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

                                   FORM 10-KSB

                                   ----------

                  ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d)
                     OF THE SECURITIES EXCHANGE ACT OF 1934
                     FOR THE FISCAL YEAR ENDED MAY 31, 2002

                           Commission File No. 0-21816

                                    PML, INC.
                 (Name of small business issuer in its charter)


           Delaware                                             93-1089304
(State or other jurisdiction of                           (I.R.S. Employer
incorporation or organization)                            Identification Number)


                              27120 SW 95TH Avenue
                            Wilsonville, Oregon 97070
          (Address of principal executive offices, including zip code)

                                 (503) 570-2500
                           (Issuer's telephone number)


Indicate by check mark whether the issuer (1) has filed all reports  required to
be filed by Section 13 or 15(d) of the  Securities  Exchange Act during the past
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 if  disclosure of  delinquent  filers  pursuant to Item 405 of
Regulation S-B is not contained herein,  and will not be contained,  to the best
of  registrant's   knowledge,  in  definitive  proxy  or  information  statement
incorporated  by reference  in Part III of this Form 10-KSB or any  amendment to
this Form 10-KSB.   Yes X No
                       ---

Revenues for the most recent fiscal year:  $13,244,771

The aggregate market value of voting Common Stock held by non-affiliates  (based
on the closing  sales price on the NASD  Electronic  Bulletin  Board) on May 31,
2001 was approximately $2,147,300.

Indicate by check mark  whether the issuer has filed all  documents  and reports
required  to be filed by Section 12, 13 or 15(d) of the  Exchange  Act after the
distribution  of securities  under a plan  confirmed by a court.  Yes    No X
                                                                           ---


As of May 31,  2002,  there were  1,789,441  shares of Class A Common Stock with
$0.01 par value  outstanding,  211,551 Class B Common Stock with $0.01 par value
outstanding and 4,950 Preferred Class A Stock $100 per share outstanding.

Documents incorporated by reference:  N/A

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<PAGE>
                                    PML, INC.

                                FORM 10-KSB INDEX

                                     Part I                                 Page
                                     ------                                 ----
Item 1.      Description of Business                                         3

Item 2.      Description of Properties                                       7

Item 3.      Legal Proceedings                                               7

Item 4.      Submission of Matters to a Vote of Security Holders             8

                                     Part II
                                     -------

Item 5.      Market for Registrant's Common Equity and Related
                Stockholder Matters                                          8

Item 6.      Management's Discussion and Analysis of Financial Condition
                and Results of Operations                                    8

Item 7.      Financial Statements and Supplementary Data                 12 & 20

Item 8.      Changes in and Disagreements with Accountants on Accounting
                and Financial Disclosure                                     12

                                    Part III
                                    --------

Item 9.      Directors, Executive Officers, Promoters and Control Personnel;
                Compliance with Section 16(a) of the Exchange Act            13

Item 10.     Executive Compensation                                          14

Item 11.     Security Ownership of Certain Beneficial Owners and Management  14

Item 12.     Certain Relationships and Related Transactions                  16

Item 13.     Exhibits, Financial Statement Schedules and Reports on Form 8-K 16
<PAGE>
                                    PML, INC.

                         2002 FORM 10-KSB ANNUAL REPORT

Forward Looking Statements
--------------------------

This report,  including  without  limitation the section entitled  "Management's
Discussion  and  Analysis of  Financial  Condition  and  Results of  Operations"
includes  "forward-looking  statements" within the meaning of Section 21E of the
Securities  Exchange  Act of  1934.  Forward-looking  statements  are  based  on
management's beliefs and assumptions using currently available information.  All
statements  other than  statements  of historical  fact  regarding our financial
position,  business  strategy and  management's  plans and objectives for future
operations are forward-looking  statements.  When used in this report, the words
"anticipate," "believe," "plan," "estimate," "expect," and "intend" and words or
phrases  of  similar  meaning,  as they  relate  to PML or its  management,  are
intended  in part to help  identify  forward-looking  statements.  Although  PML
believes  that  management's   expectations  as  reflected  in   forward-looking
statements are reasonable, we cannot assure readers that those expectations will
prove to be correct. Forward-looking statements are subject to various risks and
uncertainties that will cause our actual results to differ from our expectations
as indicated in the  forward-looking  statements,  and those  deviations  may be
material  and  adverse.  These  risks and  uncertainties  include our ability to
maintain or expand our market share and production capabilities and to implement
our marketing and growth strategies.  Further, actual results may be affected by
our ability to compete on price and other  factors  with other  businesses  that
produce  products  similar  to ours;  our  ability  to  obtain  additional  debt
financing  as  needed  and  on  acceptable  terms;  customer  acceptance  of new
products;  the regulatory environment in which we operate; and general trends in
the local,  regional and national economies of the United States and Canada. You
should be aware that these  factors are not an exhaustive  list,  and you should
not  assume  these are the only  factors  that may cause our  actual  results to
differ from our expectations.

                                     PART I

Item 1.  Description of Business

General
-------

PML  Microbiologicals,  Inc. is the sole  operating  subsidiary of PML, Inc. and
consequently   references   herein   to   "PML"  or  "the   Company"   are  used
interchangeably.  PML,  which has been in business  since  1969,  markets to the
clinical  market  (diagnosis of diseases in humans),  to the  industrial  market
(environmental   and  sterility   testing),   and  to  the  original   equipment
manufacturers (OEM) market (private label clinical products).  Typical customers
for PML's clinical  products include  hospitals,  clinics,  and wholesalers that
market to hospitals and clinics.  Industrial  customers  include  pharmaceutical
companies,  biotech research facilities, and food and water testing enterprises.
The OEM market includes companies in the medical device industry.

In September  1991,  the Company  entered into a  transaction  with  Monogenesis
Corporation,  in which it purchased a  non-operating  subsidiary of  Monogenesis
Corporation  named Meda,  Inc. This entity was  subsequently  renamed PML, Inc.,
which became the parent organization of Prepared Media Laboratory,  Inc. and was
later renamed PML Microbiologicals, Inc.

PML,  Inc.  shares  have  been  listed on the NASD  Over-the-Counter  Electronic
Bulletin Board since January 1993 under the symbol "PMLI".

Products
--------

The  Company's  product line  consists of  diagnostic  products  and  supporting
materials  used  by  both  clinical  and  industrial  microbiologists.  Clinical
diagnostic products include,  among other items, prepared culture media in


                                       3
<PAGE>
Petri  dishes,  tubes  and  bottles  for use in  culturing  and  differentiating
organisms   from   specimens;   various   kits,   disks  and  strips  for  rapid
identification  of organisms;  microdilution  ("MIC") panels for determining the
minimum  inhibitory  concentration of antibiotics  which may be used against the
cultured organisms;  and various identification stains and reagents. The Company
also  offers  a  complete  line  of  irradiated  media  used  for  environmental
monitoring and sterility testing by the  pharmaceutical,  biotechnology and food
and beverage  industries.  Supporting  materials  include  inoculating loops for
inoculating a specimen into culture media; transport media for keeping specimens
viable until they are delivered to the laboratory;  lyophilized  quality control
organisms;  gas generating systems for providing the proper gaseous  environment
for culturing organisms;  swabs for collecting specimens;  and various fixatives
and preservatives.

The majority of the Company's products have a defined shelf life ranging from as
little as a few weeks for media in Petri dishes to one year or more for products
in test  tubes or  bottles.  Most  products  require  refrigeration  to  prevent
premature  deterioration  and some products are stored and shipped frozen.  Most
products can be shipped by common carrier overnight  without special  protective
packaging except for shipments to or through areas of extreme temperature.  Some
products,  such as general laboratory reagents,  contain hazardous chemicals and
require special storage, packaging, and shipping. See "Regulatory Matters."

Marketing
---------

The  Company  markets its  products  primarily  in the United  States and Canada
through its internal sales  organization  and through a growing network of major
distributors.  Customers  include  both  clinical  and  industrial  microbiology
laboratories.  Hospital and private  medical  laboratories,  as well as doctors'
offices and clinics make up most of our clinical market.  The industrial  market
includes  food  and  drug   packagers,   food  and  water   testing  labs,   and
pharmaceutical  and  biotechnology  research  firms.  The  OEM  market  includes
companies that  manufacture  medical devices or industrial  equipment  requiring
media based suppliers.

Based upon  management's  research and  information  derived from sources  which
management believes to be reliable,  the clinical microbiology market exceeds $1
billion  annually in the United  States.  The Company  estimates the  industrial
market to be in excess of $100 million and growing.  The prepared  culture media
segment of the clinical  microbiology market is similarly estimated at over $200
million.  The  balance  of this  market  consists  of  products  such  as  viral
identification kits, mainly for hepatitis and AIDS, bacteriology  identification
test kits, and automated microbiology systems.

Although  prepared  culture media  represents only a modest portion of the total
microbiology  products  market,  these  products  are some of the most basic and
essential  tools  used  by  microbiologists.   Despite  technological  advances,
conventional  culture media are among the cheapest and most reliable methods for
identification  of  microorganisms.   Product  differentiation  between  various
suppliers of prepared  culture media typically  shows only minimal  differences;
price and service are generally the key variables, and culture media tends to be
a very  competitive  market.  The Company  maintains  a strong  presence in this
product line because of its overwhelming  importance to microbiologists  and the
proven  value  of the  Company's  service  philosophy  in  gaining  and  keeping
customers.  The Company's main  marketing  strategy is to acquire and/or develop
newer  technological  products that can be sold in conjunction with conventional
culture  media.  Marketing  selected  products  at the  national,  regional  and
international level is another strategy the Company believes will be successful.

In addition, the Company has increased its focus on the industrial  microbiology
market and OEM  market,  which  appear to be  growing at a faster  pace than the
clinical market.  In fiscal 2002, the Company's sales in the industrial  segment
continued to increase,  and management is optimistic about further  increases in
fiscal 2003.

Distribution of Products
------------------------

The  Company  has  distribution  centers in or near the  following  metropolitan
areas; Portland, Oregon; Providence,  Rhode Island; Vancouver, British Columbia;
and  Toronto  (Mississauga),  Ontario  to  facilitate  shipping  and shelf  life
requirements.  Each distribution center has temperature-controlled storage areas
and a


                                       4
<PAGE>
full inventory of routinely ordered products.  Each distribution center receives
the bulk of its  inventory  from the  nearest PML  production  plant on a weekly
basis with specialty  products (those other than routine  prepared culture media
commercially available from most suppliers) and distributed products coming from
the Wilsonville plant, a Portland,  Oregon suburb. The Company typically ships a
complete  customer  order within  twenty-four  to  forty-eight  hours  following
receipt of the order.  Depending on the size of the order, customer requirements
and  distance,  shipments  are  made by  local  courier,  international  package
delivery service (e.g. UPS, Federal Express) or an over the road common carrier.

Manufacturing
-------------

The  majority  of the  Company's  sales  consist of  products  it  manufactures;
primarily  prepared  culture  media in Petri  dishes,  tubes  and  bottles.  The
manufacturing process is essentially a mixing,  filling and packaging operation.
The culture  medium  itself is a blend of powdered  nutrients,  which  typically
include beef and soy  byproducts;  agar, a seaweed  derivative used as a gelling
agent; and other nutritional or diagnostic  substances such as animal blood. For
Petri dish products, the powdered nutrients are blended and rehydrated, with the
resulting liquid  sterilized in pressure vessels and aseptically  dispensed into
presterilized  plastic  Petri  dishes.  As the  medium  cools,  it  gels  into a
semi-solid  state and is then  packaged  for sale.  Tubed and bottled  media are
prepared in a similar manner except that these  products are usually  sterilized
after they are dispensed.

With the exception of small batches,  the Company  produces most of its products
on custom-designed semi-automated production equipment. For example, empty Petri
dishes are loaded into a filling machine where automated dispensing pumps fill a
measured  amount  of  culture  medium  into each  dish.  The dish  moves  onto a
refrigerated  cooling  conveyor  where  gelling  occurs;  it is then stacked and
packaged.  The finished  products are stored in a quarantine  area until quality
control testing is complete and the batch is approved for distribution.

