******SECURITIES AND EXCHANGE
COMMISSIONWashington, D.C. 20549**

**FORM
10-Q**

**(Mark One)**

**/XX/QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE
         ACT OF
1934**

**For the quarterly period ended December 30,
2001**

**OR**

**/__/ TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE
ACT         OF
1934**

******For the transition period
from ______________ to ______________**

**Commission file number: 0-19717**

******NEXIQ TECHNOLOGIES,
INC.****(formerly WPI GROUP, INC.)****(Exact name of Registrant as specified in its charter)**

|**New
      Hampshire******                                              | **02-0218767******                               
|------------------------------------------------------------------------ | -------------------------------------------------
|**(State or other jurisdiction of
      incorporation or organization)** | **(I.R.S. Employer Identification
      Number)**



**********1155 Elm Street, Manchester, New
Hampshire    03101********(Address of
principal executive
offices)                
(Zip Code)**

**Registrant's telephone number, including area
code:**    **(603) 627-3500******

_________________________________________________________________________________
**Former name, former address, and former fiscal year,
if changed since last report**

**Indicate by check mark whether the registrant (1) has
filed all reports required to be filed by Section 13 or 15(d) of the Securities
Exchange Act of 1934 during the past preceding 12 months (or for such shorter
period that the registrant was required to file such reports), and (2) has been
subject to such filing requirements for the past 90 days.****Yes X****No ___**

**Applicable only to issuers involved in bankruptcy
proceedings during the preceding five years:**

**Indicate by check mark whether the registrant has filed
all documents and reports required to be filed by Section 12, 13 or 15(d) of the
Securities Exchange Act of 1934 subsequent to the distribution of securities
under a plan confirmed by a court.****Yes
___ No___**

**Applicable only to corporate
issuers:**

**Indicate the number of shares outstanding of each of
the issuer's classes of common stock, as of the latest practicable
date:**

|******Class**                    | **Outstanding as of December 30,
      2001**
|-------------------------------- | ---------------------------------------------
|**Common Stock, par value $.01** | **12,839,510 shares**                        



---



**NEXIQ TECHNOLOGIES,
INC.**

**INDEX******

|**PART I
      -FINANCIAL INFORMATION**                                                                                          |                                                                                                                                                           |  |  | Page
    No. | 
|-------------------------------------------------------------------------------------------------------------------------------- | --------------------------------------------------------------------------------------------------------------------------------------------------------- |  |  | ------------ | 
|                                                                                                                                 |                                                                                                                                                          
|Item
      1. Condensed Consolidated Financial Statements                                                                        |                                                                                                                                                           |  |  |              | 
|                                                                                                                                 |                                                                                                                                                           |  |  |              | 
|                                                                                                                                 | Condensed
      Consolidated Balance
      Sheets        
               - December 30, 2001 and
      September 30, 2001                                 |  |  |              | 
|                                                                                                                                 |                                                                                                                                                           |  |  |              | 
|                                                                                                                                 | Condensed Consolidated Statements of
      Operations        
               - Thee Months Ended
      December 30, 2001 and December 24, 2000            |  |  |              | 
|                                                                                                                                 |                                                                                                                                                           |  |  |              | 
|                                                                                                                                 | Condensed Consolidated Statements of
      Stockholders' Deficit        
               - Thee Months Ended
      December 30, 2001 and December 24, 2000 |  |  |              | 
|                                                                                                                                 |                                                                                                                                                           |  |  |              | 
|                                                                                                                                 | Condensed
      Consolidated Statements of Cash
      Flows        
               - Three months Ended
      December 30, 2001 and December 24, 2000     |  |  |              | 
|                                                                                                                                 |                                                                                                                                                           |  |  |              | 
|                                                                                                                                 | Notes to Condensed Consolidated Financial Statements                                                                                                      |  |  |              | 
|                                                                                                                                 |                                                                                                                                                           |  |  |              | 
|Item
      2.  Management's Discussion and Analysis of Financial Condition and
                      Results
      of Operations |                                                                                                                                                           |  |  |              | 
|                                                                                                                                 |                                                                                                                                                           |  |  |              | 
|Item
      3  Quantitative and Qualitative Disclosure About Market
      Risk                                                    |                                                                                                                                                           |  |  |              | 
|                                                                                                                                 |                                                                                                                                                           |  |  |              | 
|**PART II - OTHER
      INFORMATION**                                                                                            |                                                                                                                                                           |  | 
|                                                                                                                                 |                                                                                                                                                           |  |  |              | 
|Item
      6.  Exhibits and Reports on Form 8-K                                                                                  |                                                                                                                                                           |  |  |              | 
|                                                                                                                                 |                                                                                                                                                           |  |  |              | 
|**SIGNATURES**                                                                                                                   |                                                                                                                                                           |  |  |              | 



