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 October 31, 2001.
                                        -----------------

[ ]      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.)


         529 S.E. Grand Ave., Suite 300, Portland, Oregon 97214
--------------------------------------------------------------------------------
               (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 November 30, 2001 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............................................16


PART II. OTHER INFORMATION..................................................21

Item 1.    Legal Proceedings................................................21

Item 3.    Defaults Upon Senior Securities..................................21

Item 5.    Other Information................................................22

Item 6.    Exhibits and Reports on Form 8-K.................................22



































                                       2
<PAGE>
                          PART I. FINANCIAL INFORMATION

Item 1.           Financial Statements

The financial statements in this Quarterly Report on Form 10-Q for the quarter
ended October 31, 2001 have not been reviewed by an independent public
accountant as required by Rule 10-01 of Regulation S-X.






















































                                       3
<PAGE>
<TABLE>
<CAPTION>
                  TREESOURCE INDUSTRIES, INC. AND SUBSIDIARIES
                      CONSOLIDATED STATEMENT OF OPERATIONS
                    (in Thousands, Except Per-Share Amounts)
                                   (Unaudited)

                                                          THREE MONTHS                  SIX MONTHS
                                                              ENDED                        ENDED
                                                           OCTOBER 31,                   OCTOBER 31,
                                                   ----------------------------   ---------------------------
                                                       2001            2000           2001            2000
                                                   ------------    ------------   ------------   ------------
<S>                                                <C>             <C>            <C>             <C>
NET SALES                                          $   38,877      $   40,040     $  80,150       $  86,172

COST OF SALES                                          36,916          39,347        73,924          87,366
                                                   ------------    ------------   ------------   ------------

GROSS PROFIT (LOSS)                                     1,961             693         6,226          (1,194)

SELLING, GENERAL AND
  ADMINISTRATIVE EXPENSES                               2,070           2,547         4,236           5,414
REORGANIZATION CHARGES                                    561             629           891           1,281
IMPAIRMENT CHARGE                                        (346)             --          (347)             --
                                                   ------------    ------------   ------------   ------------

OPERATING INCOME (LOSS)                                  (324)         (2,483)        1,446          (7,889)

OTHER INCOME (EXPENSE)
     Interest expense                                     (48)            (27)          (87)            (57)
     Miscellaneous                                         99              61           196             148
                                                   ------------    ------------   ------------   ------------

                                                           51              34           109              91
                                                   ------------    ------------   ------------   ------------
INCOME (LOSS) BEFORE INCOME TAXES                        (273)         (2,449)        1,555          (7,798)

PROVISIONS FOR INCOME TAXES (BENEFIT)                      --              --            --              --
                                                   ------------    ------------   ------------   ------------
NET INCOME (LOSS)                                        (273)         (2,449)        1,555          (7,798)

PREFERRED DIVIDENDS                                       --              --             --              --
                                                   ------------    ------------   ------------   ------------

NET INCOME (LOSS) APPLICABLE
  TO COMMON STOCKHOLDERS                           $     (273)     $   (2,449)    $   1,555      $   (7,798)
                                                   ============    ============   ============   ============

NET INCOME (LOSS) PER COMMON SHARE
   - BASIC                                             ($0.02)         ($0.22)        $0.14          ($0.70)
                                                       =======         =======        =====          ======

   - DILUTED                                           ($0.02)         ($0.22)        $0.14          ($0.70)
                                                       =======         =======        =====          ======
</TABLE>


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

                                       4
<PAGE>
<TABLE>
<CAPTION>
                  TREESOURCE INDUSTRIES, INC. AND SUBSIDIARIES
                           CONSOLIDATED BALANCE SHEET
                                     ASSETS
                                 (in Thousands)
                                   (Unaudited)

