in March 1999.  On
September 27, 1999 the Company filed for voluntary  reorganization under chapter
11 of the  U.S.  Bankruptcy  Code in the  U.S.  District  Court  of the  Western
District of  Washington:  In re  TreeSource  Industries,  Inc., et al (Case Nos.
99-10932 and 99-10937 through 99-10961).  As of August 31, 2000, the Company had
not paid seven  consecutive  quarterly  dividend  payments due to holders of its
Series A Preferred Stock, totaling approximately $3,933,000 and is in arrears on
payment  of  approximately  $6,800,000  in  interest on its senior secured debt.
Additionally,  the  Company is in  arrears


                                       18
<PAGE>

on payment of  approximately  $397,000 in interest  on its 8%  unsecured  senior
notes as of August 31, 2000. During the  reorganization  period,  the Company is
allowed relief from payment of interest charges on all pre-petition  debt but is
required  to accrue  interest  expense  on claims  that are,  in the  opinion of
management, fully secured. No interest expense has been recorded since September
27,  1999  on  the   pre-petition   senior  secured  debt  or  unsecured  senior
subordinated debt, because management  believes the claims of these debt holders
are under-secured.











Item 6.  Exhibits and Reports on Form 8-K

         (a)  Exhibits

              The Index to Exhibits is located on page 21.

         (b)  Reports on Form 8-K

              No reports on Form 8-K were filed  during the  quarter  ended July
31, 2000.











                                       19
<PAGE>

                                   SIGNATURES

              Pursuant to the  requirements  of the  Securities  Exchange Act of
1934,  the  Registrant  has caused this report to be signed on its behalf by the
undersigned, thereunto duly authorized.






                                             TreeSource Industries, Inc.
                                             -----------------------------------
                                             (Registrant)

                                             /s/ Jess R. Drake
                                             -----------------------------------
                                             Jess R. Drake
                                             President, Chief Executive Officer
                                             and Director

                                             /s/ Robert W. Lockwood
                                             -----------------------------------
                                             Robert W. Lockwood
                                             Vice President - Finance and Chief
                                             Financial Officer







September 14, 2000






                                       20
<PAGE>

                           TreeSource Industries, Inc.

                                Index to Exhibits


                                                                    Sequential
                                                                      Number
                                                                      System
                                                                       Page
                                                                      Number


3.1      Fourth  Restated  Articles of  Incorporation  of Registrant
         adopted effective November 27, 1992, as amended(1)

3.2      Second Restated Bylaws of the Registrant  adopted effective
         November 27, 1992(2)

27       Financial Data Schedule(3)




















(1)      Incorporated  by  reference  to  the  exhibit  of  like  number  to the
         Registrant's  quarterly  report  on Form  10-Q  for the  quarter  ended
         October 31, 1998.

(2)      Incorporated  by  reference  to  the  exhibit  of  like  number  to the
         Registrant's  annual  report on Form 10-K for the year ended  April 30,
         1993.

(3)      This  schedule has been  submitted in  electronic  form  prescribed  by
         EDGAR.







                                 21