The Company maintains a quality control  laboratory in each of its manufacturing
plants as part of its Total Quality Assurance  program.  The quality control lab
tests raw material samples prior to purchase,  and tests representative  samples
from each production batch for sterility, pH, color, and general appearance,  as
well as the  growth  of the  microorganisms  that the  product  is  designed  to
culture.

In  addition  to culture  media,  the  Company  produces a variety of  ancillary
products  such as stains,  reagents,  microdilution  MIC  panels,  animal  blood
products,  and  a  variety  of  chemical  solutions  used  by  other  production
departments.  The manufacturing  process for certain PML ancillary products such
as stains,  reagents,  and other chemical solutions generates a small amount (50
to 100 gallons per year) of  hazardous  materials,  which  consist  primarily of
organic  solvents and heavy metal salts.  The Company hires  licensed  hazardous
waste disposal  companies for the disposal of these materials at a nominal cost.
See "Regulatory Matters."

Suppliers
---------

The Company's largest  suppliers  provide Petri dishes,  blood, agar and plastic
packaging  material,  which are available from a number of sources in the United
States  and  Canada.   Several  manufacturers  and  distributors  of  glassware,
chemicals and packaging  materials are currently  operating in the United States
and Canada.

Competition
-----------

The Company operates in three distinct  markets,  clinical,  industrial and OEM,
with each containing different customers and competitive forces.

In the  clinical  market,  the  Company's  primary  customers  are  hospital and
clinical laboratories.  In the United States, most hospitals have become members
of buying  groups known as Group  Purchasing  Organizations  (GPOs),  which have
negotiated single supplier  contracts for prepared media from only one supplier.
Under these agreements,  the Company's  principal  competitor,  Becton Dickinson
Microbiology  Systems  (BDMS),  a  subsidiary  of Becton  Dickinson  & Co.,  has
obtained sole source supplier status to approximately 85% of the U.S. market. In
the Canadian  clinical  market,  normal  nonrestrictive  competitive  conditions
exist, and the


                                       5
<PAGE>
Company has historically outperformed all of its competitors and has continually
increased its market share.

In the industrial  market,  the key  competitive  factors are product  features,
quality and  service.  Only one other  significant  competitor  competes in this
market and  management  believes  the Company  competes  favorably  against this
supplier.

In the  OEM  market,  the  Company  is  one  of  very  few  companies  supplying
media-based  products.  Product  quality  and  customer  responsiveness  are the
primary  factors for success in this market.  Management has been  successful in
expanding this market against its competitors.

Research and Development
------------------------

The Company does a small amount of pure research and  development ("R & D"). The
principal  purposes of its current R & D activities  are to improve its products
(e.g.,  testing  additional   ingredients  and  formulas  or  enhancing  certain
performance characteristics), to evaluate products being considered for addition
to the Company's  product line,  and to develop new products for addition to its
line.  Multiple   departments  within  the  Company  and  independent   research
scientists retained by the Company presently perform R & D functions.

Patents and Licenses
--------------------

The Company owns a number of patents, trademarks and licenses, but no individual
patent,  trademark,  or license is  material  or  critical to the Company or any
particular product line.

Employees
---------

On May 31, 2002 and 2001,  the Company had  approximately  151 and 155 full time
employees  respectively.  Minor fluctuation in the number of employees occurs in
the ordinary course  throughout the year as  manufacturing  demand changes.  The
Company's  employees  are located  throughout  North  America  with the heaviest
concentrations  in  Wilsonville,  Oregon  (a suburb of  Portland,  Oregon),  and
Mississauga, Ontario (a suburb of Toronto, Ontario), Canada.

The Company's  employees are not covered by a collective  bargaining  agreement,
and the Company considers its employee relations to be satisfactory.

Regulatory Matters
------------------

As a  manufacturer  of  medical  devices,  the  Company  is  subject  to certain
regulations of the U.S. Food and Drug  Administration  (FDA) and Canada's Health
Protection  Branch  (HPB).  These  regulations  require  that  these  government
agencies  inspect  the  Company's   products,   facilities,   and  manufacturing
processes. The Company's facilities, processes and products have received all of
the  required  approvals  management  believes  are  required,  and the  Company
believes that it is in compliance with all relevant FDA and HPB requirements.

In addition, the Company is subject to other federal, state and local regulatory
requirements  relating to environmental  concerns,  waste management,  hazardous
materials  shipping,  and  health  and safety  matters.  Some risk of  liability
related to these  matters  exists in the  Company's  business;  principally  the
disposal  of small  quantities  of  by-product  of the  Company's  manufacturing
processes.  Management  believes  that the  Company's  business  is  operated in
compliance with applicable laws and regulations.

In fiscal 2001, the Company made a commitment to become  certified  under one of
the  International  Standardization  Organization  (ISO) 9000 Series  Standards,
committing to ISO 9001 standard  "Quality  System".  The Company's  Wilsonville,
Oregon facility achieved ISO 9001 and ISO 13485 certification in April of fiscal
2001.  The  Company's  other  three   facilities,   Providence,   Rhode  Island,
Mississauga,  Ontario and Richmond,  British Columbia achieved ISO certification
in Fiscal 2002.

                                       6
<PAGE>
Effective  January 2003, Canada will require Canadian  manufactures,  related to
the  class  of the  device,  to be  certified  to ISO  13485  or  13488  quality
standards. The Company's goal is to use the ISO 13485 certificate to demonstrate
compliance with the quality system requirements of Canada.

Liability Insurance
-------------------

The Company maintains  liability  insurance in the amount of $2 million dollars,
with an additional $10 million dollar umbrella policy.  Based on the essentially
confirmatory  nature  of the  majority  of the  Company's  diagnostic  products,
management  believes  that  the  Company  is not  subject  to  material  product
liability risk with its present product line.

Item 2.  Description of Properties

The Company owns its Mississauga,  Ontario facility and currently  operates from
three other leased  locations,  one in Wilsonville,  Oregon,  one in Providence,
Rhode Island and one in Richmond,  British Columbia. Each facility has extensive
leasehold  improvements  and  equipment.  The  following  chart  summarizes  the
Company's facilities.

                                Approximate        Approximate
                               Square Footage     Square Footage        Lease
         Location              Manufacturing   Admin & Distribution  Expiration
         --------              -------------   --------------------  ----------
OWNED:
  Mississauga, Ontario          16,000             3,000                   N/A

LEASED:
  Wilsonville, Oregon            9,000            34,000             June 2004
  Providence, Rhode Island           -            12,000           April, 2004
  Richmond, British Columbia         -             5,100            June, 2005

The  Wilsonville  facility  houses all  corporate  administrative  functions,  a
manufacturing unit, and a distribution center. The manufacturing production unit
supplies  conventional  culture media to the western  United States and Canadian
regions and provides  specialty  products to all other locations.  Equipment for
the production of PML's  PHASE2(R)  blood culture  system,  DUOTEK(R)  sterility
testing  system,   MIC  panels,   and  dehydrated  media  are  also  located  in
Wilsonville.

The  Mississauga  manufacturing  plant produces mostly high volume culture media
for eastern Canada and for the eastern  United States,  and provides much of the
Company's  industrial  contact plate  product line and assembly of  parasitology
kits on a contract basis for various Canadian accounts.

The lease on the Wilsonville,  Oregon facility, which ends June 30, 2004, allows
two successive  options to renew the lease for two (2) successive  terms of four
(4) years each,  which must be exercised one at a time in succession.  The lease
on the Providence, Rhode Island facility ends April 30, 2004, is the last option
to renew the original  lease signed on June 23, 1994. The lease on the Richmond,
British Columbia  facility was renewed July 1, 2002 for a three-year term ending
June 30, 2005,  converting if not renewed, to a month-to-month rental agreement.
The Company does not expect any material difficulty in extending or renewing any
of its leases as they come due.

Item 3.  Legal Proceedings

The  Company  occasionally  has been made a party to  incidental  suits or other
legal  actions  arising in the ordinary  course of its  business.  As previously
reported,  on September  14, 2000 a complaint  was filed naming the Company as a
defendant in a lawsuit filed by Bayer Corporation in North Carolina state court.
The case,  Bayer  Corporation v. VWR  Scientific  Products  Corporation  and PML
Microbiologicals,  Inc.,  alleged  breaches of express and implied  warranty and
products  liability  claims.  Bayer  had  sought  unspecified  damages,  and PML

                                       7
<PAGE>
tendered  the claim to its products  liability  insurance  carrier.  On July 25,
2002,  all matters  between the parties  were  satisfactorily  resolved  and all
claims between and among PML Inc., its subsidiaries, and all plaintiffs relating
to  allegations  that  involve  PML,  Inc.  were  subsequently  dismissed.   The
settlement  agreement  had no  financial  impact on PML's  operating  results or
financial condition in past or future reporting periods.

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

There were no matters  submitted  to a vote of the security  holders  during the
fourth quarter ended May 31, 2002

                                     PART II

Item 5.  Market for Registrant's Common Equity and Related Stockholder Matters

The Company's Class A Common Stock trades on the NASD Over-the-Counter  Bulletin
Board system under the symbol  "PMLI." The  following  table sets forth the high
and low closing bid prices for the last two years as reported by PinkSheets LLC,
(formerly The National Quotation Bureau).

              For the Quarterly             High               Low
              Period Ended                Bid Price         Bid Price
              ------------                ---------         ---------

              May, 2002                   $1.40000          $0.51000
              February, 2002              $0.75000          $0.40000
              November, 2001              $1.01000          $0.55000
              August, 2001                $1.25000          $1.01000
              May, 2001                   $1.39000          $1.07000
              February, 2001              $1.25000          $1.25000
              November, 2000              $2.12500          $1.25000
              August, 2000                $1.37500          $0.75000

The Company has not paid any cash  dividends  on the Class A Common Stock in the
past and  anticipates  that,  for the  foreseeable  future,  it will  retain all
earnings for use in its business.  The Company's  loan agreement with its lender
does not allow the  Company to declare or pay cash  dividends  on Class A Common
Stock without the consent of the lender.  There were approximately  1,076 record
holders of the Class A Common Stock as of May 31, 2002.

Item 6.  Management's Discussion and Analysis of Financial Condition and
         Results of Operations

Canadian Currency Exchange
--------------------------

PML,  Inc. is  incorporated  in the United  States but has  several  significant
operating locations in Canada.  Since management has previously  determined that
the  functional  currency of the Canadian  operations  is the U.S.  dollar,  the
Company must consolidate its foreign operations by using the appropriate foreign
exchange rate in  accordance  with  generally  accepted  accounting  principles.
Unlike  many of its  competitors,  the Company  manufactures  in both the United
States and Canada and ordinarily receives approximately 35% of its revenues from
Canadian sales.

The currency  exchange  rates  between the United States dollar and the Canadian
dollar for the past four years has been very unstable  declining from a high but
stable rate of $0.73 in early 1998, to reaching an  historical  low of $0.625 in
February 2002 before showing any improvement. For the quarter ended May 31, 2002
and May 31, 2001, the average rate was $0.64 and $0.65 respectively,  and at May
31, 2002 the exchange rate stood at $0.65.


                                       8
<PAGE>
The slight  improvement in the exchange rates during the three-months  ended May
31, 2002 resulted in a gain to earnings of approximately $13,000. For the twelve
months ending May 31, 2002 and May 31, 2001, the average exchange rate was $0.64
and $0.66 respectively, and as reported above the rate at May 31, 2002, stood at
$0.65,  resulting  in a charge to  earnings of  approximately  $43,400 in fiscal
2002, compared to a charge of approximately $30,500 during fiscal 2001.

Accounting Estimates
--------------------

The  preparation  of the  Company's  financial  statements  in  conformity  with
generally  accepted  accounting  principles  (GAAP) requires  management to make
estimates  and  assumptions  that  affect  the  reported  amounts  of assets and
liabilities  and reported  amounts of revenues and expenses during the reporting
periods. Actual results often will differ from those estimates.