-2-

---



******NEXIQ TECHNOLOGIES, INC.CONDENSED CONSOLIDATED BALANCE
SHEETS**

|                                                                                                                    |  | September
      30,2001 |             | December
      30,2001 |  
|------------------------------------------------------------------------------------------------------------------- |  | ----------------------- | ----------- | ---------------------- | -
|                                                                                                                    | 
|ASSETS                                                                                                              |  |                         |             |                        |  
|                                                                                                                    | 
|Current assets                                                                                                      |  |                         |             |                        |  
|Cash and cash
      equivalents                                                                                     |  | $                       | 1,030,601   |                        | $
|Accounts receivable -
      net of allowance for doubtful accounts of $57,675 and
            $62,675, respectively |  |                         | 1,657,738   |                        |  
|Inventories                                                                                                         |  |                         | 844,768     |                        |  
|Costs in excess of
      billings                                                                                   |  |                         | 113,564     |                        |  
|Prepaid expenses and
      other current assets                                                                     |  |                         | 469,975     |                        |  
|Refundable income
      taxes                                                                                       |  |                         | 102,735     |                        |  
|                                                                                                                    |  |                         |             |                        |  
|Total current assets                                                                                                |  |                         | 4,219,381   |                        |  
|                                                                                                                    |  |                         |             |                        |  
|Property,Plant and Equipment,at cost,
      less accumulated depreciation                                           |  |                         | 1,626,038   |                        |  
|Other Assets                                                                                                        |  |                         | 8,519,306   |                        |  
|                                                                                                                    |  |                         |             |                        |  
|Total
    assets                                                                                                    |  | $                       | 14,364,725  |                        | $
|                                                                                                                    |  |                         |             |                        |  
|                                                                                                                    |  |                         |             |                        |  
|LIABILITIES AND STOCKHOLDERS' EQUITY                                                                                | 
|                                                                                                                    | 
|Current liabilities                                                                                                 |  |                         |             |                        |  
|Notes
    payable                                                                                                   |  | $                       | 10,872,335  |                        | $
|Accounts
      payable                                                                                              |  |                         | 1,503,225   |                        |  
|Accrued
      expenses                                                                                              |  |                         | 5,010,436   |                        |  
|                                                                                                                    |  |                         |             |                        |  
|Total current
      liabilities                                                                                     |  |                         | 17,385,996  |                        |  
|                                                                                                                    |  |                         |             |                        |  
|Convertible Notes Payable                                                                                           |  |                         | 17,931,649  |                        |  
|                                                                                                                    |  |                         |             |                        |  
|Other Long-Term Liabilities                                                                                         |  |                         | 848,457     |                        |  
|                                                                                                                    |  |                         |             |                        |  
|                                                                                                                    |  |                         |             |                        |  
|Stockholders' Deficit                                                                                               |  |                         |             |                        |  
|Common stock, $0.01 par value; authorized
      75,000,000 shares;                                                  |  |                         |             |                        |  
|issued and outstanding
      11,629,819 and 12,839,510, respectively                                                |  |                         | 116,298     |                        |  
|Additional paid-in
      capital                                                                                    |  |                         | 36,283,795  |                        |  
|Accumulated
    deficit                                                                                             |  |                         | (58,201,470 | )                      |  
|                                                                                                                    |  |                         |             |                        |  
|Total stockholders'
      deficit                                                                                   |  |                         | (21,801,377 | )                      |  
|                                                                                                                    |  |                         |             |                        |  
|Total liabilities
      and stockholders' deficit                                                                   |  | $                       | 14,364,725  |                        | $
|                                                                                                                    |  |                         |             |                        |  

