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 January 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 March 8, 2000 was 11,162,874.





<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.................................................19

Item 1.    Legal Proceedings...............................................19

Item 3.    Defaults Upon Senior Securities.................................19

Item 6.    Exhibits and Reports on Form 8-K................................20



<PAGE>

                          PART I. FINANCIAL INFORMATION

Item 1.           Financial Statements
<TABLE>
<CAPTION>
                  TREESOURCE INDUSTRIES, INC. AND SUBSIDIARIES
                      CONSOLIDATED STATEMENT OF OPERATIONS
                    (in Thousands, Except Per-Share Amounts)
                                   (Unaudited)

                                                                 THREE MONTHS                NINE MONTHS
                                                                    ENDED                       ENDED
                                                                  JANUARY 31,                 JANUARY 31,
                                                            ------------------------    ------------------------
                                                               2000          1999          2000          1999
                                                            ----------    ----------    ----------    ----------
<S>                                                         <C>            <C>           <C>          <C>
NET SALES                                                   $  59,546      $ 44,257      $186,148     $ 143,158

COST OF SALES                                                  58,088        43,273       171,079       135,307
                                                            ----------    ----------    ----------    ----------
GROSS PROFIT                                                    1,458           984        15,069         7,851

SELLING, GENERAL AND
  ADMINISTRATIVE EXPENSES                                       2,411         2,560         8,276         7,952
REORGANIZATION CHARGES                                            942            --         1,819            --
                                                            ----------    ----------    ----------    ----------
OPERATING INCOME (LOSS)                                        (1,895)       (1,576)        4,974          (101)

OTHER INCOME (EXPENSE)
     Interest expense                                             (93)       (1,143)       (1,926)       (3,461)
     Miscellaneous                                                450           (80)        1,135          (180)
                                                            ----------    ----------    ----------    ----------

                                                                  357        (1,223)         (791)       (3,641)
                                                            ----------    ----------    ----------    ----------
INCOME (LOSS) BEFORE INCOME TAXES                              (1,538)       (2,799)        4,183        (3,742)

PROVISIONS FOR INCOME TAXES (BENEFIT)                              --          (117)          100          (117)
                                                            ----------    ----------    ----------    ----------

NET INCOME (LOSS)                                              (1,538)       (2,682)        4,083        (3,625)

PREFERRED DIVIDENDS                                                --           540            --         1,688
                                                            ----------    ----------    ----------    ----------
NET INCOME (LOSS) APPLICABLE
  TO COMMON STOCKHOLDERS                                    $  (1,538)    $  (3,222)    $   4,083     $  (5,313)
                                                            ==========    ==========    ==========    ==========


NET INCOME (LOSS) PER COMMON SHARE

   - BASIC                                                     ($0.14)       ($0.29)        $0.37        ($0.48)
                                                               =======       =======        =====        =======



   - DILUTED                                                   ($0.14)       ($0.29)        $0.37        ($0.48)
                                                               =======       =======        =====        =======
</TABLE>

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)


                                                                   JANUARY 31,         APRIL 30,
                                                                      2000               1999
                                                                 -------------      -------------
<S>                                                              <C>                <C>
CURRENT ASSETS
   Cash and cash equivalents                                     $      2,777       $      2,131
   Restricted cash                                                      1,424                --
   Accounts receivable, net                                            14,015             10,210
   Inventories                                                         22,499             13,716
   Prepaid expenses                                                     7,173              1,320
   Income tax refund receivable                                            70                 70
   Deferred tax asset                                                     750                750
   Assets held for sale                                                 6,019              7,749
   Timber, timberlands and timber-related assets                        1,951              2,190

                                                                 -------------      -------------
      Total current assets                                             56,678             38,136


NOTES AND ACCOUNTS RECEIVABLE                                               5                 27

PROPERTY, PLANT AND EQUIPMENT, at cost
   Land                                                                 1,527              1,527
   Buildings and improvements                                           8,528              8,287
   Machinery and equipment                                             47,994             47,462
                                                                 -------------      -------------

                                                                       58,049             57,276
      Less reserve for impairment                                         941                941
      Less accumulated depreciation                                    44,044             41,116

                                                                 -------------      -------------
                                                                       13,064             15,219
   Construction in progress                                               694                324

                                                                 -------------      -------------
                                                                       13,758             15,543