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

General

The Company's operating results showed dramatic  improvement in nearly all areas
of  manufacturing  and sales margins.  Despite  inflationary  trends,  operating
expenses  remained  virtually flat over the prior year.  However,  the continued
decline in the Canadian  currency  exchange rate during  fiscal 2002  negatively
affected  sales  revenue.   Non-operating  expenses,  primarily  interest,  also
improved  during  fiscal 2002 because of favorable  interest  rates and debt pay
down.

All of these factors  contributed  to the dramatic  improvement in income before
taxes. The fiscal 2002 pre tax income of $701,775 is over 96% higher than fiscal
2001.  Detailed  discussions of the comparison of the operating  results for the
forth quarter and the fiscal years of 2002 and 2001 follow.

Three Months Ended May 31, 2002 Compared to May 31, 2001

In this three-month  period sales increased 1.8% or  approximately  $63,000 over
the same period in fiscal 2001. There was no measurable  effect on sales in this
three-month period related to the Canadian currency exchange.

Cost of goods sold  continued  to improve in this  three-month  period  with the
Company  realizing  a 57.7% rate to sales  compared to a 59.7% rate in this same
period of fiscal 2001. All manufacturing  functions (i.e., material yield, labor
utilization,  purchase  variances,  etc.)  improved  as a result  of  management
controls and  monitoring.  Management  believes that this level of cost of goods
sold will continue and reflects the return on investment the Company has made in
equipment upgrades and facility  improvements in its US and Canada manufacturing
areas.

Operating expenses for this three-month period increased  approximately  $29,000
over operating  expenses for the same period of fiscal 2001, but as a percent of
sales increased only 0.3%.

Other  expenses  decreased  approximately  $45,000 or 80.0% in this  three-month
period from the same period of fiscal 2001.  This  improvement  is attributed to
decreases in interest  expense due to lower  interest rates and less reliance on
the  Company's  credit line  facility,  and a gain to earnings of  approximately
$13,000 due to an improvement in the Canadian  exchange  translation as reported
above under Canadian Currency Exchange.

Fiscal Year May 31, 2002 Compared to Fiscal Year May 31, 2001

Sales were flat for the twelve-month  period ended May 31, 2002 when compared to
the same period of fiscal 2001,  declining  approximately  0.1% or approximately
$15,000. However,  excluding the negative effect of the continued decline in the
Canadian  exchange  translation  as  reported  above  under  "Canadian  Currency
Exchange",  actual sales would have increased 1.2%, or  approximately  $157,000,
had the rate between these two periods stayed the same.

                                       9
<PAGE>
Cost of goods sold as a  percentage  of sales  improved  to 58.5% in fiscal 2002
compared to 60.9% in fiscal 2001.  Management's  goal to bring its cost of goods
sold to 60.0% of sales or lower  was  achieved  in the third  quarter  of fiscal
2002, and is directly  related to management  controls and  monitoring,  and the
investments  made by the  Company  in  manufacturing  facilities  and  equipment
upgrades in fiscal 2001 and 2002.  Management  expects to maintain this level of
cost-to-sales  ratio,  but the  Company  will  have to  continue  to  invest  in
modernizing its equipment to meet future growth and customer  demands.  Further,
management  believes  that  any  future  investment  in  equipment  or  facility
improvements can be funded from current operating activities and bank loans.

Operating  expense  as a percent  of sales  increased  to 34.5% in  fiscal  2002
compared to 34.3% in fiscal 2001, or approximately $23,700.

Other expense decreased 22.0% or approximately  $62,600 from fiscal 2001, and is
directly  related to reduced  interest  expense due to decreases in the interest
rate and less  dependency  of the  Company  on its line of credit.  However,  if
adjusted for approximately $31,400 of costs associated with the final settlement
of a legal  action as reported in the  Company's  10-QSB for the fiscal  quarter
ended August 31, 200, not associated with the legal action discussed above under
"Item 3. Legal  Proceedings",  other  expense  would have improved an additional
11.0%.

The following table presents the percentage  relationship  between certain items
in the Company's  Consolidated  Statements  of Operations  and Net Sales for the
periods indicated.

                                       Three Months Ended         Year Ended
                                       ------------------         ----------
                                            May 31,                May 31,
                                            -------                -------
                                        2002        2001       2002        2001
                                        ----        ----       ----        ----

         Net Sales                     100.0%      100.0%     100.0%      100.0%
         Cost of Goods Sold             57.7        59.7       58.5        60.9
                                      ------      ------     ------      ------
         Gross Profit                   42.3        40.3       41.5        39.1
         Operating Expense              33.5        33.3       34.5        34.3
                                      ------      ------     ------      ------
         Operating Income                8.8         7.0        7.0         4.8
         Other expense                   0.3         1.6        1.7         2.1
                                      ------      ------     ------      ------
         Income before income taxes      8.5         5.4        5.3         2.7
         Income tax expense (benefit)   (0.1)        3.0        1.2         1.2
                                      -------    -------     ------      ------
         Net income                      8.6%        2.4%       4.1%        1.5%
                                      =======    =======     ======      ======

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

As discussed  in  "General"  above,  in fiscal 2002 the Company  continued  it's
program to invest in  facility  improvements  and  upgrade  aging  manufacturing
equipment. Of these improvements,  approximately $330,000 utilized existing cash
generated  from  operations.  In  addition,  approximately  $370,000 of cash was
utilized  to pay down  debt  and  reduce  current  liabilities.  Because  of the
positive   direction  in  the  Company's   operations,   this   consumption   of
approximately  $700,000  had no  negative  effect  in the cash  position  of the
Company or the financial ratios of the Company for the fiscal year ended May 31,
2002.

The ratio of  current  assets to  current  liabilities  is 1.07 at May 31,  2002
compared  to  0.95  at May  31,  2001.  Quick  liquidity  (current  assets  less
inventories divided by current liabilities) was 0.59 at May 31, 2002 and 0.55 at
May 31,  2001.  At May 31,  2002,  the Company  had working  capital of $234,530
compared with working a capital  deficit of  ($175,166)  at May 31, 2001.  Trade
receivables at May 31, 2002 had a 52 days average  collection period compared to
53 days at May 31, 2001.

The Company has financed its operations over the years principally through funds
generated  from  operations  and bank  loans.  Net cash  provided  by  operating
activities  was  $655,128  in  fiscal  2002  compared  to net cash  provided  by
operating  activities  of $504,011 in fiscal  2001.  Net cash used in  investing
activities  was $448,707


                                       10
<PAGE>
in fiscal 2002 compared with $832,360 used in fiscal 2001. The  expenditures  in
fiscal  2002,  as  in  fiscal  2001,  were  mainly  for  manufacturing  facility
improvements and equipment purchases in Toronto, Canada and replacement of aging
equipment at our Wilsonville, Oregon manufacturing facility. Cash from financing
activities,  including  net  repayments  toward  our  existing  credit  line  of
$121,907,  increases of $121,865 in long-term  debt and  repayments  of existing
debt obligations of $117,335 and payments toward accreted  dividends of $24,480,
resulted in net cash used of $141,857. This compares to cash provided of $34,242
from  financing  activities  in fiscal  2001,  primarily  from  increases in the
Company's credit line facility and increases in long-term debt.

The Company has a revolving line of credit and a revolving  equipment term loan.
The line of credit has a maturity  date of  November  30,  2002;  each  drawdown
against  the  equipment  term  loan has a  five-year  amortization.  The  amount
available  under the line of credit is limited to  $2,500,000  based upon 80% of
our eligible  accounts  receivable  and 40% of eligible  inventory not to exceed
$600,000, at the end of each reporting period. The revolving equipment term loan
has a limit of $500,000.  Both lines are secured with  substantially  all of the
Company's assets,  and will be repaid primarily out of the Company's  receivable
collections and other funds from operations.  As of May 31, 2002 the Company was
in compliance with all operating covenants required by its lender.

The Class A  convertible  preferred  shares have a provision  that calls for the
accretion  of  dividends  annually  at a rate of prime plus 1.5%.  As of May 31,
2002,  accreted  dividends  totaled  $347,388.  See  Note  8  of  the  Notes  to
Consolidated  Financial  Statements.  The Company's revolving line of credit and
revolving  equipment  term loan,  limit the  Company's  ability to pay dividends
accrued on these securities.

The  Company  may  require  additional  capital to finance  current  operations,
enhance  or  expand  its  manufacturing   capacity  in  accordance  with  future
developments  in its business  strategy,  or for additional  working capital for
inventory and accounts  receivable.  The Company may also seek additional  funds
through public or private debt or through bank borrowings.
<TABLE>
<CAPTION>
Our total debt structure at May 31, 2002 is as follows:
                                                                Long-Term       Current Portion
                                                                ---------       ---------------
<S>                                                             <C>             <C>
     Revolving credit line at prime plus .25%, (5.0% at
       May 31, 2002), due November 30, 2002                             -            $1,698,724
     Equipment term loan accruing interest at
       9.16%, due November 30, 2005                                33,461                10,103
     Equipment term loan accruing interest at
       8.27%, due November 30, 2005                                59,330                17,138
     Equipment term loan accruing interest at
       8.27%, due November 30, 2005                                85,345                17,685
     Capital Lease obligations, one due June 2002 and one
       due January 2005                                            22,356                 8,511
     Note payable at 6%, due May 2005                              20,000                10,000
     Note payable at prime less .25% (4.5% at May 31, 2002)
       due May 1, 2010                                            473,745                28,005
                                                                 --------        --------------
     Total Bank and Term debt                                     694,237            $1,790,166
                                                                 --------        --------------
     Notes payable to related parties                             186,968                92,941
                                                                 --------        --------------
     Total long and short term debt                             $ 881,205            $1,883,107
                                                                =========        ==============
</TABLE>


Critical Accounting Policies
----------------------------

The  Company's  significant  accounting  policies are described in Note 2 to the
financial  statements  included in Item 13 of the Annual  Report on Form 10-KSB.
The Company  believes its most critical  accounting  policy is the allowance for
doubtful accounts.

                                       11
<PAGE>
Estimates for inventory  obsolescence  reserves are  developed  using  inventory
aging reports for finished goods,  work-in-progress and raw materials,  combined
with historical usage,  forecasted usage and inventory shelf-life.  As trends in
these  variables  change,  the  percentages   applied  to  the  inventory  aging
categories are updated.

The $50,000  estimate of  allowance  for  doubtful  accounts is comprised of two
parts,  a  specific  account  analysis  and a general  reserve.  Accounts  where
specific  information  indicates a potential  loss may exist are  reviewed and a
specific  reserve  against  amounts due is recorded.  As additional  information
becomes  available such specific account reserves are updated.  Additionally,  a
general  reserve  is  applied  to  the  aging  categories  based  on  historical
collection  and write-off  experience.  As trends in historical  collection  and
write-offs change, the percentages applied against the accounts receivable aging
categories are updated.

Recently  issued  accounting  standards - In June 2001 the Financial  Accounting
Standards Board ("FASB") approved  Statement of Financial  Accounting  Standards
("SFAS") No. 141,  "Business  Combinations,"  SFAS No. 142,  "Goodwill and Other
Intangible  Assets,"  and  SFAS  No.  143,   "Accounting  for  Asset  Retirement
Obligations."  SFAS No. 141  prospectively  prohibits  the  pooling of  interest
method of accounting for business  combinations  initiated  after June 30, 2001.
SFAS No. 142 requires  companies to cease  amortizing  goodwill  that existed at
June 30, 2001.  SFAS No. 142 also  establishes a new method of testing  goodwill
for  impairment  on an annual basis or on an interim basis if an event occurs or
circumstances  change that would more likely than not reduce the fair value of a
reporting  unit  below its  carrying  value.  SFAS No. 143  addresses  financial
accounting  and  reporting for  obligations  associated  with the  retirement of
long-lived  assets and the associated  asset  retirement  costs.  The Company is
required  to adopt SFAS No. 143 as of June 1, 2003.  The  Company  expects  that
there will be no effect on our  financial  results  relating to the  adoption of
SFAS No. 141, SFAS No. 142 and SFAS No. 143.