                                                            OCTOBER 31,           APRIL 30,
                                                               2001                  2001
                                                          ----------------     ----------------
<S>                                                       <C>                  <C>
CURRENT ASSETS
   Cash and cash equivalents                              $            211     $          1,210
   Restricted cash                                                   1,778                1,755
   Accounts receivable, net                                          6,804                7,869
   Inventories                                                      10,357                6,840
   Prepaid expenses                                                  2,220                1,429
   Assets held for sale                                              5,085                6,008
   Timber, timberlands and timber-related assets                     2,115                3,087
                                                          ----------------     ----------------

      Total current assets                                          28,570               28,198


NOTES AND ACCOUNTS RECEIVABLE                                           82                    3

PROPERTY, PLANT AND EQUIPMENT, at cost
   Land                                                                510                  510
   Buildings and improvements                                        4,579                4,579
   Machinery and equipment                                          26,810               26,555
                                                          ----------------     ----------------

                                                                    31,899               31,644
      Less accumulated depreciation                                 26,897               26,126
                                                          ----------------     ----------------
                                                                     5,002                5,518
   Construction in progress                                            464                  175

                                                          ----------------     ----------------
                                                                     5,466                5,693

OTHER ASSETS                                                         1,777                1,729

                                                          ----------------     ----------------
                                                          $         35,895     $         35,623
                                                          ================     ================





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

                                       5
<PAGE>
                  TREESOURCE INDUSTRIES, INC. AND SUBSIDIARIES
                           CONSOLIDATED BALANCE SHEET
                      LIABILITIES AND STOCKHOLDERS' EQUITY
                    (in Thousands, Except Share Information)
                                   (Unaudited)


                                                             OCTOBER 31,           APRIL 30,
                                                                2001                 2001
                                                          ----------------     ----------------
CURRENT LIABILITIES
   Accounts payable                                       $         4,096      $         4,151
   Accrued expenses                                                 4,842                6,147
   Timber contracts payable                                            --                  448
   Current borrowings                                               1,034                  485

                                                          ----------------     ----------------
      Total current liabilities                                     9,972               11,231

LONG-TERM DEBT, less current maturities                                87                  120

LIABILITIES SUBJECT TO COMPROMISE                                  49,113               49,112

COMMITMENTS AND CONTINGENCIES                                          38                   30

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                                                (73,112)             (74,667)

                                                          ----------------     ----------------
                                                                  (23,315)             (24,870)

                                                          ----------------     ----------------
                                                          $        35,895      $        35,623
                                                          ================     ================
</TABLE>









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

                                       6

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

                                                                          SIX MONTHS
                                                                       ENDED OCTOBER 31,
                                                                 ----------------------------
                                                                     2001             2000
                                                                 -----------      -----------
<S>                                                              <C>              <C>
CASH FROM OPERATING ACTIVITIES:
  Net income (loss)                                              $     1,555      $    (7,798)
  Adjustments to reconcile net income (loss) to
     cash provided by operating activities:
    Depreciation, depletion and amortization                             913            1,343
    Loss (gain) on sale of assets                                        (15)              10
    Impairment loss                                                     (352)              --
    Accounts receivable                                                1,321            6,068
    Inventories                                                       (3,516)           7,493
    Prepaid expenses                                                    (791)             104
    Timber, timberlands and timber-related assets - current              531             (643)
    Payables and accruals                                             (1,357)          (1,148)
    Income taxes                                                          --               86
    Commitments                                                            8               --

                                                                 -----------      -----------
     Cash from operating activities                                   (1,703)           5,515
                                                                 -----------      -----------

CASH FROM INVESTING ACTIVITIES:
  Notes and accounts receivable                                          (79)               1
  Acquisition of property, plant and equipment                          (728)            (488)
  Proceeds from the sale of fixed assets                               1,017              127

                                                                 -----------      -----------
     Cash from investing activities                                      210             (360)
                                                                 -----------      -----------

CASH FROM FINANCING ACTIVITIES:
  Increase (decrease) in notes payable                                   962             (458)
  Proceeds from long-term debt                                            --               --
  Principal payments on long-term debt                                  (445)            (748)
  Other assets                                                            --             (396)

                                                                 -----------      -----------
     Cash from financing activities                                      517           (1,602)
                                                                 -----------      -----------

INCREASE (DECREASE) IN CASH AND CASH EQUIVALENTS                        (976)           3,553

CASH BALANCE AT BEGINNING OF PERIOD                                    2,965            3,487

                                                                 -----------      -----------
CASH BALANCE AT END OF PERIOD                                    $     1,989      $     7,040
                                                                 ===========      ===========

CASH PAID DURING THE PERIOD FOR:
  Interest                                                       $        27      $        56
  Income taxes                                                   $        --      $        --
</TABLE>

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

                                       7
<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 U.S. Bankruptcy
Court (the "Court") approval.