See notes to condensed consolidated financial
statements

-3-



---

**NEXIQ TECHNOLOGIES,
INC.****CONDENSED CONSOLIDATED STATEMENTS
OF OPERATIONS****(unaudited)******

| |                                                                       | Three Months
      Ended |  
| | --------------------------------------------------------------------- | ------------------------ | -
|
| |                                                                       |                          |  
| | Net
      Sales                                                       |                          | $
| | Cost
      of Goods Sold                                              |                          |  
| |                                                                       |                          |  
| | Gross
      Profit                                                    |                          |  
| |                                                                       |                          |  
| |                                                                       |                          |  
| | Operating expenses:                                                   |                          |  
| | Research and new product
      development                            |                          |  
| | Selling, general and
      administration                             |                          |  
| |                                                                       |                          |  
| | Total
      operating expenses                                        |                          |  
| |                                                                       |                          |  
| | Operating Loss                                                        |                          |  
| |                                                                       |                          |  
| | Other
      Income (Expense):                                         |                          |  
| | Interest expense                                                      |                          |  
| | Other, net                                                            |                          |  
| |                                                                       |                          |  
| | Loss
      Before Income Taxes                                        |                          |  
| |                                                                       |                          |  
| | Income
      Tax Expense (Benefit)                                    |                          |  
| |                                                                       |                          |  
| | Loss Before Cumulative
      Effect of Change in Accounting Principle |                          |  
| |                                                                       |                          |  
| | Cumulative Effect of
      Change in Accounting Principle             |                          |  
| |                                                                       |                          |  
| | Net Loss                                                              |                          | $
| |                                                                       |                          |  
| |                                                                       |                          |  
| | Earnings (Loss) Per
      Share:                                      |                          |  
| | Loss Before Cumulative Effect of Change in Accounting Principle       |                          | $
| | Cumulative Effect
      of Change in Accounting Principle             |                          |  
| |                                                                       |                          |  
| | Net
      loss                                                        |                          | $
| |                                                                       |                          |  
| | Weighted Average Common
      Shares                                  |                          |  

See notes to condensed consolidated financial
statements

-4-

---

**NEXIQ TECHNOLOGIES,
INC.****CONDENSED CONSOLIDATED STATEMENTS
OF STOCKHOLDERS'****DEFICIT******

For the Three Months Ended December 30, 2001

---

|                                                       |  | Common Stock
$.01 Par Value |  | Additional
Paid-in |         | RetainedEarnings(Accumulated
|------------------------------------------------------ |  | --------------------------- |  | ------------------ | ------- | ----------------------------
|
|                                                       |  |                             |  |                    |         |                             
|Balance   Septembere 30,2001                           |  | 11,629,819                  |  | $                  | 116,298 | $                           
|                                                       |  |                             |  |                    |         |                             
|Sale of common stock                                   |  | 1,209,691                   |  |                    | 12,097  |                             
|Sale of warrants to purchase common stock              |  |                            |  |                    |        |                             
|Non-cash compensation expense related to stock options |  |                            |  |                    |        |                             
|Effect of beneficial conversion                        |  |                            |  |                    |        |                             
|Net loss                                               |  |                            |  |                    |        |                             
|                                                       |  |                             |  |                    |         |                             
|Balance   December 30,2001                             |  | 12,839,510                  |  | $                  | 128,395 | $                           
|                                                       |  |                             |  |                    |         |                             