OTHER ASSETS                                                            1,222              1,281

                                                                 -------------      -------------
                                                                 $     71,663       $     54,987
                                                                 =============      =============






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)



                                                                   JANUARY 31,         APRIL 30,
                                                                      2000               1999
                                                                 -------------      -------------
CURRENT LIABILITIES
   Accounts payable                                              $     10,786       $     10,830
   Accrued expenses                                                     7,401              7,744
   Timber contracts payable                                               222                428
   Current borrowings                                                   6,817             43,474

                                                                 -------------      -------------
      Total current liabilities                                        25,226             62,476

LONG-TERM DEBT, less current maturities                                   203                327

LIABILITIES SUBJECT TO COMPROMISE                                      49,967                 --

COMMITMENTS AND CONTINGENCIES                                              --                 --

STOCKHOLDERS' EQUITY (DEFICIT)
  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                                                    (53,530)           (57,613)

                                                                 -------------      -------------
                                                                       (3,733)            (7,816)

                                                                 -------------      -------------
                                                                 $     71,663       $     54,987
                                                                 =============      =============
</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)

                                                                 NINE MONTHS ENDED JANUARY 31,
                                                               ---------------------------------
                                                                    2000             1999
                                                               -------------     -------------
<S>                                                            <C>               <C>
CASH FROM OPERATING ACTIVITIES:
  Net income (loss)                                            $      4,083      $     (3,625)
  Adjustments to reconcile net income (loss) to
     cash provided by operating activities:
    Loss on sale of assets                                              147                --
    Depreciation, depletion and amortization                          3,242             3,098
    Deferred income tax                                                  --                --
    Impairment Loss
    Accounts receivable                                              (3,805)            1,963
    Inventories                                                      (8,775)            3,218
    Prepaid expenses                                                 (5,853)             (455)
    Timber, timberlands and timber-related assets - current              33             2,118
    Payables and accruals                                             5,863            (1,793)
    Income taxes                                                         --              (236)

                                                               -------------     -------------
     Cash from operating activities                                  (5,065)            4,288
                                                               -------------     -------------
CASH FROM INVESTING ACTIVITIES:
  Notes and accounts receivable                                          22                --
  Acquisition of property, plant and equipment                       (1,389)           (2,089)
  Proceeds from the sale of fixed assets                              1,583                --
  Net book value of retirements                                          --               268
  Net book value of disposed idle assets                                 --               177
  Other investing activities                                             --                60

                                                               -------------     -------------
     Cash from investing activities                                     216            (1,584)
                                                               -------------     -------------

CASH FROM FINANCING ACTIVITIES:
  Proceeds from long-term borrowings                                  6,936                --
  Principal payments on long-term debt                                   --            (1,577)
  Other assets                                                         (17)              (294)
  Dividends paid on Preferred Stock                                       --           (1,671)
  Issuance of common stock                                                --                9

                                                               -------------     -------------
     Cash from financing activities                                   6,919            (3,533)
                                                               -------------     -------------

INCREASE (DECREASE) IN CASH AND CASH EQUIVALENTS                      2,070              (829)

CASH BALANCE AT BEGINNING OF PERIOD                                   2,131             2,157

                                                               -------------     -------------
CASH BALANCE AT END OF PERIOD                                  $      4,201      $      1,328
                                                               =============     =============

CASH PAID DURING THE PERIOD FOR:
  Interest                                                     $        147      $      3,195
  Income taxes                                                 $        100      $         (2)

</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, TreeSource  Industries,  Inc. and certain of its
wholly-owned  subsidiaries ("the Company" or "TreeSource"),  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 October  28, 1999 the Company  filed a Plan of  Reorganization  (the
"Plan") in U.S. Bankruptcy Court (the "Court") that, if confirmed,  would result
in the  cancellation  of the Company's  current  classes of common and preferred
stock.  Any value these  equities might have would be eliminated if the proposed
Plan is confirmed by the Court.  The senior secured  lenders that have a secured
interest in  substantially  all assets of the Company  will convert a portion of
their debt into equity.  Unsecured  trade  creditors  would receive up to 90% of
their claims based on the Company's estimate of its unsecured liabilities.

         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, 1999,  filed with the  Securities  and Exchange  Commission.  The results of
operations for the current interim periods are not necessarily indicative of the
results to be expected for the current year.



                                       7
<PAGE>

         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.