         In April 2000 the Company filed a plan of reorganization with the
Court. Due to the downturn in the lumber market, the Company successfully
petitioned the Court to delay consideration of and then to withdraw the plan of
reorganization. On March 31, 2001 the period of exclusivity (the time in which
the Company has the sole right to present a plan of reorganization) expired,
which will allow other interested parties an opportunity to submit a plan of
reorganization. No competing plan of reorganization has been proposed. In July
2001, the Company's pre-petition senior secured debt securities were purchased
by an investment group. This sale, in itself, may not affect the status of the
Company's bankruptcy proceedings. On November 21, 2001, the Company filed an
amended plan of reorganization with the Court. A plan confirmation hearing is
currently scheduled for January 4, 2002. The amended plan of reorganization
contemplates, among other things, the continued operation of three or four mills
and the sale of all the Company's non-operating or surplus assets. If the
amended plan of reorganization is approved, all outstanding shares of the
Company's existing common and preferred stock would be canceled, which would
eliminate any value remaining in these securities, and the Company would issue
new common stock to the current holders of its senior secured debt securities in
exchange for cancellation of a portion of their claims against the Company.

         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.



                                       8
<PAGE>
         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, 2001, 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.

         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):

                               October 31,           April 30,
                                   2001                2001
                               ------------         ------------
         Logs                  $     6,232          $     2,510
         Lumber                      3,665                3,888
         Supplies and Other            460                  442
                               ------------         ------------
                               $    10,357          $     6,840
                               ============         ============































                                       9
<PAGE>
NOTE 3 - STOCKHOLDERS' EQUITY

         Stockholders' equity at October 31, 2001 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 October 31, 2001 the Company was in arrears on eleven
consecutive quarterly dividend payments totaling approximately $6,026,000.

         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 11,375,567 shares if the shares of Series B Preferred Stock remaining
outstanding at October 31, 2001 were converted to Common Stock.

         If the amended plan of reorganization is approved, all outstanding
shares of the Company's existing common and preferred stock will be canceled. It
is unlikely, in any event, that the Company's current classes of common and
preferred stock will have any value upon conclusion of the bankruptcy
proceedings.



                                       10
<PAGE>
NOTE 4 - NET INCOME (LOSS) PER SHARE

         The calculations of net income (loss) per share for the three and
six-month period ended October 31, 2001 and 2000 are summarized below (in
thousands, except per-share data):
<TABLE>
<CAPTION>
                                                          Three Months Ended             Six Months Ended
                                                              October 31,                   October 31,
                                                      ---------------------------    --------------------------
                                                          2001            2000          2001            2000
                                                      -----------     -----------    -----------    -----------
<S>                                                   <C>             <C>            <C>            <C>
Net income (loss) applicable to common shareholders    $    (273)      $  (2,449)     $   1,555      $   (7,798)
                                                      ===========     ===========    ===========    ===========
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                                           $   (0.02)      $   (0.22)     $     0.14     $     (0.70)
                                                      ===========     ===========    ===========    ===========

     - Diluted
                                                       $  (0.02)       $   (0.22)     $     0.14     $     (0.70)
                                                      ===========     ===========    ===========    ===========
</TABLE>

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 $1,077,000 was not accrued
during the quarter ended October 31, 2001, 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 October 31, 2001, and April 30, 2001,
are the following (in thousands):
                                                     October 31,  April 30,
                                                        2001        2001
                                                     ----------  ----------
         Trade, interest and other miscellaneous
             claims to unsecured creditors           $   6,134   $   6,133
         Secured notes                                     261         261
         Unsecured notes                                 1,007       1,007
         Senior secured debt                            41,711      41,711
                                                     ----------  ----------

