================================================================================


                                  UNITED STATES
                       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 March 31, 2003

                                       OR

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


                         Commission file number 0-23259



                       U.S. TIMBERLANDS KLAMATH FALLS, LLC
                         U.S. TIMBERLANDS FINANCE CORP.
             (Exact name of registrant as specified in its charter)

           Delaware                                   93-1217136
           Delaware                                   91-1851612
   (State or other jurisdiction of         (I.R.S. Employer Identification No.)
    incorporation or organization)

     625 Madison Avenue, Suite 10-B, New York, NY            10022
       (Address of principal executive offices)            (Zip Code)


               Registrant's telephone number, including area code:
                                  212-755-1100



Indicate by check mark whether the registrant (1) has filed all reports required
to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during
the 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 [ ]



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<PAGE>


                                   Form 10-Q

                                Table of Contents

Part I.  Financial Information                                            Page

     Item  1.  Condensed Consolidated Statements of Operations
                  for the three months ended March 31, 2003 and 2002 .....  3

     Item  1.  Condensed Consolidated Balance Sheets
                  at March 31, 2003 and December 31, 2002 ................  4

     Item  1.  Condensed Consolidated Statements of Cash Flows
                  for the three months ended March 31, 2003 and 2002......  5

     Item  1.  Notes to Condensed Consolidated Financial Statements.......  6

     Item  2.  Management's Discussion and Analysis of Financial
                  Condition and Results of Operations .................... 10

     Item  4.  Controls and Disclosures................................... 14


Part II.  Other Information

     Item  1.  Legal Proceedings.......................................... 16

     Item  2.  Changes in Securities and Use of Proceeds ................. 16

     Item  3.  Defaults Upon Senior Securities ........................... 16

     Item  4.  Submission of Matters to a Vote of Security Holders ....... 16

     Item  5.  Other Information ......................................... 16

     Item  6.  Exhibits and Reports on Form 8-K .......................... 17



<PAGE>



PART 1.  FINANCIAL  INFORMATION
ITEM 1.  FINANCIAL STATEMENTS

                       U.S. TIMBERLANDS KLAMATH FALLS, LLC
                 CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
                                 (IN THOUSANDS)
                                   (UNAUDITED)

<TABLE>
<CAPTION>
                                                                    THREE MONTHS ENDED MARCH 31,
                                                             ------------------------------------------
                                                                   2003                    2002
                                                             ------------------      ------------------
<S>                                                          <C>                       <C>
Revenues                                                      $ 6,831                  $ 2,155
Cost of timber harvested                                       (3,468)                  (1,037)
Depletion, depreciation and road amortization                  (2,883)                  (1,066)
Cost of timber and property sales                                (474)                    --
                                                              -------                  -------
       Gross profit                                                 6                       52

Selling, general and administrative expenses                   (1,657)                  (1,381)
Equity in net loss of affiliate                                (2,228)                  (2,327)
                                                              -------                  -------
       Operating loss                                          (3,879)                  (3,656)

Interest expense                                               (5,385)                  (5,384)
Interest income                                                     4                        3
Amortization of deferred financing fees                          (169)                    (169)
Other income, net                                                  33                       43
                                                              -------                  -------

       Net loss                                               $(9,396)                 $(9,163)


       See notes to the condensed consolidated financial statements





                                      -3-
<PAGE>


                                            U.S. TIMBERLANDS KLAMATH FALLS, LLC
                                           CONDENSED CONSOLIDATED BALANCE SHEETS
                                                      (IN THOUSANDS)
                                                                                          March 31,          December 31,
                                                                                            2003                2002
                                                                                      -----------------   ------------------
                                                                                         (Unaudited)              *
ASSETS
Current assets:
     Cash and cash equivalents                                                          $   1,981              $     965
     Accounts receivable, net                                                                 466                  1,028
     Due from general partner                                                                --                        6
     Other receivables                                                                        432                    211
     Notes receivable                                                                       1,191                  1,344
     Prepaid expenses and other current assets                                                255                    331
                                                                                        ---------              ---------

         Total current assets                                                               4,325                  3,885

Timber and timberlands, net                                                               150,304                163,980
Investment in affiliate                                                                    47,118                 38,881
Property, plant and equipment, net                                                            889                    905
Notes receivable, less current portion                                                         10                     10
Restricted cash                                                                                91                     82
Deferred financing fees, net                                                                3,130                  3,298
                                                                                        ---------              ---------

         Total assets                                                                   $ 205,867              $ 211,041
                                                                                        =========              =========

LIABILITIES AND MEMBERS' EQUITY/(DEFICIENCY)
Current liabilities:
     Accounts payable                                                                         503                  1,454
     Accrued liabilities                                                                    9,049                  3,990
     Payable to general partner                                                               115                   --
                                                                                        ---------              ---------

         Total current liabilities                                                          9,667                  5,444
                                                                                        ---------              ---------

Long-term debt                                                                            225,000                225,000
                                                                                        ---------              ---------

Members' equity (deficiency)
     Managing member's interest                                                              (291)                  (196)
     Nonmanaging member's interest                                                        (28,509)               (19,207)
                                                                                        ---------              ---------
         Total members' equity (deficiency)                                               (28,800)               (19,403)
                                                                                        ---------              ---------

         Total liabilities and members' equity (deficiency)                             $ 205,867              $ 211,041
                                                                                        =========              =========