-5-

---

**NEXIQ TECHNOLOGIES,
INC.****CONDENSED CONSOLIDATED STATEMENTS
OF CASH FLOWS****(unaudited)******

|                                                                                                            |                                                                                               | Three Months
      Ended                            |                                                
|----------------------------------------------------------------------------------------------------------- | --------------------------------------------------------------------------------------------- | --------------------------------------------------- | -----------------------------------------------
|
|**Cash Flows From
      Operating Activities:**                                                             |                                                                                               |                                                     |                                                
|                                                                                                            | Net loss                                                                                      |                                                     | $                                              
|                                                                                                            |                                                                                               |                                                     |                                                
|                                                                                                            | Adjustments to reconcile
      net loss to net cash   used in operating
    activities:       |                                                     |                                                
|                                                                                                            |                                                                                               | Depreciation and amortization                       |                                                
|                                                                                                            |                                                                                               | Cumulative effect of change in accounting principle |                                                
|                                                                                                            |                                                                                               | Other                                               |                                                
|                                                                                                            | Changes in current
      assets and liabilities net of effects  of businesses
      divested: |                                                     |                                                
|                                                                                                            |                                                                                               |                                                     | Accounts receivable                            
|                                                                                                            |                                                                                               |                                                     | Inventories                                    
|                                                                                                            |                                                                                               |                                                     | Cost in Excess of
    Billings                 
|                                                                                                            |                                                                                               |                                                     | Prepaid expenses and other current
      assets
|                                                                                                            |                                                                                               |                                                     | Accounts payable                               
|                                                                                                            |                                                                                               |                                                     | Accrued expenses                               
|                                                                                                            |                                                                                               |                                                     |                                                
|                                                                                                            |                                                                                               |                                                     | Total
      adjustments                        
|                                                                                                            |                                                                                               |                                                     |                                                
|Net cash used in
      operating activities                                                                 |                                                                                               |                                                     | (2,276,077                                     
|                                                                                                            |                                                                                               |                                                     |                                                
|                                                                                                            |                                                                                               |                                                     |                                                
|**Cash Flows From
      Investing Activities:**                                                             |                                                                                               |                                                     |                                                
|                                                                                                            | Proceeds from sale of
      businesses, net of expenses                                       |                                                     |                                                
|                                                                                                            | Additions to property,
      plant and equipment                                              |                                                     |                                                
|                                                                                                            |                                                                                               |                                                     |                                                
|                                                                                                            | Net cash provided by (used in)
      investing activities                                     |                                                     |                                                
|                                                                                                            |                                                                                               |                                                     |                                                
|                                                                                                            |                                                                                               |                                                     |                                                
|**Cash Flows From
      Financing Activities:**                                                             |                                                                                               |                                                     |                                                
|                                                                                                            | Borrowings (payments) of notes
      payable                                                  |                                                     |                                                
|                                                                                                            | Proceeds from debt, net
      of debt issuance costs                                          |                                                     |                                                
|Proceeds from sale of warrants to purchase
      common stock       and beneficial
      conversion feature |                                                                                               |                                                     | 308,571                                        
|Proceeds from issuance of common
      stock                                                                |                                                                                               |                                                     | 3,344                                          
|                                                                                                            |                                                                                               |                                                     |                                                
|Net cash provided by (used in)
      investing activities                                                   |                                                                                               |                                                     | (2,606,623                                     
|                                                                                                            |                                                                                               |                                                     |                                                
|**Net Increase
      (Decrease) in Cash and Cash Equivalents**                                              |                                                                                               |                                                     | 521,956                                        
|                                                                                                            |                                                                                               |                                                     |                                                
|**Cash and Cash
      Equivalents, Beginning of Period**                                                    |                                                                                               |                                                     | 102,156                                        
|                                                                                                            |                                                                                               |                                                     |                                                
|**Cash and Cash
      Equivalents, End of Period**                                                          |                                                                                               | $                                                   | 624,112                                        
|                                                                                                            |                                                                                               |                                                     |                                                
|                                                                                                            |                                                                                               |                                                     |                                                
|**Supplemental
      Disclosure of Cash Information:**                                                      |                                                                                               |                                                     |                                                
|Income taxes paid (refunded)                                                                                |                                                                                               | $                                                   |                                               
|Interest paid                                                                                               |                                                                                               |                                                     | 433,569                                        
|                                                                                                            |                                                                                               |                                                     |                                                
|**Supplemental
      Disclosure of Non-cash Transactions:**                                                 |                                                                                               |                                                     |                                                
|Insuance of Transaction Fee PIK Conversion Shares                                                           |                                                                                               | $                                                   |                                               

See notes to condensed consolidated financial
statements

-6-

---

**NOTES TO CONDENSED CONSOLIDATED FINANCIAL
STATEMENTS(Unaudited)**

**1. BASIS OF
PRESENTATION**

The financial statements for the three months ended December
30, 2001 are prepared in accordance with Rule 10-01 of Regulation S-X and include all adjustments which, in the opinion of
management, are necessary to present fairly the results of operations for the
periods then ended. All such adjustments are of a normal recurring nature. These
financial statements should be read in conjunction with the financial statements
and notes thereto included in the Company's Form 10-K filed with the Securities
and Exchange Commission (File No. 333-72391), which included financial statements
for the years ended September 30, 2001.

Certain prior year amounts have been reclassified to conform
to current year presentation.

The results of the Company's operations for any interim
period are not necessarily indicative of the results of the Company's operations
for any other interim period or for a full fiscal year.