                                                     $  49,113   $  49,112
                                                     ==========  ==========

                                       11
<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
<TABLE>
<CAPTION>
         Long-term borrowings and the Line of Credit consist of the following
(in thousands):

                                                                             October 31,        April 30,
                                                                                2001              2001
                                                                          --------------    --------------
<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      $     41,711

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
October 31, 2001 and April 30, 2001; 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, effective rate of interest 4.9%.                  156               187
                                                                          --------------    --------------
                                                                                 43,135            43,166

Less current maturities.                                                            (69)              (67)
Less liabilities subject to compromise.                                         (42,979)          (42,979)
                                                                          --------------    --------------
                                                                          $          87     $         120
                                                                          ==============    ==============
</TABLE>

         As discussed in Note 5, the Company is in default on substantially all
of its 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."

         The Company has renewed its Line of Credit effective September 28,
2001. This $10 million Line of Credit matures upon the earliest of September 28,
2002 or
                                       12
<PAGE>
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 average rate of interest on
outstanding short-term borrowings on the Line of Credit is approximately 5.5%.
The Line of Credit allows the Company to borrow from time to time up to $8
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 October 31,
2001 there were $966,000 in borrowings on the Line of Credit and $525,000 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") carryforwards.

         The federal and state income tax provision consists of the following
(in thousands):
                                     Six Months Ended October 31,
                                     ----------------------------
                                        2001              2000
                                     ----------        ----------
Income (loss) before income taxes    $   1,555         $  (7,798)
                                     ==========        ==========
Provision for income taxes:
   Federal                           $      --         $      --
   State                                    --                --
                                     ----------        ----------
                                     $      --         $      --
                                     ==========        ==========

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

         The Company's remaining adjusted NOLs at April 30, 2001 were
approximately $48 million for federal income tax and $36 million for state
income tax purposes. These carryforwards 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. 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 October 31, 2001. For the
six months ended October 31, 2001 the Company utilized previously reserved NOLs
to offset any potential income tax expense related to current period earnings.
This utilization of NOLs resulted in no income tax expense for the current
period. Management periodically reviews the


                                       13
<PAGE>
above factors and may change the amount of the 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 would be treated as part of a plan of reorganization. See
"Legal Proceedings."

         The Company is subject to many federal, state and local regulations
regarding waste disposal and pollution control at all production facilities.
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.

         In accordance with the Company's accounting practice, environmental
liabilities are recorded when the Company's liability is probable and the costs
are reasonably estimable. In many cases, however, investigations are not yet at
a stage where the Company has been able to determine whether it is liable or, if
liability is probable, to reasonably determine a probable course and cost of
correction. As of October 31, 2001, the Company's accrual for environmental
related liabilities totaled approximately $616,000.

         Estimates of the Company's liability are further subject to
uncertainties regarding the nature and extent of site contamination, the range
of remediation alternatives available, evolving remediation standards, imprecise
engineering evaluations and estimates, appropriate cleanup technology, the
extent of corrective actions required and the number and financial condition of
other potential responsible parties, as well as the extent of their
responsibility for the remediation. Accordingly, as investigation and
remediation of these sites proceeds, it is likely that adjustments in the
Company's accruals will be necessary to reflect new information. The amounts of
any such adjustments could have a material adverse effect on the Company's
results of operations in a given period, but the amount, and the possible range
of loss in excess of the amounts accrued, are not reasonably estimable.

         As of October 31, 2001, the Company had accrued $38,000 for the future
costs associated with closing the landfill at its facility in Glide, Oregon. The
Company routinely estimates the closure cost of this landfill and charges such
costs over its estimated remaining life.