*    Derived from audited Consolidated Balance Sheet as of December 31, 2002


       See notes to the condensed consolidated financial statements


                                      -4-
<PAGE>


                                           U.S. TIMBERLANDS KLAMATH FALLS, LLC
                                     CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
                                                      (IN THOUSANDS)
                                                       (UNAUDITED)
                                                                                      THREE MONTHS ENDED MARCH 31,
                                                                              ------------------------------------
                                                                                    2003                 2002
                                                                              --------------          ------------
CASH FLOWS FROM OPERATING ACTIVITIES:
Net cash provided by (used in) operating activities                               $  1,118              $   (473)
                                                                                  --------              --------

CASH FLOWS FROM INVESTING ACTIVITIES:
      Timber, timberlands and road additions                                          (102)                 (103)
      Purchase of property, plant and equipment - net                                 --                      (4)
                                                                                  --------              --------
Net cash used in investing activities                                                 (102)                 (107)
                                                                                  --------              --------

CASH FLOWS FROM FINANCING ACTIVITIES:                                                 --                    --
                                                                                  --------              --------

Increase (decrease) in cash and cash equivalents                                     1,016                  (580)
Cash and cash equivalents - beginning of period                                        965                 1,070
                                                                                  --------              --------

Cash and cash equivalents - end of period                                         $  1,981              $    490
                                                                                  ========              ========

Noncash activities:
      Contribution of timberlands for investment in affiliate                     $ 10,466              $   --

Supplemental cash flow information:
      Cash paid for interest expense                                              $    505              $   --
</TABLE>



       See notes to the condensed consolidated financial statements


                                      -5-
<PAGE>



                       U.S. TIMBERLANDS KLAMATH FALLS LLC
              NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
                  (In thousands, except as otherwise indicated)
                                   (Unaudited)

1.  Business and Basis of Presentation

Business

The accompanying  consolidated financial statements include the accounts of U.S.
Timberlands  Klamath Falls, LLC ("USTK"),  a Delaware limited liability company,
and its wholly  owned  subsidiary,  U.S.  Timberlands  Finance  Corp.  ("Finance
Corp"),  collectively referred to hereafter as the Company. Finance Corp. serves
as the co-obligator for USTK's notes. It has nominal assets and does not conduct
operations. All intercompany transactions have been eliminated in consolidation.

U.S. Timberlands Company, LP (the "MLP") owns a 99% non-managing member interest
in USTK. The MLP was formed in 1997 to acquire and own  substantially all of the
equity  interests in USTK and to acquire and own the business and assets of U.S.
Timberlands Management Company, LLC, formerly known as U.S. Timberlands Services
Company,  LLC. U.S.  Timberlands  Services  Company (the "Manager")  manages the
business of the Company and owns a 1% managing member interest in USTK.

The primary activity of the Company is the growing of trees and the sale of logs
and standing  timber to third party wood  processors.  The  Company's  timber is
primarily located in Oregon,  east of the Cascade Range. Logs harvested from the
timberlands are sold to unaffiliated domestic conversion facilities.  These logs
are processed for sale as lumber, plywood and other wood products, primarily for
use in new residential home construction, home remodeling and repair and general
industrial applications.

Basis of Presentation

These  condensed  consolidated  financial  statements  have been prepared by the
Company, without audit by independent public accountants,  pursuant to the rules
and regulations of the United States Securities and Exchange Commission.  In the
opinion of management,  the accompanying  unaudited financial statements include
all normal  recurring  adjustments  necessary to present fairly the  information
required  to be set forth  therein.  Certain  information  and note  disclosures
normally included in financial statements prepared in accordance with accounting
principles  generally  accepted  in the  United  States  of  America  have  been
condensed  or  omitted  from  these  statements   pursuant  to  such  rules  and
regulations and, accordingly these condensed  consolidated  financial statements
should  be  read in  conjunction  with  the  consolidated  financial  statements
included in the Company's 2002 Annual Report on Form 10-K. Operating results for
the quarter ended March 31, 2003 are not  necessarily  indicative of the results
that may be expected for the full year or any other period.



                                      -6-
<PAGE>

There  have  been no  significant  changes  in the  accounting  policies  of the
Company.


2.  Timber and Timberlands


Timber and Timberlands consisted of the following:


<TABLE>
<CAPTION>
                                                        March 31,        December 31,
                                                           2003              2002
                                                        ---------------  ------------
<S>                                                       <C>              <C>
Timber and logging roads                                  $288,534         $294,208
Timberlands                                                 20,781           26,043
Seed orchard and nursery stock                               1,475            1,375
                                                          --------         --------
                                                           310,790          321,626
Less accumulated depletion and road amortization           160,486          157,646
                                                          --------         --------
                                                          $150,304         $163,980
                                                          ========         ========
</TABLE>

3.       Investment In Affiliate

The following is summarized  financial  information for U.S. Timberlands Yakima,
LLC (USTY), an affiliate of the Company accounted for under the equity method:

                                  Quarter Ended         Quarter Ended
                                    March 31              March 31
                                      2003                  2002
                               --------------------  --------------------

        Net sales                    $ 2,576               $ 5,656
        Gross profit (loss)               36                  (535)
        Net income (loss)             (2,228)               (2,338)


In February 2003, the Company contributed timberlands located in Central Oregon
to USTY. The contributions have an aggregate agreed upon value of $12.9 million
and were added to the Company's Preferred Interest in USTY. Terms of the
additional senior preferred interest acquired are the same terms as the senior
preferred interest previously issued to the Company. The Company recorded its
additional preferred interests at its aggregate costs for the timberlands of
approximately $10.5 million.