         Due to the filing for  protection  under chapter 11 of the Code,  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):

                                             January 31,        April 30,
                                                2000              1999
                                            ------------      ------------
         Logs                               $    10,997       $     6,649
         Lumber                                  10,417             6,001
         Supplies and Other                       1,085             1,066
                                            ------------      ------------
                                            $    22,499       $    13,716
                                            ============      ============


NOTE 3 - STOCKHOLDERS'  EQUITY

Stockholders' equity at January 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 January  31,  2000 the Company was in arrears on four
consecutive quarterly dividend payments totaling  approximately  $2,147,000.  In
addition, because the Company filed for protection under chapter 11 of the Code,
the Company did not pay the quarterly  dividend due February 29, 2000.  This was
the fifth consecutive dividend payment skipped by the Company.



                                       8
<PAGE>

         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 January 31, 2000 were converted to Common Stock.

NOTE 4 - NET INCOME (LOSS) PER SHARE

         The  calculations  of net  income  (loss)  per  share for the three and
nine-month  periods  ended  January 31, 2000 and 1999 are  summarized  below (in
thousands, except per-share data):
<TABLE>
<CAPTION>
                                                           Three Months Ended              Nine Months Ended
                                                               January 31,                     January 31,
                                                       --------------------------      --------------------------
                                                          2000            1999            2000            1999
                                                       ----------      ----------      ----------      ----------
<S>                                                    <C>             <C>             <C>             <C>
Net income (loss) applicable to common
shareholders                                           $  (1,538)      $  (3,222)      $   4,083       $  (5,313)
                                                       ==========      ==========      ==========      ==========

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

Net income (loss) per common share
     - Basic                                           $   (0.14)      $   (0.29)      $    0.37       $   (0.48)
                                                       ==========      ==========      ==========      ==========

     - Diluted                                         $   (0.14)      $   (0.29)      $    0.37       $   (0.48)
                                                       ==========      ==========      ==========      ==========
</TABLE>


                                       9
<PAGE>

NOTE 5 - LIABILITIES SUBJECT TO COMPROMISE

         Under the  Bankruptcy  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 $1,131,000 was not accrued
during the quarter ended January 31, 2000 as management believes these debts are
under-secured.  Amounts  included  under the  caption  "Current  Borrowings"  at
January 31, 2000  represent  draws on a line of credit that was  established  to
provide additional  liquidity during the reorganization  process.  These amounts
are not subject to compromise.

         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 January 31, 2000 are the following (in
thousands):
                                                     January 31,
                                                         2000
                                                   -----------------
         Trade, interest and
               other miscellaneous claims          $         6,250
         Secured notes                                         261
         Unsecured notes                                     1,007
         Senior secured debt                                42,449
                                                   -----------------
                                                   $        49,967
                                                   =================

         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  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.








                                       10
<PAGE>

NOTE 6 - BORROWINGS
         Long-term  borrowings  and the Line of Credit  consist of the following
(in thousands):
<TABLE>
<CAPTION>
                                                                   January 31,         April 30,
                                                                      2000               1999
                                                                 --------------     --------------
<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.              $      42,449      $      42,449

Secured notes, interest at 9% and 10%; payable on
various dates; secured by various assets.                                  261                359

Unsecured senior subordinated notes, net of discount
of $264 and $278 at January 31, 2000 and April 30, 1999,
respectively; 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                993

Obligations under capital leases                                           258                  -
                                                                 --------------     --------------
                                                                        43,975             43,801

Less debt subject to compromise                                       (43,717)                  -
Less current maturities                                                   (55)           (43,474)
                                                                 --------------     --------------
                                                                 $         203      $         327
                                                                 ==============     ==============
</TABLE>

         As  discussed  in  Note  5,   TreeSource   Industries,   Inc.  and  its
subsidiaries are in default on  substantially  all of their debt agreements as a
result of the  chapter 11 filing,  except  for with  respect to the $16  million
debtor-in-possession  working capital  revolver.  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,   have  been  reclassified  to
"Liabilities Subject to Compromise".

         The Company obtained a  debtor-in-possession  secured revolving line of
credit (the "Line of Credit") in October 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 is 8.5%.
Borrowings under the Line fluctuate daily based on cash needs and are subject to
customary  covenants  and  collateral  reserves.  The Line of Credit  allows the
Company  to  borrow  from  time to time up to $16  million,  including  up to $5
million of letters of credit.  As of January 31, 2000 there were  $6,762,000  in
borrowings  on  the  Line  of  Credit  and   $2,685,000  in  letters  of  credit
outstanding.