         Based on currently available information, management does not believe
that future environmental costs in excess of those accrued with respect to sites
with which the Company has been identified are likely to have a material adverse
effect on the Company's financial condition or results of operations. However,
the resolution in any reporting period of one or more of these matters could
have a material adverse effect on the Company's results of operations for that
period. In addition, there can


                                       14
<PAGE>
be no assurance that additional future developments, administrative actions or
liabilities relating to environmental matters will not have a material adverse
effect on the Company's financial condition or results of operations.


























































                                       15
<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 deteriorated during the second
quarter of fiscal 2002 due to recent social, political and economic events. The
average price of the industry benchmark green fir 2x4 standard and better lumber
fell 14%, from $330 per unit in the quarter ended July 31, 2001, to $284 per
unit in the quarter ended October 31, 2001. In addition, the average price of
the industry benchmark #2 fir saw log increased 2% from $566 to $578 per unit
during these periods. Because lumber prices decreased and log costs increased,
industry margins contracted and the Company's profits fell.

         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 U.S. Bankruptcy
Court (the "Court") approval.

         In April 2000 the Company filed a plan of reorganization with the
Court. Due to the downturn in the lumber market, the Company successfully
petitioned the Court to delay consideration of and then to withdraw the plan of
reorganization. On March 31, 2001 the period of exclusivity (the time in which
the Company has the sole right to present a plan of reorganization) expired,
which will allow other interested parties an opportunity to submit a plan of
reorganization. No competing plan of reorganization has been proposed. In July
2001, the Company's pre-petition senior secured debt securities were purchased
by an investment group. This sale, in itself, may not affect the status of the
Company's bankruptcy proceedings. On November 21, 2001, the Company filed an
amended plan of reorganization with the Court. A plan confirmation hearing is
currently scheduled for January 4, 2002. The amended plan of reorganization
contemplates, among other things, the continued operation of three or four mills
and the sale of all the Company's non-operating or surplus assets. If the
amended plan of reorganization is approved, all outstanding shares of the
Company's existing common and preferred stock would be canceled, which would
eliminate any value remaining in these securities, and the Company would issue
new common stock to the current holders of its senior secured debt securities in
exchange for cancellation of a portion of their claims against the Company.



                                       16
<PAGE>

         The costs associated with the reorganization totaled $0.6 million
during the quarter ended October 31, 2001. Interest expense for the quarter was
approximately $1.1 million 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.

         A restricted cash account is maintained by the Company pursuant to an
agreement with the current holders of its pre-petition senior secured debt
securities whereby all of the net proceeds from any sale of assets prior to
September 28, 2001, from Burke Lumber Co., Midway Engineered Wood Products,
Inc., Pacific Softwoods Co., Philomath Forest Products Co., and Sedro-Woolley
Lumber Co. will be deposited into the restricted cash account.

         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      Six Months
                                 Three Months Ended     Six Months Ended           Ended           Ended
                                    October 31,           October 31,            10/31/01         10/31/01
                                --------------------- ---------------------         to               to
                                   2001       2000       2001       2000         10/31/00         10/31/00
                                ---------- ---------- ----------  ---------    ----------------- -------------
<S>                             <C>        <C>        <C>         <C>          <C>               <C>
Net sales                        100.0  %   100.0  %   100.0  %   100.0  %            (2.9) %        (7.0) %
Cost of sales                     95.0       98.3       92.2      101.4               (6.2)         (15.4)
                                --------   --------   --------    -------      --------------    -----------
Gross Profit (Loss)                5.0        1.7        7.8       (1.4)             183.0             NM

Selling, general and
     Administrative expense        5.3        6.4        5.3        6.3              (18.7)         (21.8)
Reorganization charges             1.4        1.6        1.1        1.5              (10.8)         (30.4)
Impairment charges                (0.9)       0.0       (0.4)       0.0                 NM             NM
                                --------   --------   --------    -------      --------------    -----------

  Operating income (loss)         (0.8)      (6.2)       1.8       (9.2)             (87.0)            NM

Interest expense                  (0.1)      (0.1)      (0.1)      (0.1)              77.8           52.6
Miscellaneous                      0.3        0.2        0.2        0.2               62.3           32.4
                                --------   --------   --------    -------      --------------    -----------