4.  Short-Term Debt

The Company had a credit  facility with an affiliate of the General Partner (the
"Affiliate Credit  Facility")  consisting of a revolving line of credit of up to
$12.0 million.  Borrowings  under the Affiliate Credit Facility bore interest at
the prime lending rate as published in the Wall Street  Journal plus  applicable
margin,  which was based on the Company's  leverage ratio.  The Affiliate Credit


                                      -7-
<PAGE>

Facility expired, by its terms, at the end of April 2002. The Company is seeking
to replace the Affiliate Credit Facility with a working capital facility from an
unaffiliated  third party.  However,  there can be no assurance that the Company
will be able to obtain a working capital credit  facility in amounts  sufficient
to fund its working  capital needs from a  traditional  commercial  lender.  The
Company and the affiliated  lender have also initiated  discussions with respect
to a further  extension of the credit facility on terms comparable to those that
would be  obtained  from an  unaffiliated  financing  source.  While the Company
continues to seek a credit  facility  from an  unaffiliated  source,  affiliated
lenders have made short term  advances to the Company,  payable on demand to the
affiliates,  at an  annual  interest  rate of 10%.  The  affiliate  has  made no
commitment  to  continue  lending  funds to the  Company,  and each  request  is
reviewed on a case by case basis.

5.  Long-Term Debt and Distributions

As of March 31, 2003, the Company was not permitted to make any distributions as
it had not exceeded the  requisite  Consolidated  Fixed  Charge  Coverage  Ratio
within the Restricted  Payments  provisions of the 9 5/8% Senior Notes issued by
the Operating Company.

6. Unit-based Compensation Plans

The MLP has a Unit  Option  Plan  which  permits  the grant of unit  options  to
employees  and  directors  of the Company who perform  services  for the Company
covering  857,749 Common Units. As permitted under SFAS No. 148,  Accounting for
Stock-Based Compensation-Transition and Disclosure, which was issued in December
2002 and amended SFAS No. 123,  Accounting  for  Stock-Based  Compensation,  the
Company  has  elected  to  continue  to follow  the  intrinsic  value  method in
accounting for its stock-based employee compensation  arrangements as defined by
Accounting Principles Board Opinion ("APB") No. 25, "Accounting for Stock Issued
to Employees", and related interpretations.  The following table illustrates the
effect  on net  loss if the  Company  had  applied  the fair  value  recognition
provisions  of  SFAS  No.  123 to  stock-based  employee  compensation.


                                                     Three Months Ended
                                                  March 31,         March 31,
                                                     2003             2002

Net (loss) as reported                            $(9,396)         $ (9,163)
Unit-based employee compensation determined
              under the intrinsic value method    $    --          $     --

Unit-based employee compensation determined
              under the fair value method                          $     80

Net income (loss) pro forma                       $(9,396)         $ (9,243)
                                                  ========       ============

For purposes of the pro forma disclosures,  the estimated fair value of the unit
options is amortized  to expense over their  estimated  exercise  period,  which
corresponds to the assumed subordinated unit's conversion period.


                                      -8-
<PAGE>

7.  Recent Accounting Standards

In December  2002,  the FASB issued SFAS No. 148,  "Accounting  for  Stock-Based
Compensation  - Transition  and  Disclosure"  as an amendment to SFAS No. 123 by
introducing two additional  conversion methods when converting to the fair value
based method from the  intrinsic  value  method of  accounting  for  stock-based
employee compensation.  It also amends the disclosure provisions of SFAS No. 123
to require prominent  disclosure about the effects on reported net income (loss)
of an entity's accounting policy decisions with respect to stock-based  employee
compensation  and amends APB  Opinion No. 28 to require  disclosure  about those
effects  in  interim  financial  information.   The  disclosure  provisions  are
effective  for fiscal  years  ending  after  December  15,  2002 and for interim
periods  beginning  after December 15, 2002.  The Company  follows the intrinsic
value method of  accounting  for  stock-based  employee  compensation,  but will
continue to evaluate the benefits of a voluntary  change to the fair value based
method.

In January 2003, the FASB issued  Interpretation  No. 46 (FIN 46) "Consolidation
of Variable Interest Entities" which is an interpretation of Accounting Research
Bulletin  No.  51  "Consolidated  Financial  Statements".  FIN 46  requires  the
consolidation  of  entities  in which an  enterprise  absorbs a majority  of the
entity's expected losses,  receives a majority of the entity's expected residual
returns,  or both,  as a result of  ownership,  contractual  or other  financial
interests in the entity.  Currently,  entities are generally  consolidated by an
enterprise when it has a controlling  financial  interest through ownership of a
majority voting interest in the entity. The provisions of FIN 46 are required to
be applied by the  Company no later  than July 1, 2003,  and would  require  the
Company to consolidate the financial  statements of U.S. Timberlands Yakima, LLC
("USTY"} its unconsolidated  affiliate which is presently being accounted for on
the equity method.  If the Company had  consolidated  USTY beginning  January 1,
2003,  there would have been no effect on the  Company's  net loss for the three
months ended March 31, 2003,  however  revenues  would have increased by $2,576,
expenses  would have  increased  by $4,804 and the $2,228  equity in net loss of
affiliate would be eliminated. In addition, although there would be no change in
members'  equity/(deficiency),  total  assets  would  increase by  approximately
$139,000, principally representing timber and timberlands, and total liabilities
would increase by approximately $139,000 including $129,000 of long-term debt at
March 31, 2003. Such long-term debt is  collateralized by all of the USTY assets
and the debt holder does not have recourse to the Company. The Company's maximum
exposure  to loss as a result of its  involvement  with USTY is  limited  to its
investment in USTY, which amounts to $47,118 at March 31, 2003.