In August 2001,  the FASB issued SFAS No. 144,  "Accounting  for  Impairment  or
Disposal  of  Long-Lived  Assets".   SFAS  No.  144  supersedes  SFAS  No.  121,
"Accounting for the Impairment of Long-Lived Assets and for Long-Lived Assets to
Be Disposed Of" and  addresses the  financial  accounting  and reporting for the
impairment  or disposal of long-lived  assets.  The Company is required to adopt
SFAS No.  144 as of June 1,  2002.  The  Company  expects  that there will be no
effect on our financial results relating to the adoption of SFAS No. 144.

In April 2002,  the FASB issued SFAS No. 145,  "Rescission of FASB Statement No.
4, 44, and 64,  Amendment of FASB Statement No. 13, and Technical  Corrections."
SFAS No. 145 generally  requires that any gains or losses on  extinguishment  of
debt in current or prior periods be classified  as other income  (expense).  The
Company  expects to adopt the  provisions  of SFAS No.  145 in its  fiscal  year
ending May 31, 2003. The Company is currently  evaluating the impact of adopting
the provisions of SFAS No. 145 in its financial statements.

In July 2002,  the FASB issued SFAS No. 146,  "Accounting  for Costs  Associated
with Exit or Disposal  Activities." SFAS No. 146 requires companies to recognize
costs associated with exit or disposal  activities when they are incurred rather
than at the date of a commitment to an exit or disposal  plan.  SFAS 146 will be
applied  prospectively  to any  exit  or  disposal  activities  initiated  after
December 31, 2002. The Company  expects there will be no effect on its financial
results relating to the adoption of SFAS No. 146.


Item 7.  Financial Statements and Supplementary Data

The information required by this item starts on page 19 of this report.

Item 8.  Changes in and Disagreements with Accountants on Accounting Disclosure

PML's independent accountants, Moss-Adams LLP, were engaged in April 1999. There
have been no  disagreements  with the  accountants  on any matter of  accounting
principles or practices,  financial  statement  disclosures,  auditing  scope or
procedures.



                                       12
<PAGE>
                                    PART III

Item 9.  Directors, Executive Officers, Promoters and Control Personnel;
         Compliance with Section 16(a) of the Exchange Act

Directors and Executive Officers of the Company
-----------------------------------------------

The  directors  and  executive  officers  of the  Company at May 31, 2002 are as
follows:
                                                                 Term as
                Name                Position                 Director Expires
                ----                --------                 ----------------

         A. Ron Torland        Chairman of the Board             2002
                               Secretary, Treasurer

         Kenneth L. Minton     President and
                               Chief Executive Officer
                               Director                          2002

         Douglas C. Johnson    Director                          2002

         Craig S. Montgomery   Director                          2002


A. Ron  Torland,  age 55, has been  employed by the  Company or its  predecessor
since 1970. He became Chairman of the Board in 1988, was Chief Executive Officer
from 1988 to 1996,  and was President  from 1982 to 1988. He was Treasurer  from
1972 to 1996 and a member  of the  Board of  Directors  since  the  Company  was
incorporated in 1972. Mr. Torland holds a B.S. degree in business administration
and served in the U.S. Army from 1968 to 1970.

Kenneth  L.  Minton,  age 52,  was hired as the  Company's  President  and Chief
Executive  Officer in April,  1996, and was elected to the Board of Directors in
November,  1997.  Prior to joining  PML, he was  President  and Chief  Operating
Officer of Hind, Inc., a manufacturer and distributor of high end sports apparel
from 1993 to 1996,  and Vice  President  of  Microwave  Applications  Group,  an
electronics  manufacturer,  from 1985 to 1993.  Prior to 1985,  Mr.  Minton  had
extensive  experience  in  operations,  finance,  sales and marketing in several
industries. Mr. Minton holds a B.S. degree in Business Administration.

Douglas C. Johnson, age 46, has been a director of the Company since March 1996.
He holds a B.A. degree in Music from Fort Wright College in Spokane, Washington,
and a Masters Degree from the University of Southern  California in Los Angeles.
He has been a professional  opera singer for 13 years,  performing in Europe for
nine  years.  Mr.  Johnson  returned to the US in 1995 and joined the Company in
November, 1995. He currently holds a position in the Company as Project Manager.

Craig S.  Montgomery,  Ph.D.,  48 has been a director of the Company since March
1996. He is a licensed clinical psychologist.  From 1983 to 1991, he was Program
Director of New Day Center,  Portland,  Oregon,  a  residential  and  outpatient
facility for chemical dependency  treatment.  From 1991 to 1993, he was Clinical
Supervisor of both the New Day Center and the Dual Diagnosis program at Portland
Adventist Hospital and Caremark Behavioral Health Services. He is now in private
practice. Dr. Montgomery holds a Masters Degree from Pepperdine University and a
Ph.D.  from the  California  School of  Professional  Psychology  in San  Diego,
California.

No  director  holds a  directorship  in any other  Company  reporting  under the
Securities and Exchange Act of 1934.


                                       13
<PAGE>
Significant Employees

There are no significant employees as defined by the SEC other than those listed
above.

Family Relationships
---------------------

Mr. Torland and Dr. Montgomery are stepbrothers. Mr. Johnson is Dr. Montgomery's
and Mr. Torland's brother-in-law.

Beneficial Ownership Reporting Compliance
-----------------------------------------

Based solely upon a review of forms 3 and 4 and amendments  thereto furnished to
the registrant under Rule 16a-3(e) during its most recent fiscal year and Form 5
and  amendments  thereto  furnished to the  registrant  with respect to its most
recent  fiscal year,  the Company  believes  that those  persons who, at various
times during that fiscal year, were directors, officers, or beneficial owners of
more than 10 percent of any class of equity securities of the Company registered
pursuant to Section 12 of the  Securities  Exchange  Act filed on a timely basis
reports  required by Section  16(a) of the  Exchange  Act during the most recent
fiscal year and prior fiscal years.

Item 10.  Executive Compensation

The  information  required in response to Item 10 shall appear in our definitive
proxy  statement  to be  filed  pursuant  to  Regulation  14A of the  Securities
Exchange Act of 1934 in  connection  with PML's 2002 Annual  Meeting,  and it is
incorporated herein by reference when filed.

Item 11.  Security Ownership of Certain Beneficial Owners and Management

The  following  table sets forth  information  with respect to the  ownership of
issued  and  outstanding  shares of the  Company  as of the date  hereof by each
director,  executive  officer,  and  person  known  to  the  Company  to be  the
beneficial owner of more than 5% of any class of the Company's voting securities
as of July 31, 2001.

Amount and              Name and Address                Nature of      Percent
Title of                of Beneficial                   Beneficial     of Class
Class                   Owner                           Ownership
-------------------------------------------------------------------------------

Class A Common Shares   A. Ron Torland                  183,381 (a)     10.3%
                        10595 SW Kiowa Street
                        Tualatin, OR  97062

Class A Common Shares   Julian G. Torland               144,705 (e)(f)   8.1%
                        11100 SW North Dakota Street
                        Tigard, OR  97223

Class A Common Shares   Douglas C. & Joanne E. Johnson  266,832 (b)     14.9%
                        21860 SW 103rd Ct.
                        Tualatin, OR  97062

Class A Common Shares   Craig S. Montgomery             167,243 (c)      9.4%
                        12600 SE Rachella Court
                        Boring, OR  97009

Class A Common Shares   Marcia & Stan Drake             121,243          6.8%
                        28890 S. Beavercreek Rd.
                        Mulino, OR  97042

                                       14
<PAGE>
Item 11.  Security Ownership of Certain Beneficial Owners and Management
          (Continued)

Class A Common Shares   Mary Lou Ham                    167,243 (d)      9.4%
                        1051 Windsong Lane
                        Moscow, ID  83843

Class B Common Shares   A. Ron Torland                  142,902         67.5%
                        10595 SW Kiowa Street
                        Tualatin, OR  97062

Class B Common Shares   Julian G. Torland                68,649         32.5%
                        11100 SW North Dakota Street
                        Tigard, OR  97223
Class A Convertible
Preferred Shares        Arthur N. and Bessie M. Torland   1,250         25.2%
                        10755 SW Lucas Dr.
                        Tualatin, OR  97062

Class A Convertible
Preferred Shares        Julian G. Torland                   700         14.1%
                        11100 SW North Dakota Street
                        Tigard, OR  97223

Class A Convertible
Preferred Shares        Douglas C. & Joanne E. Johnson    1,800         36.3%
                        21860 SW 103rd CT.
                        Tualatin, OR  97062

Class A Convertible     A. Ron Torland                      300          6.1%
Preferred Shares        10595 SW Kiowa Street
                        Tualatin, OR  97062

Class A Convertible     Craig S. Montgomery                 300          6.1%
Preferred shares        12600 SE Rachella Court
                        Boring, OR  97009

Class A Convertible     Marcia & Stan Drake                 300          6.1%
Preferred Shares        28890 S. Beavercreek Rd
                        Mulino, OR  97042

Class A Convertible     Mary Lou Ham                        300          6.1%
Preferred Shares        1051 Windsong Lane
                        Moscow, ID  83843

--------------------------------------------------------------------------------

a)   Includes 1,000 shares owned by Janice  Torland,  Ron Torland's  wife.  Also
     includes 23,500 shares owned by Kris Torland,  Ron Torland's daughter.  Ron
     Torland disclaims any beneficial interest in these shares.
b)   Includes 96,743 shares owned by Joanne Johnson, Doug Johnson's wife.
     Includes 70,500 shares owned by the Johnson children.
c)   Includes 70,500 shares owned by the Montgomery children.
d)   Includes  70,500 shares owned by the three Ham children.  However,  two of
     the Ham children are adults who own 47,000 and Mary Lou Ham disclaims any
     beneficial interest in these shares.
e)   In June 1998 Mr.  Torland  gifted 54,625  Common  shares to his children

                                       15
<PAGE>
     and 15,000  Common shares to his wife,  and Julian G.Torland disclaims any
     beneficial interest in these shares.
f)   Includes 15,000 shares owned by Mary H Torland, Julian Torland's wife.
g)   In fiscal  2002  Arthur N. and  Bessie M.  Torland  gifted  300  shares
     each to Joanne  E.  Johnson,  A. Ron  Torland,  Craig Montgomery,  Marcia &
     Stan Drake and Mary Lou Ham, and Arthur N. and Bessie M. Torland disclaims
     any beneficial  interest in these shares.
--------------------------------------------------------------------------------

The  directors  and  officers of the  Company,  as a group,  own 355,213  common
shares,  representing  19.9% of that class, and 142,902 shares of Class B Common
shares,  representing  67.5%  of  that  class,  and  2,100  shares  of  Class  A
Convertible Preferred, representing 42.4% of that class.

There are no  arrangements,  which may  result  in a change  of  control  of the
Company.


Item 12.  Certain Relationships and Related Transactions

The Company  currently  leases  equipment from Arthur & Bessie  Torland,  Julian
Torland,  and Ron  Torland,  some of whom hold more than ten  percent of certain
classes of voting  securities of the Company under two operating  leases.  Total
rental  expense  incurred  under these two  operating  leases was  approximately
$78,000  in both  fiscal  2002 and 2001,  (See Note 11 on Notes to  Consolidated
Financial Statements).  The Company's Board of Directors believes that the lease
terms on this equipment approximate market value.

There are no other transactions,  or series of similar  transactions,  involving
amounts in excess of $60,000.


Item 13.  Exhibits, Financial Statement Schedules and Reports on Form 8-K

(a) Exhibits
------------
Exhibit           Description of Exhibit
-------           ----------------------
23.1     Consent of independent accountants
99.1     Certification of Principal Executive Officer
99.2     Certification of Principal Financial Officer

Upon written  request to the  corporate  secretary,  the Company will deliver or
cause to be delivered to the requesting person a copy of the registrant's  proxy
statement for the annual meeting of shareholders to be held on Tuesday,  October
29, 2002,  which proxy statement  contains  information  required by part III of
form 10-KSB. Requests should be directed to A. Ron Torland, Corporate Secretary,
PML Inc., 27120 SW 95th Ave, Wilsonville, Oregon, 97070. Interested persons also
may obtain copies through the Securities  and Exchange  Commission's  Electronic
Data Retrieval database via the Internet at http://www.sec.gov.
<PAGE>
Item 14. Controls and Procedures.