                             11
<PAGE>

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 (NOL) carry-forwards.

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

                                         Nine Months Ended January 31,
                                         -----------------------------
                                            2000               1999
                                         ---------          ---------
Income (loss) before income taxes        $   4,183          $ (3,742)
                                         =========          =========
Provision for income taxes (benefit):
   Federal                               $    100           $     (5)
   State                                       --               (112)
                                         ---------          ---------
                                         $    100           $   (117)
                                         =========          =========

   Current                               $    100           $   (117)
   Deferred                                    --                 --
                                         ---------          ---------
                                         $    100           $   (117)
                                         =========          =========

         The   Company's   remaining   adjusted   NOL  at  April  30,  1999  was
approximately  $26  million  for  federal  income tax and $24  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 expects to utilize  approximately  $8
million of the  available  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 proceedings and potential  reorganization plans, the Company
has fully reserved for its available NOLs at January 31, 2000. The Company's tax
expense relates to current year taxable income not available for offset by NOLs.
Management  periodically  reviews the above factors and may change the amount of
valuation allowance as facts and circumstances dictate.










                                       12
<PAGE>

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 various 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.

         The average price of the industry  benchmark green fir 2x4 standard and
better  lumber  declined 2%, from $374 per unit in the quarter ended October 31,
1999, to $368 per unit in the quarter ended January 31, 2000.  The average price
of the industry  benchmark #2 fir saw log  increased  from $631 to $637 per unit
during these periods. The decline in lumber prices with an increase in log costs
caused industry  margins and TreeSource  profits to decline in the quarter ended
January 31, 2000, as compared to the quarter ended October 31, 1999. The Company
has increased the number of shifts at selected facilities resulting in increased
asset  utilization and operating  efficiencies.  Lumber shipments in the quarter
ended  January 31, 2000 are up 2% from the previous  quarter and up 19% from the
same period in 1999.

         On September 27, 1999,  the Company filed for voluntary  reorganization
under chapter 11 of the U.S.  Bankruptcy  Code.  The costs  associated  with the
reorganization  totaled  $942,000  during the quarter  ended  January 31,  2000.
Interest  expense  for the quarter was  approximately  $1,131,000  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 undersecured. (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 October 28, 1999,  the Company filed a Plan of  Reorganization  (the
"Plan")  in U.S.  Bankruptcy  Court  that,  if  confirmed,  will  result  in the
cancellation of the Company's  current classes of common and preferred stock and
eliminate any remaining value in these equity  securities.  The Company's senior
secured  lenders  have a security  interest in  substantially  all 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


                                       14
<PAGE>

pursuant to the Plan. Unsecured trade creditors would receive up to 90% of their
claims  based  on the  Company's  estimate  of its  unsecured  liabilities.  The
percentage  paid on unsecured  claims depends on a number of factors,  including
claim  estimates  and the outcome of current and  potential  legal  proceedings.
Distributions that may be due to holders of the Company's senior unsecured notes
would be remitted  to holders of Series A  preferred  stock per the terms of the
senior unsecured notes. The Company plans to file an amendment to the Plan.

         In November,  the Company  auctioned the equipment at the Philomath and
Sedro-Woolley  mill sites.  The assets  that were sold in this  auction had been
previously  written down and are included in the  classification of "Assets held
for  sale" on the  balance  sheet.  Proceeds  from the sale of  assets  totaling
approximately  $1,424,000 have been placed in a separate  account and classified
as "restricted  cash" on the balance  sheet.  If the Company's Plan is approved,
proceeds  from sales of the assets  classified  as "Assets held for sale" on the
balance  sheet will be  remitted  to the  Company's  pre-petition  secured  debt
holders.  The Company has three properties and three other facilities  currently
held for sale of which one, Burke, is operating.