8.  Other Matters

On October 17, 2002, the MLP announced that it had signed a definitive agreement
to be  acquired  by an  acquisition  company  formed  by a group  led by  senior
management.  The definitive agreement  contemplates a cash tender offer for 100%
of the  outstanding  common limited  partnership  units not already owned by the


                                      -9-
<PAGE>

acquiring  entity or its  affiliates  for $3.00 per unit in cash,  followed by a
merger of the acquisition  company with and into the MLP, pursuant to which each
common limited partnership unit not already owned by the acquiring entity or its
affiliates  would be converted into the right to receive $3.00 per unit in cash.
The tender offer  commenced  on November 19, 2002 and was  completed on March 6,
2003.  Pursuant to the tender offer,  approximately  71% of the Company's common
units were tendered.  The acquisition group therefore controls approximately 87%
of the outstanding common units. The remaining common units not purchased in the
tender  offer will be  acquired  by the  acquisition  group in a merger  that is
expected to be completed in the second quarter of 2003.

On April 25, 2002,  the Company  announced that several  purported  class action
lawsuits  were filed in the Court of Chancery  of the State of Delaware  for the
County of New Castle  against  the  Manager  and the board of  directors  of the
General  Partner  alleging,  among other  things,  breach of fiduciary  duty and
self-dealing  by the Manager and the board in connection  with the going private
transaction.  The lawsuits  sought to enjoin the going private  transaction,  to
rescind  the going  private  transaction  if it is  consummated,  and to recover
damages and attorney's fees. The lawsuits also named the Company as a defendant.
On July 12,  2002,  the Company was  notified  that all of the  purported  class
action lawsuits were  consolidated into one class action lawsuit by the Court of
Chancery of the State of Delaware.  On October 17, 2002,  the Company  announced
that it had  reached  a  tentative  settlement  of the  purported  class  action
lawsuits,  subject  to  court  approval  and  other  customary  conditions.  The
settlement  provided,  among other things,  for an increase in the consideration
provided  in the offer to  purchase  the  common  units to $3.00  per  unit.  On
December 12, 2002 the parties  executed a Stipulation  of  Settlement  which the
Court of Chancery approved at a settlement hearing on January 30, 2003.

On June 21, 2002,  the Company was notified that it was named in a lawsuit filed
in State Court in Oregon as a  codefendant  seeking  medical  expenses and up to
$12.0  million  in  damages  for  injuries  sustained  by the minor  child of an
employee of the Manager while riding on equipment  owned by the Manager.  At the
time, liability insurance was in place,  however, the insurance  underwriter has
since gone  bankrupt  and coverage is limited and is being  administered  by the
Oregon Guarantee Insurance Association.

Management  and its counsel are still  reviewing  the facts of the injury claims
and it is too early to assess their effect on the Company.


ITEM 2.  MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
                 CONDITION AND RESULTS OF OPERATIONS

Forward-Looking Statements

Certain  information  contained  in this report may  constitute  forward-looking
statements  within the  meaning of the federal  securities  laws.  Although  the
Company believes that expectations reflected in such forward-looking  statements
are  based  upon  reasonable  assumptions,  it can  give no  assurance  that its
expectations will be achieved. Forward-looking information is subject to certain
risks,  trends and  uncertainties  that  could  cause  actual  results to differ
materially from those projected.  Such risks,  trends and uncertainties  include
the highly  cyclical nature of the forest products  industry,  general  economic


                                      -10-
<PAGE>

conditions,  competition, price conditions or trends for the Company's products,
the possibility that timber supply could increase if governmental, environmental
or endangered  species policies change, and limitations on the Company's ability
to  harvest  its  timber  due  to  adverse   natural   conditions  or  increased
governmental restrictions.  These and other risks are described in the Company's
other reports and registration  statements,  which are available from the United
States Securities and Exchange Commission.


Application of Critical Accounting Policies

The Company's condensed  consolidated financial statements have been prepared in
accordance with accounting principles generally accepted in the United States of
America.  Certain  accounting  policies  have a  significant  impact on  amounts
reported in the financial statements.  A summary of those significant accounting
policies can be found in Note 1 to the Company's  financial  statements included
in the Company's  2002 Annual  Report on Form 10-K.  The Company has not adopted
any significant new accounting  policies during the three months ended March 31,
2003.

Among the  significant  judgments  made by management in the  preparation of the
Company's  financial  statements  are the  determination  of the  allowance  for
doubtful  accounts  and the  rates  of  depletion  applicable  to the  Company's
merchantable  timber. These determinations are made periodically in the ordinary
course of accounting.