The Registrant's Chief Executive Officer and Chief Financial Officer, as well as
the  Registrant's  Comptroller,   have  evaluated  the  Registrant's  disclosure
controls and  procedures  within the 90 days prior to the date of filing of this
Annual  Report on Form  10-KSB.  Based  upon such  review,  the Chief  Executive
Officer/Chief  Financial  Officer and the  Comptroller  have  concluded that the
Registrant  has in  place  controls  and  procedures  designed  to  ensure  that
information  required to be disclosed by the  Registrant in the reports it files
or submits under the Securities Exchange Act of 1934, as amended,  and the rules
thereunder,  is recorded,  processed,  summarized  and reported  within the time
periods specified in the Commission's rules and forms.  Disclosure  controls and
procedures  include,  without  limitation,  controls and procedures  designed to
ensure  that  information  required to be  disclosed  by an issuer in reports it
files  or  submits  under  the  Securities   Exchange  Act  is  accumulated  and
communicated to the Registrant's  management,  including its principal executive
officer or officers and  principal  financial  officer or  officers,  or persons
performing similar functions, as appropriate to allow timely decisions regarding
required disclosure.

CERTIFICATION
-------------

I, Kenneth L. Minton, Chief Executive Officer and Chief Financial Officer, and
I, Ron Horne, Comptroller, certify that:

1. I have reviewed this annual report on Form 10-KSB of PML, Inc.;

2.  Based on my  knowledge,  this  annual  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 annual
report;

3.  Based  on my  knowledge,  the  financial  statements,  and  other  financial
information  included  in this annual  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 annual report;

4.  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 annual 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 date of this annual
report (the "Evaluation Date"); and

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

5. 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):
<PAGE>
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 controls; 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

6. The  registrant's  other  certifying  officers  and I have  indicated in this
annual 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.


Date: August 29, 2002


                            /s/KENNETH L. MINTON
                            --------------------
                            Kenneth L. Minton
                            Chief Executive Officer and Chief Accounting Officer





                            /s/RON HORNE
                            --------------------
                            Ron Horne
                            Comptroller



























<PAGE>

                                       16
<PAGE>
                                   SIGNATURES

In  accordance  with  Section 13 or 15(d) of the Exchange  Act,  the  Registrant
caused this report to be signed on its behalf by the undersigned, thereunto duly
authorized in the City of Wilsonville, State of Oregon, on August 28, 2002.

                            PML, INC.
                            By: /s/ KENNETH L. MINTON
                            ------------------------------------------
                            Kenneth L. Minton, Chief Executive Officer


In  accordance  with the Exchange  Act, this report has been signed below by the
following  persons  on August  28,  2002,  on behalf of the  Company  and in the
capacities indicated.

                                           Signatures        Title

/s/ Kenneth L. Minton             President and Chief Executive Officer
---------------------------       Director
Kenneth L. Minton

/s/A. Ron Torland                 Chairman of the Board, Secretary
---------------------------       Treasurer
A. Ron Torland

/s/Doug C. Johnson                Director
---------------------------
Doug C. Johnson

/s/Craig S. Montgomery            Director
---------------------------
Craig S. Montgomery



























                                       17
<PAGE>


















                                    PML, INC.
                                   ----------

                          INDEPENDENT AUDITOR'S REPORT
                                       AND
                              FINANCIAL STATEMENTS

                                   ----------
                              MAY 31, 2002 AND 2001
<PAGE>









CONTENTS
--------------------------------------------------------------------------------



                                                                         Page
                                                                         ----

INDEPENDENT AUDITOR'S REPORT                                              20


CONSOLIDATED FINANCIAL STATEMENTS
    Consolidated balance sheets                                           21
    Consolidated statements of income                                     22
    Consolidated statement of changes in stockholders' equity             23
    Consolidated statements of cash flows                                 24
    Notes to financial statements                                       25 - 40
<PAGE>
INDEPENDENT AUDITOR'S REPORT


To the Board of Directors and Stockholders
PML, Inc.


We have audited the  accompanying  balance sheet of PML, Inc. as of May 31, 2002
and  2001,  and the  related  consolidated  statements  of  income,  changes  in
stockholders'  equity,  and cash flows for the years then ended. These financial
statements   are  the   responsibility   of  the   Company's   management.   Our
responsibility  is to express an opinion on these financial  statements based on
our audits.

We conducted our audit 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 financial
statements are free of material misstatement.  An audit includes examining, on a
test basis,  evidence  supporting  the amounts and  disclosures in the financial
statements.  An audit also includes assessing the accounting principles used and
significant  estimates  made by  management,  as well as evaluating  the overall
financial  statement  presentation.   We  believe  that  our  audit  provides  a
reasonable basis for our opinion.

In our opinion,  the financial  statements  referred to above present fairly, in
all material  respects,  the financial  position of PML, Inc. as of May 31, 2002
and 2001,  and the  results of its  operations  and its cash flows for the years
then ended, in conformity with accounting  principles  generally accepted in the
United States of America.



/s/ Moss Adams LLP
------------------
MOSS ADAMS LLP


Beaverton, Oregon
July 24, 2002
<PAGE>
<TABLE>
<CAPTION>
                                    PML, INC.
                           CONSOLIDATED BALANCE SHEETS
--------------------------------------------------------------------------------
                                                                             May 31,
                                                                   ----------------------------
                                                                       2002            2001
                                                                   ------------    ------------
<S>                                                                <C>             <C>
                                     ASSETS
CURRENT ASSETS                       ------
    Cash                                                           $    68,839      $    4,275
    Trade accounts receivable, net                                   1,859,386       1,875,892
    Inventories                                                      1,709,893       1,599,368
    Prepaid expenses and other                                          55,186          64,363
    Deferred income tax asset                                          125,000         220,000
                                                                   ------------    ------------
              Total current assets
                                                                     3,818,304       3,763,898
                                                                   ------------    ------------

PROPERTY, PLANT, AND EQUIPMENT, net                                  2,476,384       2,456,818
INTANGIBLE ASSETS, net                                                  87,454          38,721
OTHER ASSETS                                                            53,038          52,788
                                                                   ------------    ------------

                                                                   $ 6,435,180     $ 6,312,225
                                                                   ============    ============
           LIABILITIES AND STOCKHOLDERS EQUITY
           -----------------------------------
CURRENT LIABILITIES
    Bank line of credit                                            $  1,698,724    $  1,820,631
    Accounts payable                                                    875,866       1,332,323
    Accrued salaries and wages                                          521,284         207,874
    Other accrued liabilities                                           303,517         407,163
    Current portion of capital lease obligations                          8,511          12,886
    Current portion of long-term debt - related parties                  92,941          92,941
    Current portion of long-term debt                                    82,931          65,246
                                                                   -------------   -------------

              Total current liabilities                               3,583,774       3,939,064
                                                                   -------------   -------------

CAPITAL LEASE OBLIGATIONS, less current portion                          22,356          30,867
                                                                   -------------   -------------

LONG TERM DEBT, related parties less current portion                    186,968         205,050
                                                                   -------------   -------------

LONG TERM DEBT, less current portion                                    671,881         654,068
                                                                   -------------   -------------

DEFERRED INCOME TAX LIABILITY                                           117,000         159,000
                                                                   -------------   -------------

COMMITMENTS AND CONTINGENCIES

STOCKHOLDERS' EQUITY
    Preferred stock, $.01 per share; 25,000 shares authorized;
      no shares issued or outstanding                                         -               -
    Class A convertible preferred stock, stated and liquidation
      value $100 per share; 7,500 shares authorized; 4,950 shares
      issued and outstanding, including accreted dividends              842,388         831,740
    Common stock, $.01 par value; 2,500,000 shares authorized;
      1,789,441 shares issued and outstanding                            17,894          17,894
    Class B common stock, $.01 par value; 250,000 shares
      authorized; 211,551 shares issued and outstanding                   2,116           2,116
    Class D common  stock, $.01 par value; 100 shares authorized;
      no shares issued or outstanding                                         -               -
    Additional paid-in-capital                                          150,325         150,325
    Retained earnings                                                   840,478         322,101
                                                                   -------------   -------------

                                                                      1,853,201       1,324,176
                                                                   -------------   -------------

                                                                   $  6,435,180    $  6,312,225
                                                                   =============   =============
</TABLE>

See accompanying notes.                21
--------------------------------------------------------------------------------
<PAGE>
                                    PML, INC.
                        CONSOLIDATED STATEMENTS OF INCOME
--------------------------------------------------------------------------------


                                                  Year ended May 31,
                                           -------------------------------
                                               2002              2001
                                           -------------     -------------

NET SALES                                  $ 13,244,771      $ 13,259,853

COST OF GOODS SOLD                            7,753,766         8,074,319
                                           -------------     -------------

GROSS PROFIT                                  5,491,005         5,185,534

OPERATING EXPENSES                            4,566,476         4,542,779
                                           -------------     -------------

OPERATING INCOME                                924,529           642,755

OTHER EXPENSE
     Interest expense                           155,101           218,211
     Miscellaneous                               67,653            67,134
                                           -------------     -------------
                                                222,754           285,345
                                           -------------     -------------

NET INCOME BEFORE INCOME
     TAX PROVISION                              701,775           357,410

INCOME TAX EXPENSE                              148,270           158,040
                                           -------------     -------------

NET INCOME                                 $    553,505      $    199,370
                                           =============     =============


NET INCOME PER COMMON SHARE
     Basic                                 $       0.26      $       0.07
                                           =============     =============
     Diluted                               $       0.24      $       0.07
                                           =============     =============




See accompanying notes.                22
--------------------------------------------------------------------------------
<PAGE>
<TABLE>
<CAPTION>
                                    PML, INC.
            CONSOLIDATED STATEMENT OF CHANGES IN STOCKHOLDERS' EQUITY
--------------------------------------------------------------------------------


                                                 Class A                              Class B    Additional
                                               Convertible          Common            Common      Paid-in   Retained
                                            Preferred Shares        Shares            Shares      Capital   Earnings      Total
                                            ----------------  ------------------  --------------  --------  ---------  ----------
<S>                                         <C>     <C>       <C>        <C>      <C>     <C>     <C>       <C>        <C>
BALANCE, MAY 31, 2000                       4,950   $787,644  1,785,441  $17,854  211,551 $2,116  $148,365  $ 174,987  $1,130,966

  Preferred stock dividends accreted            -     55,256          -        -        -      -         -    (52,256)          -
  Preferred stock dividends accreted - paid           (8,160)                                                              (8,160)
  Common stock issued                           -          -      4,000       40        -      -     1,960         -        2,000
  Net income                                    -          -          -        -        -      -         -    199,370     199,370

                                            ------  --------  ---------  -------  -------  -----  --------  ---------  ----------

BALANCE, MAY 31, 2001                       4,950    831,740  1,789,441   17,894  211,551  2,116   150,325    322,101   1,324,176
                                            ------  -------   ---------  -------  -------  -----  --------  ---------  ----------
  Preferred stock dividends accreted            -     35,128          -        -        -      -         -    (35,128)          -
  Preferred stock dividends accreted - paid     -    (24,480)         -        -        -      -         -          -     (24,480)
  Net income                                    -        -            -        -        -      -         -    553,505     553,505
                                            ------  --------  ---------  -------  -------  -----  --------  ---------  ----------
BALANCE, MAY 31, 2002                       4,950   $842,388  1,789,441  $17,894  211,551 $2,116  $150,325  $ 840,478  $1,853,201
                                            ======  ========  =========  =======  =======  =====  ========  =========  ==========
</TABLE>







See accompanying notes.                23
--------------------------------------------------------------------------------
<PAGE>
<TABLE>
<CAPTION>
                                    PML, INC.
                      CONSOLIDATED STATEMENTS OF CASH FLOWS
--------------------------------------------------------------------------------