Income (loss) before income
taxes                             (0.7)      (6.1)       1.9       (9.0)             (88.9)            NM

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

Net income (loss)                 (0.7) %    (6.1) %     1.9  %    (9.0)  %          (88.9)  %         NM
                                ========   ========   ========    =======
</TABLE>

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



                                       17
<PAGE>
Comparison of Three Months Ended October 31, 2001 and 2000
----------------------------------------------------------

         Net sales for the three months ended October 31, 2001 decreased $1.2
million (2.9%), as compared to the three months ended October 31, 2000. This
decrease was principally caused by a 6% decrease in lumber sales volume
partially offset by a 3% increase in the weighted average net lumber sales
price. The decrease in lumber sales volume resulted from the curtailment of
operations of Central Point Lumber Co., Morton Forest Products Co., North Powder
Lumber Co., and Pacific Hardwoods-South Bend Co. during fiscal 2001.

         Gross profit for the quarter ended October 31, 2001 was 5.0% of net
sales, compared to negative 1.7% of net sales for the quarter ended October 31,
2000. Unit manufacturing costs on a consolidated basis in the three months ended
October 31, 2001 decreased 14% as compared to the three months ended October 31,
2000. A significant portion of this decrease relates to the closure of
facilities with higher than average unit manufacturing costs. The combined unit
manufacturing costs for just the four currently operating mills (Glide,
Spanaway, Trask and Tumwater) decreased 2% for the three months ended October
31, 2001 as compared to the three months ended October 31, 2000. This decrease
in unit manufacturing costs was due to both improved mill productivity and an
increase in total operating hours. During the three months ended October 31,
2000, the production at several mills was curtailed in response to then-existing
poor market conditions.

         Selling, general and administrative expenses for the quarter ended
October 31, 2001 decreased by 18.7% as compared to the quarter ended October 31,
2000, excluding reorganization and impairment charges. This decrease resulted
from the implementation of a number of cost-saving measures, including corporate
staff reductions, reduction in leased office space, and the closure of certain
facilities.

         Reorganization charges for the quarter ended October 31, 2001 are
comprised primarily of fees for professional services related to the bankruptcy.

         As of October 31, 2001, the Company had available an estimated $47
million in federal net operating losses and $35 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
October 31, 2001. The Company periodically reviews the above factors and may
change the amount of the valuation allowance as facts and circumstances dictate.

Comparison of Six Months Ended October 31, 2001 and 2000
--------------------------------------------------------

         Net sales for the six months ended October 31, 2001 decreased $6.0
million (7.0%), as compared to the six months ended October 31, 2000. This
decrease was principally caused by a 12% decrease in lumber sales volume
partially offset by a 5% increase in the weighted average net lumber sales
price. The decrease in lumber


                                       18
<PAGE>
sales volume resulted from the curtailment of operations of Central Point Lumber
Co., Morton Forest Products Co., North Powder Lumber Co., and Pacific
Hardwoods-South Bend Co. during fiscal 2001.

         Gross profit for the six months ended October 31, 2001 was 7.8% of net
sales, compared to negative 1.4% of net sales for the six months ended October
31, 2000. Unit manufacturing costs on a consolidated basis in the six months
ended October 31, 2001 decreased 17% as compared to the six months ended October
31, 2000. A significant portion of this decrease relates to the closure of
facilities with higher than average unit manufacturing costs. The combined unit
manufacturing costs for just the four currently operating mills (Glide,
Spanaway, Trask and Tumwater) decreased 4% for the six months ended October 31,
2001 as compared to the six months ended October 31, 2000. This decrease in unit
manufacturing costs was due to both improved mill productivity and an increase
in total operating hours. During the six months ended October 31, 2000, several
of the mills curtailed production in response to then-existing poor market
conditions.