Overview

The Company's principal  operations consist of growing and harvesting timber and
selling  logs,  standing  timber and  related  by-products  to third  party wood
processors. These logs and by-products are processed for sale as lumber, molding
products, doors, mill work, commodity,  specialty and overlaid plywood products,
laminated  veneer lumber,  engineered  wood I-beams,  particleboard,  hardboard,
paper  and  other  wood  products.  These  products  are  used  in  residential,
commercial  and industrial  construction,  home  remodeling and repair,  general
industrial  applications  and a variety of paper  products.  The  results of the
Company's  operations  and its  ability to pay  quarterly  distributions  to its
members  depend upon a number of factors,  many of which are beyond its control.
These factors include  general  economic and industry  conditions,  domestic and
export  prices,  supply  and demand for  timber  logs,  seasonality,  government
regulations  affecting  the  manner  in  which  timber  may  be  harvested,  and
competition from other supplying regions and substitute products. The Company is
currently  not  permitted to make any  distributions  to members (see  Financial
Condition and Liquidity).

Seasonality

The  Company's  log and  standing  timber sales  volumes are  generally at their
lowest  levels in the first  and  second  quarters  of each  year.  In the first
quarter,  heavy snowfalls in higher  elevations  prevent access to many areas of
the  Company's  timberlands.  This limited  access,  along with spring  break-up
conditions (when warming weather thaws and softens  roadbeds) in March or April,
restricts  logging  operations to lower  elevations  and areas with rockier soil
types.  As a result  of these  constraints,  the  Company's  sales  volumes  are


                                      -11-
<PAGE>

typically at their lowest in the first quarter,  improving in the second quarter
and at their highest during the third and fourth quarters. Most customers in the
region react to this seasonality by carrying  sufficiently  high log inventories
at the end of the  calendar  year to carry  them to the  second  quarter  of the
following year.

Current Market Conditions

First quarter 2003 prices for finished wood products (e.g.  lumber,  plywood and
engineered  wood  products ) were lower than the fourth  quarter  2002 and lower
than the same  period in 2002.  Prices  for all  species  were down in the first
quarter.  Ponderosa  Pine prices led the decline  with #3 shop falling more than
$100/mbf. Delivered log prices also fell in the first quarter and were down more
than 10% from the prior quarter.

Results of Operations

Selected operating statistics for the Company:


<TABLE>
<CAPTION>
----------------------------------------------------------------------------------------------------------------
                                       Sales Volume (MBF)                  Price Realization (MBF)
----------------------------------------------------------------------------------------------------------------
                                                              Timber                                Timber
              Period                    Logs     Stumpage      Deeds         Logs      Stumpage      Deeds
----------------------------------------------------------------------------------------------------------------
               2003
----------------------------------------------------------------------------------------------------------------
<S>                      <C>            <C>                     <C>           <C>            <C>       <C>
Three Months Ended March 31             17,098           -      2,886         $ 313          $ -       $ 236
----------------------------------------------------------------------------------------------------------------
               2002
----------------------------------------------------------------------------------------------------------------
Three Months Ended March 31              5,024           -      2,333         $ 349          $ -       $ 169
----------------------------------------------------------------------------------------------------------------
</TABLE>


Quarter Ended March 31, 2003 Compared to Quarter Ended March 31, 2002

Revenues

Revenues for the quarter ended March 31, 2003 were $6.8 million,  an increase of
$4.6 million or 209% from  revenues of $2.2 million for the same period in 2002.
The significant increase in revenues during the first quarter of 2003 was caused
by favorable weather  conditions that allowed for an extended harvest before the
annual break-up period and accelerated  harvesting of "salvage" wood relating to
the 2002 fires.



                                      -12-
<PAGE>

Timber deed sales for the first  quarter of 2003 were $0.7  million on volume of
2.9 million board feet  ("MMBF"),  as compared to the same period in 2002,  when
timber deed sales were $0.4 million on 2.3 MMBF.  The average  timber deed price
was $236 per thousand  board feet ("MBF")  during the first  quarter of 2003, as
compared to $169 per MBF for the same period in 2002.

Log sales for the quarter  ended  March 31, 2003 were $5.4  million on volume of
17.1  MMBF,  as  compared  to the same  period in 2002 when log sales  were $1.8
million  on 5.0 MMBF.  The  average  sales  price was $313 per MBF for the first
quarter of 2003,  as  compared to an average of $349 per MBF for the same period
in 2002.  The decrease in log prices  reflects a general  decrease in the market
caused by a high volume of fire-damaged logs.

In addition, property sales for the first quarter were $0.6 million, as compared
to $0.0 million for the same period in 2002.

Gross Profit

The Company had a gross profit of $0.0  million in the first  quarter of 2003 as
compared to a gross  profit of $0.1  million  for the same period in 2002.  As a
percentage  of sales the  gross  profit  was 0% as  compared  to a gross  profit
percentage of 2% in the first quarter of 2002. The decrease in gross profit as a
percentage of sales is a result of lower prices and higher logging costs, offset
in part by increased profits from by-product sales over the same period in 2002.


Selling, General and Administrative Expenses

Selling, general and administrative expenses increased by $0.3 million from $1.4
million  in the first  quarter of 2002 to $1.7  million in the first  quarter of
2003. The increase was principally  attributable to higher wage and wage related
expenses  of $0.2  million  and higher  professional  service  expenses  of $0.1
million related to the privatization transaction.

