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                                 UNITED STATES
                       SECURITIES AND EXCHANGE COMMISSION
                             WASHINGTON, D.C. 20549

                                   FORM 10-K/A

                         (AMENDMENT NO. 2 TO FORM 10-K)

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

                     For the fiscal year ended May 31, 2001

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

     For the transition period from __________ to __________

                         Commission file number 0-26088

                      PACIFIC AEROSPACE & ELECTRONICS, INC.
             (Exact name of registrant as specified in its charter)

WASHINGTON                                             91-1744587
(State or other jurisdiction of                        (I.R.S. Employer
incorporation or organization)                         Identification No.)

430 OLDS STATION ROAD, THIRD FLOOR
WENATCHEE, WASHINGTON                                       98801
(Address of principal executive offices)                  (Zip Code)

Registrant's telephone number, including area code:     (509) 667-9600

           Securities registered pursuant to Section 12(b) of the Act:

<TABLE>
<CAPTION>
     Title of each class         Name of each exchange on which registered
     -------------------         -----------------------------------------
<S>                             <C>
           NONE                                   NONE
</TABLE>

           Securities registered pursuant to Section 12(g) of the Act:
                          COMMON STOCK, $.001 PAR VALUE
                                (Title of class)

                         COMMON STOCK PURCHASE WARRANTS
                                (Title of class)

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 [ ]

Indicate by check mark if disclosure of delinquent filers pursuant to Item 405
of Regulation S-K is not contained herein, and will not be contained, to the
best of registrant's knowledge, in definitive proxy or information statements
incorporated by reference in Part III of this Form 10-K or any amendment to this
Form 10-K. [X]

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Explanation

This amendment to Form 10-K is filed solely to amend the Auditor's Report
contained in page 52 of the Form 10-K filed on August 29, 2001. All
information not specifically amended in this amendment remains accurate as of
date of such information.


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INDEPENDENT AUDITORS' REPORT


The Board of Directors
Pacific Aerospace & Electronics, Inc.:

We have audited the accompanying consolidated balance sheets of Pacific
Aerospace & Electronics, Inc. as of May 31, 2000 and 2001, and the related
consolidated statements of operations and comprehensive loss, stockholders'
equity (deficit), and cash flows for each of the years in the three-year period
ended May 31, 2001. These consolidated financial statements are the
responsibility of the Company's management. Our responsibility is to report on
these consolidated financial statements based on the results of our audits.

We conducted our audits in accordance with auditing standards generally accepted
in the United States of America. Those standards require that we plan and
perform the audit to obtain reasonable assurance about whether the consolidated
financial statements are free of material misstatement. An audit includes
examining, on a test basis, evidence supporting the amounts and disclosures in
the consolidated financial statements. An audit also includes assessing the
accounting principles used and significant estimates made by management, as well
as evaluating the overall consolidated financial statement presentation. We
believe that our audits provide a reasonable basis for our report.

In our opinion, the 1999 and 2000 consolidated financial statements referred to
above present fairly, in all material respects, the financial position of
Pacific Aerospace & Electronics, Inc. as of May 31, 2000, and the results of
their operations and their cash flows for each of the years in the two-year
period ended May 31, 2000, in conformity with accounting principles generally
accepted in the United States of America.

The accompanying 2000 and 2001 consolidated financial statements have been
prepared assuming that Pacific Aerospace & Electronics, Inc. will continue as a
going concern. As discussed in note 3 to the consolidated financial statements,
the Company has suffered recurring losses from operations and has a net capital
deficiency at May 31, 2001, which raise substantial doubt about the
entity's ability to continue as a going concern. Management's plans in regard to
these matters are also described in note 3. The consolidated financial
statements do not include any adjustments that might result from the outcome of
this uncertainty.

Because of the significance of the uncertainty discussed in the preceding
paragraph, we are unable to express, and we do not express, an opinion on the
accompanying 2001 consolidated financial statements.

/s/ KPMG LLP

Seattle, Washington
July 27, 2001


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                                   SIGNATURES

Pursuant to the requirements of Section 13 or 15(d) of the Securities Exchange
Act of 1934, the registrant has duly caused this amended report to be signed on
its behalf by the undersigned, thereunto duly authorized.

Date:  March 12, 2002

                                       PACIFIC AEROSPACE & ELECTRONICS, INC.


                                       By /s/ DONALD A. WRIGHT
                                          -----------------------------------
                                       DONALD A. WRIGHT
                                       President and Chief Executive Officer



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