**2.  INVENTORIES**



|Inventory consists of: |  |               |         |             
|---------------------- |  | ------------- | ------- | ------------
|                       |  | September 30, |         | December 30,
|                       |  | 2001          |         | 2001        
|                       |  |               |         |             
|                       |  |               |         |             
|*Raw Materials*        |  | $             | 618,538 |             
|*Finished Goods*       |  |               | 226,230 |             
|                       |  |               |         |             
|*Total*                |  | $             | 844,768 |             
|                       |  |               |         |             

**3.  LONG-TERM DEBT**

*In December 2001, the Company completed the Term E
Financing under the Convertible Note Agreement. Under the terms of the Term E
Financing, the Company received $3.0 million in cash in exchange for the
following securities: 1,209,691 shares of common stock, warrants to purchase 342,857 shares of common stock at
$1.75 per share and Term E Convertible Note with a principal value of $3.0
million. The Term E Convertible Note matures on July 31, 2003, bears interest at
an annual rate of 10.75% payable in cash or in additional notes at the option of
the Company. The Term E Convertible Note is convertible into common stock at the
option of the holder or the Company, under certain conditions, at $1.75 per
share.*

*Subsequent to December 30,2001, the Company received $1.0
million in cash in connection with partial funding of the Term F Financing under
the Convertible Note Agreement in exchange for the following securities: 200,679
shares of common stock, warrants to purchase 114,286 shares of common stock at
$1.75 per share and Term F Convertible Note with a principal value of $1.0
million. The Term F Note matures on July 31, 2003, bears interest at an annual
rate of 10.75% payable in cash or in additional notes at the option of the
Company. The Term F Convertible Note is convertible into common stock at the
option of the holder or the Company, under certain conditions, at $1.75 per
share.*

-7-

---

**4. NET LOSS PER COMMON
SHARE**

Basic earnings per share ("EPS") is calculated by dividing
income or loss available to common stockholders by the weighted average number of common
shares outstanding during the period. Other obligations, such as stock options
and warrants, are considered to be potentially dilutive common shares. Diluted
EPS assumes the issuance of potential dilutive common shares outstanding during
the period and adjusts for any changes in income and the repurchase of common
shares that would have occurred from the assumed issuance.

During the three-month period ended December 30, 2001,
options and warrants to purchase 8,052,673 shares of common stock were
outstanding and were not included in the computation of diluted EPS because the
effect would have been anti-dilutive. For the comparable three-month period
ended December 24, 2000, options and warrants to purchase 4,108,749 shares of
common stock were outstanding and were not included in the computation of
diluted EPS because the effect would have been anti-dilutive.

**5. RECENT ACCOUNTING
PRONOUNCEMENTS**

In 2001, the Financial Accounting Standards Board ("FASB")
issued SFAS No. 141, "Business Combinations" and SFAS No. 142 "Goodwill and
Other Intangible Assets." SFAS 141 replaces Accounting Principles Board Opinion
16, "Business Combinations," and requires that the purchase method of accounting
be used for all business combinations initiated after June 30, 2001. SFAS 142
replaces APB 17, "Intangible Assets." In accordance with SFAS No. 141 and 142,
effective for the Company's fiscal year 2003, as a replacement to amortization
of goodwill and intangible assets with indefinite lives, the Company will
evaluate goodwill and intangible assets for impairment annually. The Company is
currently reviewing these statements to determine their impact.

In 2001, the FASB issued SFAS No. 143, "Accounting for
Obligations Associated with the Retirement of Long-Lived Assets." SFAS 143
establishes accounting standards for the recognition and measurement of an asset
retirement obligation and its associated asset retirement cost. SFAS 143 also
provides accounting guidance for legal obligations associated with the
retirement of tangible long-lived assets. SFAS 143 is effective for the
Company's fiscal year 2003. The Company is currently reviewing the statement to
determine its impact.

In 2001, the FASB issued SFAS No. 144, "Accounting for the
Impairment or Disposal of Long-Lived Assets." SFAS 144 address significant
issues related to implementation of SFAS No. 121, "Accounting for the Impairment
of Long-Lived Assets and for Long-Lived Assets to be Disposed Of." SFAS 144 is
effective for the Company's fiscal year 2003. The Company is currently reviewing
the statement to determine its impact.