Equity in Net Loss of Affiliate

Equity in net loss of  affiliate  was  approximately  $2.2 million for the first
quarter of 2003.  This amount reflects the Company's share of the net loss of an
affiliate (USTY) accounted for under the equity method.  This compares to equity
in net loss of affiliate of $2.3 million in the first quarter of 2002.

Financial Condition and Liquidity

Operating Activities

Cash flows provided by operating  activities during the three months ended March
31, 2003 were $1.1 million, as compared to cash used in operating  activities of
$0.5 million  during the same period in 2002.  The $1.6 million  increase is due
primarily to the  Company's  increase in sales revenue in comparison to the same
period in 2002.



                                      -13-
<PAGE>

Investing Activities

Cash flows used in investing activities were $0.1 million during the first three
months of 2003, as compared to $0.1 million during the same period in 2002.

Financing Activities

Cash flows used in financing  activities  for the first three months of 2003 and
2002 were $0.0 million.  There were no  distributions to members in the 2003 and
2002 periods respectively.

The Company had a credit agreement with an affiliate of the General Partner (the
"Affiliate  Credit  Facility"),  which allowed the Company to borrow up to $12.0
million.  The Affiliate  Credit  Facility  expired on April 30, 2002.  While the
Company  continues  to  seek a  credit  facility  from an  unaffiliated  source,
affiliated  lenders  have made short term  advances to the  Company,  payable on
demand to the  affiliates,  at an annual interest rate of 10%. The affiliate has
made no commitment to continue lending funds to the Company, and each request is
reviewed on a case by case basis.

The  agreement  governing  the  Operating  Company's  9-5/8%  Senior  Notes (the
"Notes")  contains  restrictive  covenants,  including  limitations  on  harvest
levels,  land sales, cash  distributions and the amount of future  indebtedness.
Under the Notes,  the Company's  average annual adjusted harvest volume over any
period of four  consecutive  years cannot exceed a volume of  approximately  147
MMBF as  adjusted  for  timberland  sales and  purchases.  The Notes  also limit
one-year  harvest  levels and  average  annual  harvest  levels for  consecutive
two-and-three  year periods.  In 2002,  because of the  accelerated  harvesting,
during the fourth  quarter,  of salvage timber  resulting from the Toolbox Fire,
the operating  company exceeded the allowable four year harvest by 6.9 MMBF and,
as required under the Indenture has placed $662 thousand in a restricted account
only to be used in ways  prescribed in the Indenture.  As of March 31, 2003, the
Operating  Company was in compliance with the covenants  contained in the Notes.
As of March 31, 2003, the Company was not permitted to make any distributions as
it had not exceeded the  requisite  Consolidated  Fixed  Charge  Coverage  Ratio
within the Restricted Payments provisions of the Notes.

Through the first three months of 2003,  the Company  funded its  operations and
met its cash requirements for debt service from cash on hand.

Cash required to meet the Company's debt service and any cash distributions will
be significant.  To meet its working capital  requirements,  the Company for the
past several  years has been  selling logs and making  timber sales at a rate in
excess of the General  Partner's  estimate of the current  annual board  footage
growth on the Company's timberlands.  The debt service and, prior to April 2001,
quarterly cash  distributions  have been funded from  operations and borrowings.
Given projected  volumes for sales of logs and timber,  estimated  current board
footage growth on the  timberlands  and the harvest  restrictions  in the Notes,
unless  prices  improve,  costs are  reduced,  new markets are  developed or the
Company makes  accretive  acquisitions,  the Company's  ability in the future to
make  distributions  will be  adversely  affected.  On May 10,  2001 the Company
announced an indefinite  suspension of  distributions.  The Company continues to
evaluate  means to improve cash flows,  including the factors  mentioned  above.
There can be no  assurance  that prices will improve or that the Company will be
able to take any of these actions and it is unlikely  prices will improve or any
of these actions will take effect within a short-term horizon.  The Company will
continue  to look to log and  timber  deed  sales as well as the sale of  excess
timberlands,  and  short-term  advances from an affiliated  lender,  to meet its
short term cash needs.



                                      -14-
<PAGE>

ITEM 4.  CONTROLS AND DISCLOSURES

The Company's  management  maintains an adequate system of internal  controls to
promote  the  timely   identification   and  reporting  of  material,   relevant
information.  The Company's  senior  management  team meets regularly to discuss
significant  transactions  and events  affecting the Company's  operations.  The
Company's  President and Chief Executive  Officer,  and Vice President and Chief
Financial  Officer,  lead these meetings and consider  whether topics  discussed
represent  information  that should be disclosed under the rules of the SEC. The
Board of Directors of the General Partner includes an Audit Committee. The Audit
Committee  reviews  the  earnings  release and all reports on Form 10-Q and 10-K
prior to their  filing.  The Audit  Committee  is  responsible  for  hiring  the
Company's  external  auditors and meets with those auditors at least three times
each year.

The Company's  President and Chief  Executive  Officer,  and Vice  President and
Chief  Financial  Officer  are  responsible  for  establishing  and  maintaining
disclosure  controls and procedures.  They have designed such controls to ensure
that others make all material information known to them within the organization.
Management regularly evaluates ways to improve internal controls.