         The following  table sets forth the percentages  that certain  expenses
bear to net sales, and the period-to-period percentage change for each item:
<TABLE>
<CAPTION>
                                          INCOME AND EXPENSE ITEMS AS                  PERCENTAGE
                                            A PERCENT OF NET SALES                 INCREASE (DECREASE)
                                   --------------------------------------------------------------------------
                                                                             Three Months     Nine Months
                                   Three Months Ended    Nine Months Ended       Ended           Ended
                                       January 31,          January 31,         1/31/00         1/31/00
                                   -------------------- ---------------------
                                                                                  to               to
                                     2000       1999       2000       1999      1/31/99         1/31/99
                                   --------- ---------- ---------- --------  --------------   -------------
<S>                                <C>        <C>        <C>        <C>              <C>             <C>
Net sales                          100.0 %    100.0 %    100.0 %    100.0 %          34.5 %          30.0 %
Cost of sales                       97.6       97.8       91.9       94.5            34.2            26.4
                                   -------   --------   --------   --------  --------------   -------------
Gross Profit                         2.4        2.2        8.1        5.5            48.2            91.9

Selling, general and
     Administrative expense          4.0        5.8        4.4        5.6            (5.8)            4.1
Reorganization charges               1.6        0.0        1.0        0.0              NM              NM
                                   -------   --------   --------   --------  --------------   -------------

  Operating income (loss)           (3.2)      (3.6)        2.7        0.1            20.2        (5,024.8)

Interest expense                    (0.2)      (2.6)       (1.0)      (2.4)          (91.9)          (44.4)
Miscellaneous                        0.8       (0.2)        0.6       (0.1)         (662.5)         (730.6)
                                   -------   --------   --------   --------  --------------   -------------

Income (loss) before income taxes   (2.6)      (6.3)        2.2       (2.6)           45.1          (211.8)

Provision for income taxes
(benefit)                            0.0       (0.3)        0.1       (0.1)         (100.0)          (185.5)
                                   -------   --------   --------   --------  --------------   -------------

Net income (loss)                   (2.6) %    (6.1) %      2.2 %     (2.5) %         42.7 %         (212.6) %
                                   =======   ========   ========   ========
NM - Not Meaningful
Note - percentages may not add due to rounding.

</TABLE>






                                       15
<PAGE>

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

         Net sales for the three months ended January 31, 2000  increased  $15.3
million  (35%),  as compared to the three  months ended  January 31, 1999.  This
increase was principally  caused by an 19% increase in lumber sales volume and a
13%  increase in the weighted  average net lumber  sales price.  The Company has
increased  sales volume by increasing  asset  utilization  and decreasing  costs
through an increase in the number of shifts operated at selected facilities.

         Gross  profit for the  quarter  ended  January 31, 2000 was 2.4% of net
sales,  compared to 2.2% of net sales for the quarter  ended  January 31,  1999.
Unit manufacturing costs in the three months ended January 31, 2000 decreased 7%
as  compared  to the three  months  ended  January 31,  1999,  primarily  due to
increased  production  volume resulting from an increase in the number of shifts
operated  at  certain  facilities.  Repair  and  maintenance  costs at  selected
facilities have increased due to the Company's  efforts to decrease downtime and
increase productivity at facilities that have deteriorated.

         Selling,  general and  administrative  expenses  for the quarter  ended
January 31, 2000  decreased by (6%) as compared to the quarter ended January 31,
1999,  excluding  reorganization  charges.  This  decrease has resulted from the
implementation  of a number of cost savings  measures,  such as corporate  staff
reductions,  reduction  in  office  lease  space,  and the  closure  of  certain
facilities.

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

         As of January 31, 2000,  the Company had  available  approximately  $26
million and $24 million,  respectively,  in net  operating  losses  ("NOLs") for
federal and state income tax purposes. 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
January 31 for both 1999 and 2000.  The Company  periodically  reviews the above
factors  and  may  change  the  amount  of  valuation  allowance  as  facts  and
circumstances dictate.

Comparison of Nine Months Ended January 31, 2000 and 1999
---------------------------------------------------------

         Net sales for the nine months  ended  January 31,  2000  increased  $43
million  (30%),  as compared to the nine months  ended  January 31,  1999.  This
increase was  principally  caused by a 15% increase in the weighted  average net
lumber sales price and a 13% increase in lumber  sales  volume.  The Company has
increased  sales volume by increasing  asset  utilization  and decreasing  costs
through an increase in the number of shifts operated at selected facilities.




                                       16
<PAGE>

         Gross profit for the nine months ended January 31, 2000 was 8.1% of net
sales, compared to 5.5% of net sales for the nine months ended January 31, 1999.
Unit manufacturing  costs in the nine months ended January 31, 2000 decreased by
3% from  costs in the nine  months  ended  January,  1999,  primarily  due to an
increase  in the hours of  operation  at several  facilities  and  increases  in
productivity.