-8-

---

**ITEM 2.**

**Management's Discussion and Analysis of
Financial Condition and Results of Operations**

*This Management's Discussion and Analysis of Financial
Condition and Results of Operations should be read in conjunction with the
financial statements and footnotes contained in the Company's Form 10-Q for the
period ended December 24, 2000 and the Form 10-K for the year ended September
30, 2001, filed with the Securities and Exchange Commission. In addition to
historical information, this report contains forward-looking statements that
involve risks and uncertainties that could cause actual results to differ
materially. Factors that might cause or contribute to such differences include,
but are not limited to, those discussed in this section. Readers should
carefully review the risks described in other documents the Company files from
time to time with the Securities and Exchange Commission, including the
Company's Annual Report on Form 10-K for the fiscal year ended September 30,
2001. Readers are cautioned not to place undue reliance on the forward-looking
statements which speak as of the date of this report only. The Company
undertakes no obligation to publicly release any revisions to the
forward-looking statements or reflect events or circumstances after the date of
this document.*

***RESULTS OF OPERATIONS***

*Net sales of $2.9 million for the first quarter of fiscal
2002 decreased 7.4% from sales of $3.2 million for the first quarter of fiscal
2001. The decrease was primarily due to the effects of weaker economic
conditions on sales of the Company's diagnostic tools in the first quarter of
2002.*

*Cost of sales of $1.2 million for the first quarter of
fiscal 2002 resulted in a gross profit of 60.6%, compared to a gross profit of
55.9% for the same period of fiscal 2001. The increase in the Company's gross
profit percentage in the first quarter of 2002 was primarily attributable to a
change in mix of products sold.*

*Research and new product development
expenses were $1.8 million and 60.2% of sales for the first quarter of fiscal
2002. For the same quarter of fiscal 2001, research and new product development
expenses were $1.7 million and 52.8% of sales. The increase was attributed to
the development e-Technician, a web-based remote diagnostic and "telematics"
platform for commercial vehicles.*

***Selling, general and administration expenses were $2.9 million and
$1.7 million for the first quarter of fiscal 2002 and 2001, respectively. As a
percentage of sales, selling, general and administrative expenditures were 97.5%
and 54.7% for the fiscal 2002 and 2001 first quarters, respectively. The changes
in selling, general and administrative expenses in fiscal 2002 are primarily
attributable to an increase as a result of the acquistion of Diversified
Software and staffing to support the launch of e-Technician.*

*The Company's operating loss for the
first quarter of fiscal 2002 and 2001 was $2.8 million and $1.6 million,
respectively. The increase in the operating loss was primarily due to reduced
sales and the increase in selling, general and administrative
expenses.*