On February 28, 2003,  our  executive  officers  completed an  evaluation of the
disclosure  controls and procedures  and has  determined  them to be functioning
properly and effectively.  They did not discover any significant deficiencies or
material   weaknesses   within  the  controls  and   procedures   that  required
modification.  Since  the  completion  of that  evaluation,  there  have been no
significant  changes  in  internal  controls  or in  other  factors  that  could
significantly affect internal controls.








                                      -15-
<PAGE>

PART II.  OTHER INFORMATION

ITEM 1.  LEGAL PROCEEDINGS

On April 25, 2002,  the Company  announced that several  purported  class action
lawsuits  were filed in the Court of Chancery  of the State of Delaware  for the
County of New Castle  against  the  Manager  and the board of  directors  of the
General  Partner  alleging,  among other  things,  breach of fiduciary  duty and
self-dealing  by the Manager and the board in connection  with the going private
transaction.  The lawsuits  sought to enjoin the going private  transaction,  to
rescind  the going  private  transaction  if it is  consummated,  and to recover
damages and attorney's fees. The lawsuits also named the Company as a defendant.
On July 12,  2002,  the Company was  notified  that all of the  purported  class
action lawsuits were  consolidated into one class action lawsuit by the Court of
Chancery of the State of Delaware.  On October 17, 2002,  the Company  announced
that it had  reached  a  tentative  settlement  of the  purported  class  action
lawsuits,  subject  to  court  approval  and  other  customary  conditions.  The
settlement  provided,  among other things,  for an increase in the consideration
provided  in the offer to  purchase  the  common  units to $3.00  per  unit.  On
December 12, 2002 the parties  executed a Stipulation  of  Settlement  which the
Court of Chancery approved at a settlement hearing on January 30, 2003.

On June 21, 2002,  the Company was notified that it was named in a lawsuit filed
in State Court in Oregon as a  codefendant  seeking  medical  expenses and up to
$12.0  million  in  damages  for  injuries  sustained  by the minor  child of an
employee of the Manager while riding on equipment  owned by the Manager.  At the
time, liability insurance was in place,  however, the insurance  underwriter has
since gone  bankrupt  and coverage is limited and is being  administered  by the
Oregon Guarantee Insurance Association.

Management  and its counsel are still  reviewing  the facts of the injury claims
and it is too early to assess its effect on the Company.



ITEMS 2, 3, 4, AND 5 OF PART II  are not applicable and have been omitted.



                                      -16-
<PAGE>

ITEM 6.  EXHIBITS AND REPORTS ON FORM 8-K

(a.) Exhibits

<TABLE>
<CAPTION>
<S>      <C>
        T3.1   -  Amended and Restated Agreement of Limited Partnership of U.S. Timberlands Company, LP

        T3.2   -  Second Amended and Restated Operating Agreement of U.S. Timberlands Klamath Falls, LLC

        T10.2  -  Indenture among U.S. Timberlands Klamath Falls, LLC, U.S. Timberlands
                     Finance Corp. and State Street Bank and Trust Company, as trustee

        T10.3  -  Contributions, Conveyance and Assumption Agreement among U.S. Timberlands
                  Company, LP and certain other parties

        *10.4  -  Form of U.S. Timberlands Company, LP 1997 Long-Term Incentive Plan

        *10.5  -  Employment Agreement for Mr. Rudey

        *10.9  -  Supply Agreement between U.S. Timberlands Klamath Falls, LLC and Collins
                     Products, LLC

       ++10.10 -  Operating Agreement of U.S. Timberlands Yakima, LLC

         10.11 -  Agreement and Plan of Merger by and among U.S. Timberlands  Holdings Group, LLC,
                  U.S. Timberlands  Acquisition Co., LLC and U.S. Timberlands Company, L.P.
                  Dated as of October 16, 2002

         *21.1  - List of Subsidiaries

          99.1  - Sarbanes-Oxley Certification of CEO pursuant to 18 U.S.C. Section 1350,
                  as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.

          99.2  - Sarbanes-Oxley Certification of CFO pursuant to 18 U.S.C. Section 1350,
                  as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.

     *    Incorporated  by  reference  to  the  same  numbered  Exhibit  to  the
          Registrant's  Registration  Statement  on Form S-1 filed  November 13,
          1997.

     T    Incorporated  by  reference  to  the  same  numbered  Exhibit  to  the
          Registrant's Current Report on Form 8-K filed January 15, 1998.

     ++   Incorporated  by  reference  to  the  same  numbered  exhibit  to  the
          Registrant's Form 10-Q filed on May 15, 2000.
</TABLE>


                                      -17-
<PAGE>

(b.)       Reports on Form 8-K

             None.


                                   SIGNATURES



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



         Date:  May 20, 2003        U.S. TIMBERLANDS KLAMATH FALLS, LLC
                                    By:  U.S. Timberlands Services Company, LLC
                                          as General Partner




                                  By:  /s/ Thomas C. Ludlow
                                      -----------------------
                                      Thomas C. Ludlow
                                      Chief Financial Officer
                                      (Chief Financial Officer,
                                        Duly Authorized Officer,
                                           And Principal Accounting Officer)





                                      -18-
<PAGE>

                                  CERTIFICATION

I, John M. Rudey, certify that:

I have reviewed this quarterly report on Form 10-Q of U.S.  Timberlands  Klamath
Falls, LLC.