         Selling,  general and administrative expenses for the nine months ended
January 31,  2000  increased  by  $324,000 as compared to the nine months  ended
January 31, 1999. This increase consisted primarily of $275,000 in costs related
to  obtaining  the  debtor-in-possession  revolving  working  line of credit and
additional  costs  related to  increased  bonus  expense due to the  comparative
increase in income between the two periods, partially offset by a number of cost
savings measures have been taken such as corporate staff  reductions,  reduction
in office lease space, and the closure of certain facilities.

         Reorganization  charges in the nine months  ended  January 31, 2000 are
comprised primarily of professional services related to the bankruptcy.

         As of January 31, 2000,  the Company had  available  approximately  $26
million and $24 million,  respectively, in NOLs for federal and state income tax
purposes.  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 net operating income and loss,  respectively,  generated during
the nine months ended January 31, 1999 and 2000. The tax provision  recorded for
the nine months ended January 31, 2000 relates to expenses that cannot be offset
by the NOLs. 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
the revolving  working 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
May 1, 2000. If the Company is unable to either confirm a plan of reorganization
or obtain a new cash  collateral  order by May 1, 2000,  the  Company may not be
able to meet its short term liquidity needs. The Company's  pre-petition  senior
secured  creditors  have already  agreed to one such new cash  collateral  order
during these bankruptcy proceedings.







                                       17
<PAGE>

         Cash and cash  equivalents  increased  by  approximately  $0.6  million
during the nine months ended January 31, 2000, to $2.7 million,  excluding  $1.4
million  in  restricted   cash  generated  from  the  sale  of  certain  assets.
Approximately  $5.1 million of cash was used for operations,  including  prepaid
expenses,  which  increased  by  $5.9  million,  primarily  due to log  purchase
deposits and increased  inventory  levels.  Inventory levels have increased $8.8
million  since the  beginning of the year,  with most of the increase  occurring
over the past four  months,  due to a strategy  of  increasing  log  inventories
during the winter months to reduce the risk of production downtime. The increase
in payables  and  accruals by $5.9  million  during  this period  includes  $6.3
million in  pre-petition  unsecured  accounts  payable and accrued  interest for
which  payment  was stayed by the chapter 11 filing.  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 early  October,  in
connection with filing for voluntary reorganization,  the Company obtained a $16
million  debtor-in-possession  revolving  working  line of credit to provide for
day-to-day  liquidity  and seasonal log inventory  increases.  As of January 31,
2000 there was a $6.8 million loan balance on this line of credit.

         For the nine months  ended  January 31,  2000,  the Company  spent $1.4
million for capital improvements to its facilities.  The Company had no material
commitments for capital spending at January 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 and 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 outcome of the Company's  filing for voluntary  reorganization;
the  approval  of  the  Company's  plan  of  reorganization;  adverse  operating
conditions;   fluctuations   in  quarterly   results;   availability   of  logs;
technological  change;  manufacturing risks; federal and state regulations;  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, 1999.




                                       18
<PAGE>

                           PART II. OTHER INFORMATION

Item 1.  Legal Proceedings

         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., v. WTD Industries,  Inc.,
Trask River Lumber and Bruce L. Engel).  The case is  currently  proceeding  and
notice to potential members of the collective class has been authorized.

         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).

         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 box car of lumber. (Alvin Robertson vs. TreeSource
Industries,  Inc., et al.). This action is currently stayed due to the Company's
chapter  11  filing.  The  suit is being  defended  by the  Company's  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 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 March 8, 2000, the Company had not paid five
consecutive quarterly dividend payments due to holders of its Series A Preferred
Stock,  totaling  approximately  $2,718,000,  and is in  arrears  on  payment of
approximately  $3,117,000 in interest and  $4,000,000 in principal on its senior
secured   debt.   Additionally,   the  Company  is  in  arrears  on  payment  of
approximately  $240,000 in interest on its 8% unsecured senior notes as of March
8, 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.







                                       19
<PAGE>

Item 6.           Exhibits and Reports on Form 8-K

         (a)  Exhibits

              The Index to Exhibits is located on page 22.

         (b)  Reports on Form 8-K

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




                                       20
<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


                                              /s/ Robert W. Lockwood
                                              ---------------------------
                                              Robert W. Lockwood
                                              Vice President - Finance







March 14, 2000




                                       21
<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.







                                       22