-9-

**LIQUIDITY AND CAPITAL
RESOURCES**
***As of
December 30, 2001 the Company had a working capital deficit of $14.0 million
compared to $13.2 million deficit at September 30, 2001. Net cash used in
operating activities totaled $3.2 million and $2.3 million for the three months
ended December 30, 2001 and December 24, 2000, respectively.*
*As of December 30, 2001, the Company
had no material commitments for capital expenditures.***
***On
July 31, 2000, the Company entered into a Convertible Note Agreement with
Sunrise Capital Partners, L.P., a private investment fund ("Sunrise") and
certain other participants, which include certain members of the Company's
management and certain members of the Allard-Nazarian Group. The Convertible
Note Agreement provides for a series of investment transactions: the Term A
Financing, Term B Financing and the Term C financing, as
follows:***
***Term A Financing - On September 21, 2001, the Company entered
into and Amended Convertible Note Agreement with Sunrise and certain other
participants, which included a member of the Company's management and certain
members of the Allard-Nazarian Group, Inc. The Amended Convertible Note
Agreement provides for a series of investment transactions: the Term D Financing
($5.0 million) and the Term E Financing ($3.0 million).*
*On September 21, 2001, the Company amended its credit
facility agreement with a syndicate of banks. The terms of the modified
agreement provide a $2,500,000 revolving line of credit and term notes, which
expire on July 30, 2002. As of December 30, 2001, there were $11,056,580
borrowings outstanding under the agreement, consisting of $2,500,000 million
under the revolving line of credit and $8,556,580 of term notes. Interest on all
borrowings is payable monthly at prime (4.75% at December 30 , 2001) plus 3.0%
through December 31, 2001, prime plus 3.5% from January 1, 2002 through March
31, 2002 and prime plus 4.0% thereafter.**On January 23, 2002, the Company
entered into a second Amended Convertible Note Agreement with Sunrise and
certain other participants, which included a member of the Company's management
and certain members of the Allard-Nazarian Group, Inc. The Second Amendment to
the Convertible Note Agreement provides for the issuance of additional
convertible notes up to $6 million - the Term F
Financing.*
The Company intends to utilize the proceeds from the
financing transactions under the Convertible Note Agreement to fund operations.
The Company anticipates the need to either amend the existing credit facility or
obtain additional financing to repay the remaining amounts outstanding under the
credit facility when it expires in June 2002.
The Company has begun efforts to obtain funding to replace the existing bank facility and provide sufficient cash to support the Company until positive cash flow is achieved, which management believes will occur in 2003. Management is working with investment banks, venture capital firms, and other advisors to investigate altervative funding sources and financing structures and is confident that these efforts will prove successful. Implementation is targeted for the third quarter of 2002, however, the amount, structure, and timing of this financing is subject to external factors including market conditions, economic factors, and investor preferences that are beyond the control of NEXIQ.
There can be no assurance that the Company will be
successful in obtaining additional financing or amending the credit facility. If
the Company is not successful in extending the credit facility or obtaining
additional financing to repay borrowings under the facility, management would
consider all of the options then available, including a bankruptcy
financing.
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**RECENT ACCOUNTING PROUNCEMENTS**
In 2001, the Financial Accounting Standards Board ("FASB")
issued SFAS No. 141, "Business Combinations" and SFAS No. 142 "Goodwill and
Other Intangible Assets." SFAS 141 replaces Accounting Principles Board Opinion
16, "Business Combinations," and requires that the purchase method of accounting
be used for all business combinations initiated after June 30, 2001. SFAS 142
replaces APB 17, "Intangible Assets." In accordance with SFAS No. 141 and 142,
effective for the Company's fiscal year 2003, as a replacement to amortization
of goodwill and intangible assets with indefinite lives, the Company will
evaluate goodwill and intangible assets for impairment annually. The Company is
currently reviewing these statements to determine their impact.
In 2001, the FASB issued SFAS No. 143, "Accounting for
Obligations Associated with the Retirement of Long-Lived Assets." SFAS 143
establishes accounting standards for the recognition and measurement of an asset
retirement obligation and its associated asset retirement cost. SFAS 143 also
provides accounting guidance for legal obligations associated with the
retirement of tangible long-lived assets. SFAS 143 is effective for the
Company's fiscal year 2003. The Company is currently reviewing the statement to
determine its impact.
In 2001, the FASB issued SFAS No. 144, "Accounting for the
Impairment or Disposal of Long-Lived Assets." SFAS 144 address significant
issues related to implementation of SFAS No. 121, "Accounting for the Impairment
of Long-Lived Assets and for Long-Lived Assets to be Disposed Of." SFAS 144 is
effective for the Company's fiscal year 2003. The Company is currently reviewing
the statement to determine its impact.
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**ITEM 3.**
**Quantitative and Qualitative Disclosure
About Market Risk**
The Company has considered the provisions of Financial
Reporting Release No. 48, "Disclosure of Accounting Policies for Derivative
Financial Instruments and Derivative Commodity Instruments, and Disclosure of
Quantitative and Qualitative Information about Market Risk Inherent in
Derivative Financial Instruments, Other Financial Instruments and Derivative
Commodity Instruments." The Company had no holdings of derivative financial or
commodity-based instruments as if December 30, 2001. A review of the Company's
other financial instruments and risk exposures at that date revealed that the
Company had exposure to interest risk. At December 30, 2001, the Company had
$11,056,580 of borrowings outstanding under its credit facility with a syndicate
of banks. The Company performed sensitivity analysis to assess exposure to
interest rate movements relative to this debt. A hypothetical change of 100
basis points in average interest rates would have an annual impact on the
interest cost of $110,568. The Company concluded that a change of this magnitude
would not be expected to materially affect the Company's financial position,
results of operations or cash flows.

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******NEXIQ TECHNOLOGIES,
INC.**

**PART II - Other
Information******

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

****A.
Exhibits

*None.*****

************

********       B.
Reports on Form 8-K

*None.*



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*SIGNATURES*

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

**NEXIQ TECHNOLOGIES,
INC.**(Registrant)

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| |  | --
| |  | By
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| |  | By

Date: February 12, 2002

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