         Selling, general and administrative expenses for the six months ended
October 31, 2001 decreased by 21.8% as compared to the six months ended October
31, 2000, excluding reorganization and impairment charges. This decrease
resulted from the implementation of a number of cost-saving measures, including
corporate staff reductions, reduction in leased office space, and the closure of
certain facilities.

         Reorganization charges for the six months ended October 31, 2001 are
comprised primarily of fees for professional services related to the bankruptcy.

         As of October 31, 2001, the Company had available an estimated $47
million in federal net operating losses and $35 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. For the six
months ended October 31, 2001 the Company utilized previously reserved NOLs to
offset any potential income tax expense related to current period earnings. This
utilization of NOLs resulted in no income tax expense for the current period.
The Company periodically reviews the above factors and may change the amount of
the valuation allowance as facts and circumstances dictate.


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

         Cash and cash equivalents decreased by approximately $1.0 million
during the six months ended October 31, 2001, to $0.2 million, excluding $1.8
million in restricted cash. Operations used approximately $1.7 million of cash
primarily as a result of a $3.5 million increase in inventory, primarily logs.
The Company generated $1.0 million through the sale at auction of the equipment
and a parcel of land at its Central Point Lumber Co. subsidiary.



                                       19
<PAGE>
         For the six months ended October 31, 2001, the Company spent $0.7
million for capital improvements to its facilities. The Company had commitments
of approximately $0.3 million for capital spending at October 31, 2001.

         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 a
debtor-in-possession working capital secured revolving line of credit (the "Line
of Credit") to provide for day-to-day liquidity and seasonal log inventory
increases.

         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 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
current holders of its pre-petition senior secured debt securities and
post-petition secured debtor-in-possession lenders. The current cash collateral
order expires December 31, 2001. If the Company is unable to obtain a new cash
collateral order by January 1, 2002, 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.

         As of October 31, 2001 there was a $1.0 million loan balance on the
Line of Credit and $0.5 million in letters of credit outstanding. The Company
negotiated a new line of credit on September 28, 2001, that expires September
28, 2002.

         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: court approval of a new cash collateral order; the uncertain outcome
of the Company's chapter 11 filing; adverse operating conditions; fluctuations
in quarterly results; availability of logs; technological change; manufacturing
risks; federal and state regulations; environmental 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, 2001.





                                       20
<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
U.S. District Court certified a class and the parties have agreed to a
settlement of the class members' wage claims. The Court has allowed claims for
penalties and attorney fees. Allowed claims will be treated in accordance with
the terms of any chapter 11 plan of reorganization approved by the 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.

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 November 30, 2001, the Company
had not paid twelve consecutive quarterly dividend payments due to holders of
its Series A Preferred Stock, totaling approximately $6,364,000 and is in
arrears on payment of approximately $11,570,000 in interest on its senior
secured debt. Additionally, the Company is in arrears on payment of
approximately $288,000 in interest to non-affiliated parties on its 8% unsecured
senior notes as of November 30, 2001. 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


                                       21
<PAGE>
subordinated debt, because management believes the claims of these debt holders
are under-secured.


Item 5.           Other Information

         On November 2, 2001, the Company terminated its employment of Robert W.
Lockwood, who had been serving as the Company's Chief Financial Officer, Vice
President - Finance, Secretary and Treasurer.

         Effective December 14, 2001, the Company terminated Moss Adams LLP as
the Company's independent public accountants.


Item 6.           Exhibits and Reports on Form 8-K

         (a)  Exhibits

              The Index to Exhibits is located on page 23.

         (b)  Reports on Form 8-K

              No reports on Form 8-K were filed during the quarter ended October
              31, 2001.






































                                       22
<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,
                                     Secretary and Director

                                     /s/ Bret R. Linsenmann
                                     -----------------------------------
                                     Bret R. Linsenmann
                                     Assistant Treasurer
                                     (Principal Accounting Officer)






December 19, 2001










                                       23
<PAGE>


                           TreeSource Industries, Inc.

                                Index to Exhibits


                                                                      Sequential
                                                                         Number
                                                                         System
Document                                                                  Page
  Number                                                                 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)
























(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.










                                       24