                                                               Year ended May 31,
                                                          ----------------------------
                                                              2002            2001
                                                          ------------    ------------
<S>                                                       <C>             <C>
CASH FLOWS FROM OPERATING ACTIVITIES
     Net income                                             $ 553,505       $ 199,370
     Adjustments to reconcile net income to net cash
        provided by (used in) operating activities:
        Depreciation and amortization                         379,470         365,259
        Deferred income taxes                                  53,000         120,000
        Loss (gain) on disposition of assets                    2,568          (8,808)
     Changes in:
        Accounts receivable                                    16,506          (4,834)
        Inventories                                          (110,525)        (89,232)
        Prepaid expenses and other assets                     (39,806)        (61,944)
        Accounts payable and accrued liabilities             (199,590)        (15,800)
                                                          ------------    ------------

              Net cash from operating activities              655,128         504,011
                                                          ------------    ------------

CASH FLOWS FROM INVESTING ACTIVITIES
     Proceeds from sale of assets                               2,520          17,450
     Purchase of property, plant and equipment               (451,227)       (849,810)
                                                          ------------    ------------

              Net cash from investing activities             (448,707)       (832,360)
                                                          ------------    ------------

CASH FLOWS FROM FINANCING ACTIVITIES
     Net (payments)/borrowings on line of credit             (121,907)        223,012
     Principal payments on notes payable - related parties    (18,082)        (30,224)
     Proceeds from issuance of capital lease obligations            -          54,696
     Principal payments on capital lease obligations          (12,886)        (63,088)
     Proceeds from long-term borrowings                       121,865         157,473
     Principal payments on long-term debt                     (86,367)       (301,467)
     Payments on accreted dividends                           (24,480)         (8,160)
     Proceeds from issuance of common stock                         -           2,000
                                                          ------------    ------------

              Net cash from financing activities             (141,857)         34,242
                                                          ------------    ------------

NET INCREASE (DECREASE) IN CASH                                64,564        (294,107)

CASH AND CASH EQUIVALENTS, beginning of year                    4,275         298,382
                                                          ------------    ------------

CASH AND CASH EQUIVALENTS, end of year                       $ 68,839        $  4,275
                                                          ============    ============

SUPPLEMENTAL DISCLOSURES OF CASH
     FLOW INFORMATION
        Interest paid                                       $ 190,196       $ 293,309
        Income tax paid                                      $ 81,175        $ 11,638
        Non-cash items:
           Preferred stock dividends accreted                $ 35,128        $ 52,256
</TABLE>


See accompanying notes.                24
--------------------------------------------------------------------------------
<PAGE>
                                    PML, INC.
                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
--------------------------------------------------------------------------------

NOTE 1    -    ORGANIZATION AND BASIS OF PRESENTATION

         PML  Microbiologicals,  Inc. is the sole  operating  subsidiary of PML,
         Inc.,  and any  reference  herein  to "PML" or "the  Company"  are used
         interchangeably when referring to either entity. PML, which has been in
         business  since 1969,  markets to the  clinical  market  (diagnosis  of
         diseases  in  humans),  to the  industrial  market  (environmental  and
         sterility testing),  and to the Original Equipment  Manufacturing (OEM)
         market  (private label  clinical  products).  The Company  produces and
         sells  throughout the United States and Canada.  Typical  customers for
         PML's clinical  products are hospitals,  clinics,  and wholesalers that
         market  to  hospitals  and  clinics.   Industrial   customers   include
         pharmaceutical  companies,  biotech research  facilities,  and food and
         water testing.  The OEM market includes companies in the medical device
         industry.

         In  September  1991,  the  Company  entered  into  a  transaction  with
         Monogenesis   Corporation,   in  which  it  purchased  a  non-operating
         subsidiary of Monogenesis Corporation named Media, Inc. This entity was
         subsequently renamed PML, Inc., which became the parent organization of
         Prepared  Medical  Laboratory,   Inc.,  which  was  later  renamed  PML
         Microbiologicals, Inc.


NOTE 2    -    SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

         Principles of consolidation - The accompanying  consolidated  financial
         statements  include the  accounts  of PML,  Inc.  and its  wholly-owned
         subsidiary,  PML  Microbiologicals,  Inc. All significant  intercompany
         transactions and balances have been eliminated.

         Revenue  recognition - The  contractual  sales terms with the Company's
         customers is FOB shipping  point,  whereby title to the goods passes to
         the  buyer  at the  time  of  shipment.  Thus,  sales  revenue,  net of
         allowances,  is recognized at the time the Company's product is shipped
         to its customers.

         Cash and cash  equivalents  - For the purpose of the  statement of cash
         flows, the Company considers highly liquid  investments with a maturity
         of three months or less to be cash equivalents.  The Company places its
         cash and cash equivalents with high quality financial institutions.

         Accounts receivable - The Company generally does not require collateral
         or  other   security  to  support   accounts   receivable.   Management
         periodically  assesses the collectibility of accounts receivable.  This
         assessment  provides the basis for the allowance for doubtful  accounts
         and related bad debt  expense.  An allowance  for doubtful  accounts of
         $50,049  and   $52,793   was   recorded  at  May  31,  2002  and  2001,
         respectively.

         Inventories  -  Inventories  are  stated at cost  which was lower  than
         market. Cost is determined by the first-in first-out method.



                                       25
--------------------------------------------------------------------------------
<PAGE>
                                    PML, INC.
                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
--------------------------------------------------------------------------------

NOTE 2    -    SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES - (continued)

         Property,  plant and  equipment -  Property,  plant and  equipment  are
         stated  at cost.  Depreciation  of  property,  plant and  equipment  is
         provided using  primarily the  straight-line  method over the estimated
         useful lives of the assets of 3 to 39 years.  Amortization of leasehold
         improvements  is  provided  using  the  straight-line  method  over the
         estimated  useful lives of the assets or the initial term of the lease,
         whichever is shorter.

         Intangible assets - Intangible assets are comprised of approved patents
         and patents in process of registration.  Patents are amortized over the
         life of the patent as they are received.

         Income taxes - The Company  accounts for income taxes on the  liability
         method.  The liability  method  recognizes the amount of tax payable at
         the date of the  financial  statements  as a result of all events  that
         have been  recognized in the financial  statements,  as measured by the
         provisions of currently enacted tax laws and rates. The accumulated tax
         effect of all temporary differences is presented as deferred income tax
         assets and liabilities within the balance sheet.

         Profit  sharing  plan - The Company has a profit  sharing  plan,  which
         qualifies under Section 401(k) of the Internal  Revenue Code. Under the
         plan,  eligible  U.S.  employees  may  contribute  up to 15%  of  their
         compensation  with a  Company  match,  at its  option,  up to 3% of the
         employees' total  compensation.  The Company changed its profit sharing
         plan for its eligible Canadian employees effective March 1, 2000. Under
         the old plan,  the  Company  was  required  to fund out of  profits,  a
         minimum  contribution  of $100  (CDN) per  participant.  The new profit
         sharing plan for the eligible Canadian employees is similar to the plan
         for eligible U.S.  employees,  which  qualifies under Section 401(k) of
         the Internal Revenue Code. Under the new plan,  Canadian  employees may
         contribute up to 18% of their compensation or $18,500 (CDN),  whichever
         is  higher.  The  Company  does not  currently  match for the  eligible
         Canadian and U.S. employees.

         Foreign currency - The functional  currency for the Canadian operations
         is the U.S. dollar.  Gains and losses resulting from the translation of
         foreign currency amounts to the functional currency are included in the
         results of operations. Net currency transaction losses from Canada were
         $43,436 and $30,481 in 2002 and 2001, respectively.

         Fair value of financial assets and liabilities - The Company  estimates
         the fair value of its monetary  assets and  liabilities  based upon the
         existing interest rates related to such assets and liabilities compared
         to current market rates of interest for monetary assets and liabilities
         of similar  nature and degree of risk.  The Company  estimates that the
         carrying  value  of  all  of  its  monetary   assets  and   liabilities
         approximates fair value as of May 31, 2001.



                                       26
--------------------------------------------------------------------------------
<PAGE>
                                    PML, INC.
                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
--------------------------------------------------------------------------------

NOTE 2    -    SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES - (continued)

         Shipping and handling fees and costs - In September  2000, the Emerging
         Issues Task Force  issued  EITF  00-10,  Accounting  for  Shipping  and
         Handling Fees and Costs (EITF 00-10).  EITF 00-10 requires shipping and
         handling  fees  billed to  customers  to be  classified  as revenue and
         shipping and handling  costs to be either  classified as costs of sales
         or disclosed in the notes to the consolidated financial statements. The
         Company includes  shipping and handling fees billed to customers in net
         sales. Shipping and handling costs are included in cost of goods sold.

         Research and  development  costs - Research and  development  costs are
         expensed as incurred.

         Concentration  of credit risk - Financial  instruments that potentially
         subject the Company to concentration  of credit risk consist  primarily
         of trade receivables. The Company sells to both clinical and industrial
         customers   who   traditionally   pay  in  the  45  to  70  day  range.
         Concentration  of credit  risk with  respect  to trade  receivables  is
         limited  because a  relatively  large  number of  customers  are spread
         throughout the United States and Canada.  The Company  controls  credit
         risk  through  credit   approvals,   credit   limits,   and  monitoring
         procedures.  The  Company  performs  credit  evaluations  for  all  new
         customers and requires advance payments if deemed necessary.

         Use  of  estimates  -  The  preparation  of  the  Company's   financial
         statements in conformity with accounting  principles generally accepted
         in the United States of America  requires  management to make estimates
         and  assumptions  that  affect  the  reported  amounts  of  assets  and
         liabilities and disclosure of contingent  assets and liabilities at the
         date of the financial  statements and the reported  amounts of revenues
         and expenses  during the reported  periods.  Actual  results may differ
         from such estimates.

         Recently  issued  accounting  standards  - In June  2001 the  Financial
         Accounting  Standards  Board ("FASB")  approved  Statement of Financial
         Accounting  Standards ("SFAS") No. 141, "Business  Combinations,"  SFAS
         No. 142,  "Goodwill  and Other  Intangible  Assets,"  and SFAS No. 143,
         "Accounting   for  Asset   Retirement   Obligations."   SFAS  No.   141
         prospectively  prohibits  the pooling of interest  method of accounting
         for business  combinations  initiated after June 30, 2001. SFAS No. 142
         requires  companies to cease  amortizing  goodwill that existed at June
         30,  2001.  SFAS No.  142 also  establishes  a new  method  of  testing
         goodwill for impairment on an annual basis or on an interim basis if an
         event  occurs or  circumstances  change that would more likely than not
         reduce the fair value of a  reporting  unit below its  carrying  value.
         SFAS  No.  143  addresses   financial   accounting  and  reporting  for
         obligations associated with the retirement of long-lived assets and the
         associated  asset  retirement  costs.  The Company is required to adopt
         SFAS No. 143 as of June 1, 2003. The Company expects that there will be
         no effect on our financial results relating to the adoption of SFAS No.
         141, SFAS No. 142 and SFAS No. 143.



                                       27
--------------------------------------------------------------------------------
<PAGE>
                                    PML, INC.
                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
--------------------------------------------------------------------------------

NOTE 2    -       SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES - (continued)

         In  August  2001,  the  FASB  issued  SFAS  No.  144,  "Accounting  for
         Impairment or Disposal of Long-Lived  Assets".  SFAS No. 144 supersedes
         SFAS No. 121,  "Accounting for the Impairment of Long-Lived  Assets and
         for  Long-Lived  Assets to Be Disposed Of" and  addresses the financial
         accounting  and reporting for the  impairment or disposal of long-lived
         assets.  The  Company is  required  to adopt SFAS No. 144 as of June 1,
         2002. The Company expects that there will be no effect on our financial
         results relating to the adoption of SFAS No. 144.

         In April  2002,  the FASB  issued  SFAS No.  145,  "Rescission  of FASB
         Statement  No. 4, 44, and 64,  Amendment of FASB  Statement No. 13, and
         Technical  Corrections." SFAS No. 145 generally requires that any gains
         or losses on  extinguishment  of debt in  current  or prior  periods be
         classified as other income (expense).  The Company expects to adopt the
         provisions of SFAS No. 145 in its fiscal year ending May 31, 2003.  The
         Company is currently  evaluating  the impact of adopting the provisions
         of SFAS No. 145 in its financial statements.