1.   Based on my knowledge,  this  quarterly  report does not contain any untrue
     statement of a material fact or omit to state a material fact  necessary to
     make the statements  made, in light of the  circumstances  under which such
     statements  were made, not misleading with respect to the period covered by
     this quarterly report;

2.   Based on my  knowledge,  the  financial  statements,  and  other  financial
     information  included  in this  quarterly  report,  fairly  present  in all
     material respects the financial  condition,  results of operations and cash
     flows of the  registrant  as of, and for,  the  periods  presented  in this
     quarterly report;

3.   The  registrant's  other  certifying  officers  and I are  responsible  for
     establishing  and  maintaining  disclosure  controls  and  procedures  ( as
     defined in Exchange Act Rules 13a-14 and 15d-14) for the  registrant and we
     have:

a)   designed such  disclosure  controls and  procedures to ensure that material
     information   relating  to  the  registrant,   including  its  consolidated
     subsidiaries,  is  made  known  to  us by  others  within  those  entities,
     particularly  during  the period in which  this  quarterly  report is being
     prepared;

b)   evaluated the  effectiveness  of the registrant's  disclosure  controls and
     procedures  as of a date  within  90  days  prior  to the  filing  of  this
     quarterly report (the "Evaluation Date"); and

c)   presented in this quarterly report our conclusions  about the effectiveness
     of the disclosure controls and procedures based on our evaluation as of the
     Evaluation Date;

4.   The registrant's other certifying  officers and I have disclosed,  based on
     our most recent  evaluation,  to the  registrant's  auditors  and the audit
     committee of  registrant's  board of directors (or persons  performing  the
     equivalent function);

a)   all  significant  deficiencies  in the  design  or  operation  of  internal
     controls which could adversely affect the  registrant's  ability to record,
     process,  summarize and report  financial data and have  identified for the
     registrant's auditors any material weaknesses in internal control; and

b)   any fraud,  whether or not  material,  that  involves  management  or other
     employees  who  have  a  significant  role  in  the  registrant's  internal
     controls; and

5.   The  registrant's  other  certifying  officers and I have indicated in this
     quarterly report whether or not there were significant  changes in internal
     controls  or in other  factors  that could  significantly  affect  internal
     controls  subsequent to the date of our most recent  evaluation,  including
     any corrective actions with regard to significant deficiencies and material
     weaknesses.

                                                  /s/ John M. Rudey
         Date: May 20, 2003                       ---------------------------
                                                    John M. Rudey
                                                    Chairman, Chief Executive
                                                    Officer and President


                                      -19-
<PAGE>



                                  CERTIFICATION

I, Thomas Ludlow, certify that:

I have reviewed this quarterly report on Form 10-Q of U.S.  Timberlands  Klamath
Falls, LLC.

1.   Based on my knowledge,  this  quarterly  report does not contain any untrue
     statement of a material fact or omit to state a material fact  necessary to
     make the statements  made, in light of the  circumstances  under which such
     statements  were made, not misleading with respect to the period covered by
     this quarterly report;

2.   Based on my  knowledge,  the  financial  statements,  and  other  financial
     information  included  in this  quarterly  report,  fairly  present  in all
     material respects the financial  condition,  results of operations and cash
     flows of the  registrant  as of, and for,  the  periods  presented  in this
     quarterly report;

3.   The  registrant's  other  certifying  officers  and I are  responsible  for
     establishing  and  maintaining  disclosure  controls  and  procedures  ( as
     defined in Exchange Act Rules 13a-14 and 15d-14) for the  registrant and we
     have:

a)   designed such  disclosure  controls and  procedures to ensure that material
     information   relating  to  the  registrant,   including  its  consolidated
     subsidiaries,  is  made  known  to  us by  others  within  those  entities,
     particularly  during  the period in which  this  quarterly  report is being
     prepared;

b)   evaluated the  effectiveness  of the registrant's  disclosure  controls and
     procedures  as of a date  within  90  days  prior  to the  filing  of  this
     quarterly report (the "Evaluation Date"); and

c)   presented in this quarterly report our conclusions  about the effectiveness
     of the disclosure controls and procedures based on our evaluation as of the
     Evaluation Date;

4.   The registrant's other certifying  officers and I have disclosed,  based on
     our most recent  evaluation,  to the  registrant's  auditors  and the audit
     committee of  registrant's  board of directors (or persons  performing  the
     equivalent function);

a)   all  significant  deficiencies  in the  design  or  operation  of  internal
     controls which could adversely affect the  registrant's  ability to record,
     process,  summarize and report  financial data and have  identified for the
     registrant's auditors any material weaknesses in internal control; and

b)   any fraud,  whether or not  material,  that  involves  management  or other
     employees  who  have  a  significant  role  in  the  registrant's  internal
     controls; and

5.   The  registrant's  other  certifying  officers and I have indicated in this
     quarterly report whether or not there were significant  changes in internal
     controls  or in other  factors  that could  significantly  affect  internal
     controls  subsequent to the date of our most recent  evaluation,  including
     any corrective actions with regard to significant deficiencies and material
     weaknesses.

                                             /s/ Thomas C. Ludlow
         Date: May 20,  2003                 ----------------------------------
                                             Thomas C. Ludlow
                                             Chief Financial Officer



                                      -20-