         In July 2002,  the FASB  issued  SFAS No.  146,  "Accounting  for Costs
         Associated  with Exit or Disposal  Activities."  SFAS No. 146  requires
         companies  to  recognize   costs   associated  with  exit  or  disposal
         activities  when  they  are  incurred  rather  than  at the  date  of a
         commitment  to an exit or  disposal  plan.  SFAS  146  will be  applied
         prospectively  to any  exit  or  disposal  activities  initiated  after
         December 31, 2002.  The Company  expects there will be no effect on its
         financial results relating to the adoption of SFAS No. 146.

         Reclassifications - Certain  reclassifications were made to the May 31,
         2001   balance   sheet  in  order  to  conform  to  the  May  31,  2002
         presentation. These reclassifications had no effect on net income.


NOTE 3    -       INVENTORIES

         Inventories consist of:

                                                       May 31,
                                             ----------------------------
                                                 2002            2001
                                             ------------    ------------

                  Raw materials              $ 1,050,800       $ 968,802
                  Work-in-process                 37,431          37,124
                  Finished goods                 621,662         593,442
                                             ------------    ------------

                                             $ 1,709,893     $ 1,599,368
                                             ============    ============




--------------------------------------------------------------------------------
                                       28
<PAGE>
                                    PML, INC.
                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
--------------------------------------------------------------------------------

NOTE 4    -    PROPERTY, PLANT AND EQUIPMENT

         Property, plant and equipment consist of:

                                                              May 31,
                                                   ----------------------------
                                                       2002            2001
                                                   ------------    ------------

               Land                                  $  98,541       $  98,541
               Building                                928,568         929,389
               Manufacturing equipment               3,111,338       3,005,373
               Office furniture and equipment          869,354       1,329,234
               Service vehicles                          7,981          11,504
               Leasehold improvements                  669,902         777,991
               Construction in progress                 50,741         169,100
                                                   ------------    ------------

                                                     5,736,425       6,321,132
               Less accumulated depreciation and
                  amortization                       3,260,041       3,864,314
                                                   ------------    ------------

                                                   $ 2,476,384     $ 2,456,818
                                                   ============    ============


NOTE 5    -       LINE OF CREDIT

         The Company has a $2,500,000  revolving line of credit with its primary
         lender,  which is due November 15, 2002. Interest on the line of credit
         is due monthly at prime (4.75% at May 31, 2002) plus 0.25%. The line of
         credit is  collateralized by accounts  receivable and inventory.  There
         was a balance of $1,698,724 and $1,820,631 outstanding on the revolving
         line of credit at May 31, 2002 and 2001, respectively.




















                                       29
--------------------------------------------------------------------------------
<PAGE>
                                    PML, INC.
                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
--------------------------------------------------------------------------------

NOTE 6    -       LONG-TERM DEBT
<TABLE>
<CAPTION>
         Borrowings consisted of the following:

                                                                             May 31,
                                                                    -------------------------
                                                                        2002          2001
                                                                    -----------    ----------
<S>                                                                 <C>            <C>
         KeyBank National Association:
              Note payable through May 2010 due in monthly
                 principal and interest installments of
                 $2,334 including variable interest rates of
                 prime less .25%; (4.5% at May 31, 2002);
                 due May 1, 2010; collateralized by land and
                 buildings.                                          $ 501,750     $ 532,087
         KeyBank National Association:
              Note payable through November 2005 due in
                 monthly principal and interest installments of
                 $2,405 including interest at 4.75%; due
                 July 6, 2006; collateralized by equipment.            103,030             -
         KeyBank National Association:
              Note payable through November 2005 due in
                 monthly principal and interest installments
                 of $2,026 including interest at 8.27%; due
                 November 30, 2005; collateralized by
                 equipment                                              76,468        93,567
         KeyBank National Association:
              Note payable through November 2005 due in
                 monthly principal and interest installments of
                 $1,222, including interest at 9.16%; due
                 November 30, 2005; collateralized by equipment.        43,564        53,660
         Les Leno:

              Note payable through May 2005 in yearly
                 principal installments of $10,000, plus
                 interest at 6% related to termination
                 settlement with former president.                      30,000        40,000
                                                                    -----------    ----------

                                                                       754,812       719,314
         Less current portion                                          (82,931)      (65,246)
                                                                    -----------    ----------

                                                                     $ 671,881     $ 654,068
                                                                    ===========    ==========
</TABLE>







                                       30
--------------------------------------------------------------------------------
<PAGE>
                                    PML, INC.
                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
--------------------------------------------------------------------------------

NOTE 6    -    LONG-TERM DEBT - (continued)

         Maturities of long-term debt,  including the long-term debt due related
parties disclosed in Note 7, are as follows:


                  Years ending May 31,
                                 2003            $   175,872
                                 2004                188,448
                                 2005                188,731
                                 2006                 85,972
                                 2007                 32,571
                           Thereafter                363,128
                                                 ------------

                                                 $ 1,034,722
                                                 ============


         The various debt agreements with Key Bank National  Association contain
         covenants,  which  require the  Company,  among other  things,  to meet
         certain  objectives  with  respect  to debt  service  coverage  and net
         income.  In addition,  the  agreements  place  certain  limitations  on
         dividend payments,  capital  expenditures,  lease rental payments,  and
         other outside  borrowings.  The Company is in compliance  with all debt
         covenants.


NOTE 7    -    LONG-TERM  DEBT DUE  RELATED  PARTIES
<TABLE>
<CAPTION>
              Long-term debt due related parties consisted of the following:


                                                                     May 31,
                                                            --------------------------
                                                                2002           2001
                                                            -----------    -----------
<S>                                                         <C>            <C>
         The Torland Trust
              Unsecured note payable with 9.5% interest
              due in installments through October 2003.      $ 247,551      $ 247,551

         Ronald Torland:
              Unsecured note payable with 9.5% interest due
              in installments through October 2003.
              Principal payments of $1,400 may begin
              December 2000 provided the Company meets
              certain net income criteria.                      32,358         50,440
                                                            -----------    -----------

                                                               279,909        297,991
         Less current portion                                  (92,941)       (92,941)
                                                            -----------    -----------

                                                             $ 186,968      $ 205,050
                                                            ===========    ===========
</TABLE>

                                       31
--------------------------------------------------------------------------------
<PAGE>
                                    PML, INC.
                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
--------------------------------------------------------------------------------

NOTE 8    -       STOCKHOLDERS' EQUITY

         Class A  Convertible  Preferred  Shares - In fiscal 1993,  the Board of
         Directors  adopted a resolution  authorizing  7,500 Class A Convertible
         Preferred Shares under the following terms and conditions:

         o   Stated Value - $100 per share.
         o   Conversion  Feature - Convertible by the holder into Common Shares
             at a rate of one Common Share for each $2.80 of preferred share
             stated value.
         o   Dividends - Wells Fargo Bank of Oregon,  N.A. prime rate plus 1.5%
             cumulative, annually, payable when and as declared by the Board of
             Directors.  Such  dividends  are  accreted  in  periods  when  the
             declaration  is not made.  Dividends  accreted at May 31, 2002 and
             2001 were $35,128 and $52,256,  respectively.  Accreted  dividends
             paid  during the  fiscal  years  ended May 31,  2002 and 2001 were
             $24,480 and $8,160, respectively.
         o   Redemption - Redeemable  for cash, in whole or in part, at 100% of
             stated value plus accrued and unpaid dividends to redemption date,
             on a date determined by the Board of Directors.

         Liquidation Preference - Upon any liquidation,  dissolution, or winding
         up of the  Corporation,  whether  voluntary or involuntary,  holders of
         Class A Convertible Preferred Shares shall have preference and priority
         over Common Shares,  Class B Common Shares,  Class D Common Shares, and
         other  class  of  stock  ranking  junior  to the  Class  A  Convertible
         Preferred  Shares  for  payment  out of the  assets of the  Company  or
         proceeds thereof available for distribution to stockholders of $100 per
         share plus all  accrued  and unpaid  dividends.  The holders of Class A
         Convertible  Preferred  Shares  shall  not be  entitled  to  any  other
         payments.

         Holders of issued and  outstanding  Common Shares have  preference over
         Class B Common Shares upon voluntary or involuntary  liquidation of the
         Company only to the extent that holders of Common  Shares shall be paid
         par  value of such  shares  prior to any  distributions  being  made to
         holders of Class B Common Shares. Holders of Class B Common Shares will
         then  receive  par  value  for each  share  held and a sum equal to the
         distribution to be made on each Common Share.

         Pre-emptive  Rights - Under the  terms of the  amended  Certificate  of
         Incorporation  of PML,  the  holders of shares of any class of stock of
         PML  are  not  entitled  to  cumulative   voting  nor  preferential  or
         pre-emptive right to subscribe for, purchase,  or receive any shares of
         any class of PML stock  except  that  holders of Class B Common  Shares
         shall have  pre-emptive  rights with respect to the issuance of Class B
         Common Shares only. In addition, PML is not allowed to sell or offer to
         sell any Class B Common Shares without prior approval of the holders of
         a majority of the issued and  outstanding  Class B Common Shares.  Each
         Class B  Common  Share  may be  converted  to one  Common  Share at the
         discretion of the Class B shareholder.


                                       32
--------------------------------------------------------------------------------
<PAGE>
                                    PML, INC.
                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
--------------------------------------------------------------------------------

NOTE 8    -    STOCKHOLDERS' EQUITY - (continued)

         Stock  Option  Plans -  Effective  September  6,  1994,  the  Board  of
         Directors  adopted  the "1994  Stock  Option  Plan" and the "1994 Stock
         Option Plan for Non-employee  Directors"  (collectively,  the "Plans").
         The Plans  authorize  650,000  shares of common stock be available  for
         grant to eligible individuals and entities as defined by the Plans. The
         term of each  incentive  stock option is 10 years or less as determined
         by the Plan  administrator.  Options  granted under the Plans generally
         vest  over  four to five  years  beginning  one year  after the date of
         grant,  and expire ten years or less after the date of the grant.  Only
         12,750 of all options granted to date have been exercised.

         A summary of the status of the options  granted  under the Plans at May
         31, 2002 and 2001, together with changes during the periods then ended,
         are  following.  Options  exercisable  at May 31,  2002 and  2001  were
         233,107.

                                                                Weighted
                                                                 Average
                                                  Options     Exercise Price
                                                 ---------    ---------------
              Outstanding at May 31, 2000         379,107        $    0.53
                Options granted at market price    10,000             1.25
                Options exercised                 (4,000)           (0.50)
                Options canceled or expired             -                -
                                                 ---------    -------------
              Outstanding at May 31, 2001         385,107             0.56
                Options granted at market price    60,000             0.51
                Options exercised                       -                -
                Options canceled or expired      (97,857)           (0.43)
                                                 ---------    -------------

              Outstanding at May 31, 2002         347,250        $    0.49
                                                 =========    =============

         The  Company  applies APB  Opinion 25 and  related  interpretations  in
         accounting   for  the  Option  Plans.   Accordingly,   no   significant
         compensation  cost has been recognized in the financial  statements for
         options  granted  under  the  Plans,  as  options  are  granted  at  or
         approximate  the fair market value at time of grant.  Had  compensation
         cost associated with the Plans been determined based on the fair market
         value at the grant date for options  under the Plans,  consistent  with
         the methodology of Statement of Financial  Accounting  Standards (SFAS)
         No. 123,  the  Company's  net income would have been reduced to the pro
         forma amounts indicated below:





                                       33
--------------------------------------------------------------------------------
<PAGE>
                                    PML, INC.
                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
--------------------------------------------------------------------------------

NOTE 8    -    STOCKHOLDERS' EQUITY - (continued)

                                                                 May 31,
                                                        ------------------------
                                                           2002          2001
                                                        ----------    ---------


              Net income, as reported                   $  553,505    $ 199,370
              Net income , pro forma                    $  532,841    $ 179,238
              Basic earnings per share, as reported     $     0.26    $    0.07
              Diluted earnings per share, as reported   $     0.24    $    0.07
              Basic earnings per share, pro forma       $     0.25    $    0.06
              Diluted earnings per share, pro forma     $     0.23    $    0.06

         The effects of applying SFAS 123 to pro forma  disclosures for 2002 and
         2001 are not likely to be  representative  of the  effects on  reported
         income for future  years,  because  options vest over several years and
         additional awards generally are made each year.

         The fair value of each option  grant is  estimated on the date of grant
         using  the  Black-Scholes   option-pricing  model  with  the  following
         weighted-average  assumptions used for grant in 2002 and 2001: expected
         volatility of 166% and 176%  respectively,  expected  dividend yield of
         0%; risk-free rates of return ranging from 4.31% to 7.63%; and expected
         lives ranging from 5 to 10 years.

         Total fair value of options  granted  was  computed  to be $30,600  and
         $12,477 for the years ended May 31, 2002 and 2001, respectively.

         The following table summarizes information about options outstanding at
         May 31, 2002.



                                                        Weighted
                                Number    Weighted       Average
                 Exercise         of       Average      Remaining
               Price Range      Shares      Price    Contractual Life
             ----------------   -------   --------   ----------------
             $0.3125 - $0.625   312,250     $ 0.49        4.37
              $1.25 - $1.50      35,000     $ 1.43        4.21






                                       34
--------------------------------------------------------------------------------
<PAGE>
                                    PML, INC.
                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
--------------------------------------------------------------------------------

NOTE 9   -        COMMITMENTS AND CONTINGENCIES

         The Company  leases  certain  laboratories,  facilities,  and equipment
         under noncancelable  long-term lease  arrangements,  which also require
         the Company to pay executory costs such as property taxes, maintenance,
         and insurance. The laboratories,  facilities,  and equipment leases are
         operating  and capital  leases  which expire in various  years  through
         2005. Generally,  such operating leases include renewal options ranging
         from one to seven  years.  Rental  expense  for  operating  leases  was
         $585,211 and $582,375 in fiscal 2002 and 2001, respectively. Certain of
         the operating leases represent related party transactions. See note 11.

         The future  expected  rental  commitments  as of May 31, 2002,  for all
         long-term noncancellable operating and capital leases are as follows:

                  Years ending                            Capital    Operating
                    May 31,                               Leases      Leases
             -----------------------                     ---------  ----------

                      2003                               $ 12,447   $ 420,973
                      2004                                 12,000     380,480
                      2005                                 12,031      52,608
                      2006                                             29,340
                                                                -
                      2007                                             29,340
                                                                -
                   Thereafter
                                                                            -
                                                         ---------  ----------

                     Total                               $ 36,478   $ 912,741
                                                         =========  ==========

             Less amount representing interest            (5,611)
                                                         ---------

             Present value of capital lease obligations    30,867

             Less current portion                         (8,511)
                                                         ---------

             Long-term portion                           $ 22,356
                                                         =========



NOTE 10  -        INCOME TAXES

         Deferred  income taxes are provided for temporary  differences  between
         the  financial  reporting  bases  and  the  tax  bases  of  assets  and
         liabilities. Deferred tax assets result primarily from the recording of
         certain  expenses,  which currently are not deductible for tax purposes
         and  tax  credit   carryforwards.   Deferred  tax  liabilities   result
         principally   from  the  use,   for  tax   purposes,   of   accelerated
         depreciation.



                                       35
--------------------------------------------------------------------------------
<PAGE>
                                    PML, INC.
                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
--------------------------------------------------------------------------------

NOTE 10   -       INCOME TAXES (continued)

         A  reconciliation  between the statutory  federal  income tax (benefit)
         expense  and  effective  federal  income  tax  (benefit)  expense is as
         follows:
<TABLE>
<CAPTION>
                                                             May 31,                          May 31,
                                                          --------------------------------------------------------------
                                                               2002                            2001
                                                          -----------------------------   ------------------------------
                                                              Amount            %             Amount             %
                                                          ---------------   -----------   ----------------   -----------
<S>                                                          <C>                 <C>           <C>                <C>
         Federal statutory expense at 34%                      $ 238,604           34%           $121,679           34%
         State and Canadian income taxes                          28,071            4%             14,315            4%
         Increase (decrease) in tax resulting from:
              Nondeductible permanent differences               (97,250)          -14%              6,767            2%
              Other                                             (21,155)           -3%             15,279            4%
                                                          ---------------   -----------   ----------------   -----------

                                                               $ 148,270           21%           $158,040           44%
                                                          ===============   ===========   ================   ===========
</TABLE>

         The components of the Company's income tax expense are as follows:
<TABLE>
<CAPTION>
                                                                              May 31,
                                                              ------------------------------------------
                                                                  2002                       2001
                                                              --------------            ----------------
<S>                                                              <C>                          <C>
                  Current tax expense                              $ 95,270                     $38,040
                  Deferred tax expense                               53,000                     120,000
                                                              --------------            ----------------

                                                                  $ 148,270                    $158,040
                                                              ==============            ================


         The domestic and foreign components of income before income taxes are
         as follows:

                                                                              May 31,
                                                              ----------------------------------------
                                                                  2002                       2001
                                                              --------------             -------------

                  Domestic                                        $ 747,350                  $370,854
                  Foreign                                          (45,575)                  (13,444)
                                                              --------------             -------------

                         Income before income taxes               $ 701,775                  $357,410
                                                              ==============             =============
</TABLE>






                                       36
--------------------------------------------------------------------------------
<PAGE>



NOTE 10   -       INCOME TAXES (continued)

         At May 31, 2002 and 2001, the  significant  components of the Company's
deferred tax assets and liabilities are as follows:

                                                                May 31,
                                                       ------------------------
                                                         2002          2001
                                                       ----------    ----------

             Current deferred tax assets:
                Inventory differences                   $ 96,000      $ 68,000
                Allowance for doubtful accounts           16,000        20,000
                Net operating loss carryforward                         47,000
                                                               -
                Vacation accrual                                        34,000
                                                               -
                Alternative minimum tax carryforward                    37,000
                                                               -
                Other                                     13,000        14,000
                                                       ----------    ----------

                                                       $ 125,000     $ 220,000
                                                       ==========    ==========

             Non-current deferred tax liability:
                Depreciation differences between
                      financial and tax accounting     $(117,000)    $(159,000)
                                                       ==========    ==========



NOTE 11   -       RELATED PARTY TRANSACTIONS

         The  Company  has  a  Technology   License  Agreement  with  Definitive
         Diagnostics,  Inc.  ("DDI").  Certain  stockholders and officers of the
         Company are also stockholders and officers of DDI. The agreement, which
         began on June 1, 1992,  and was modified on February 28, 1997,  extends
         over a ten year period (including option years) from the original date.
         The  Company  manufactures,   markets  and  sells  products  originally
         developed  by DDI and pays  royalties  based  upon the  number of units
         sold,  with certain  limitations  on the total  royalties  paid.  Total
         royalties of $41,709 and $17,944 were incurred in fiscal 2002 and 2001,
         respectively.

         The Company  leases  equipment  from  stockholders  under two operating
         leases.  The  monthly  obligations  under the leases  total  $6,500 per
         month.  Total rental  expense paid to  stockholders  for all leases was
         $78,000 in both fiscal 2002 and 2001.





                                       37
--------------------------------------------------------------------------------
<PAGE>
                                    PML, INC.
                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
--------------------------------------------------------------------------------

NOTE 12   -       FOREIGN OPERATIONS

         The following table indicates the relative amounts of net sales,  gross
         profit,  operating  income,  and identifiable  assets of the Company by
         geographic area during fiscal years 2002 and 2001.


                                                     2002             2001
                                                 ------------     ------------
             Net sales:
                 United States                   $ 8,473,065      $ 8,301,562
                 Canada                            4,771,707        4,958,291
                                                 ------------     ------------

                       Total net sales           $13,244,772      $13,259,853
                                                 ============     ============

             Gross profit
                 United States                   $ 3,823,979      $ 3,514,808
                 Canada                            1,667,026        1,670,726
                                                 ------------     ------------

                       Total gross profit        $ 5,491,005      $ 5,185,534
                                                 ============     ============

             Operating income:
                 United States                    $  873,919       $  509,172
                 Canada                               50,610          133,583
                                                 ------------     ------------

                       Total operating income     $  924,529       $  642,755
                                                 ============     ============

             Identifiable assets:
                 United States                   $ 3,501,818      $ 3,324,964
                 Canada                            2,720,908        2,728,540
                                                 ------------     ------------

                       Total identifiable assets $ 6,222,726      $ 6,053,504
                                                 ============     ============

         Net currency transaction losses from Canada were $43,436 and $30,481 in
         2002 and 2001, respectively.

         Sales between geographic areas and export sales are not material.

         The Company maintains  separate  accounting ledgers for both the United
         States  and  Canada  down  to  the  operating  income  level.  However,
         management  primarily relies upon the gross profit by geographic region
         for decision making purposes because some operating,  selling,  general
         and  administrative  expenses are captured  only on a corporate  level.
         Therefore, the Company has had to make substantial use of estimates and
         allocations  in order to split its  operating  income  on a  geographic
         basis. The numbers shown represent  management's best estimate of total
         operating  income  on  a  segment  basis  and  represent  the  required
         enterprise disclosure.


                                       38
--------------------------------------------------------------------------------
<PAGE>
                                    PML, INC.
                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
--------------------------------------------------------------------------------

NOTE 13   -       EARNINGS PER SHARE CALCULATIONS
<TABLE>
<CAPTION>
         Information needed to calculate basic earnings per share:

                                                                    For the year ended May 31,
                                                               -------------------------------------
                                                                    2002                2001
                                                               ---------------    ------------------
<S>                                                            <C>                <C>
             Numerator:
                Net income                                          $ 553,505          $ 199,370
                Preferred stock dividends accreted                   (35,128)           (52,256)
                                                               ---------------    ---------------

                                                                    $ 518,377          $ 147,114
                                                               ===============    ===============

             Denominator:
                Average number of common shares
                   outstanding                                      1,789,441          1,787,441
                Average number of Class B common
                   stock outstanding                                  211,551            211,551
                                                               ---------------    ---------------

             Average shares used in basic EPS calculation           2,000,992          1,998,992
                                                               ===============    ===============

             Basic income per share                                  $   0.26           $   0.07
                                                               ===============    ===============

         Information needed to calculate diluted earnings per share:

                                                                    For the year ended May 31,
                                                               --------------------------------------
                                                                     2002                 2001
                                                               ---------------    ---------------
             Numerator
             Basic income                                           $ 518,377          $ 147,114
             Add back preferred stock dividends accreted*              35,128                  -
                                                               ---------------    ---------------

             Diluted income after add back of
                accreted dividends                                  $ 553,505          $ 147,114
                                                               ===============    ===============

             Denominator
             Average number of common shares outstanding            1,789,441          1,787,441
             Average number of Class B common stock
             outstanding                                              211,551            211,551
             Effect of common stock equivalents                       107,599            193,528
             Effect of preferred convertible stock*                   176,786                  -
                                                               ---------------    ---------------

             Average shares used in diluted EPS calculation         2,285,377          2,192,520
                                                               ===============    ===============
             Diluted income per share                                $   0.24           $   0.07
                                                               ===============    ===============
</TABLE>
                                       39
--------------------------------------------------------------------------------
<PAGE>
                                    PML, INC.
                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
--------------------------------------------------------------------------------

NOTE 13   -       EARNINGS PER SHARE CALCULATIONS (continued)

             *To the  extent  that  the  effect  of  preferred  stock  dividends
             accreted,  common stock equivalents,  and the preferred convertible
             stock  are  anti-dilutive,  they are not  included  in the  diluted
             earnings per share  calculation.  In fiscal 2001,  amounts excluded
             were $52,256 of accreted  dividends and 176,786 shares of preferred
             convertible stock.















































                                       40