******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 June 24,
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 July 26,
    2001**
|-------------------------------- | ---------------------------------------
|**Common Stock, par value $.01** | **9,611,443 shares**                   



---



**NEXIQ TECHNOLOGIES,
INC.**

**INDEX******

|**PART I
      -FINANCIAL INFORMATION**                                                                                          |                                                                                                                                                                                                                               |  |  | Page
    No. | 
|-------------------------------------------------------------------------------------------------------------------------------- | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------- |  |  | ------------ | 
|                                                                                                                                 |                                                                                                                                                                                                                              
|Item
      1. Condensed Consolidated Financial Statements                                                                        |                                                                                                                                                                                                                               |  |  |              | 
|                                                                                                                                 |                                                                                                                                                                                                                               |  |  |              | 
|                                                                                                                                 | Condensed
      Consolidated Balance
      Sheets        
               -June 24, 2001 and
      September 24, 2000                                                                                                          |  |  |              | 
|                                                                                                                                 |                                                                                                                                                                                                                               |  |  |              | 
|                                                                                                                                 | Condensed Consolidated Statements of
      Operations        
               - Thee Months Ended June
      24, 2001 and June 25,
      2000        
               - Nine months Ended June
      24, 2001 and June 25, 2000 |  |  |              | 
|                                                                                                                                 |                                                                                                                                                                                                                               |  |  |              | 
|                                                                                                                                 | Condensed
      Consolidated Statements of Cash
      Flows        
               - Nine months Ended June
      24, 2001 and June 25, 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
      24,2000     |            | June
      24,2001(unaudited) |            
|------------------------------------------------------------------------------------- | -------------------------------------------------------------------------------------------------------------------------------------- | --------------------------- | ---------- | ----------------------------- | -----------
|ASSETS                                                                                |                                                                                                                                       
|**Current
      assets**                                                              |                                                                                                                                        |                             |            |                               |            
|                                                                                      | Cash and cash equivalents                                                                                                              |                             | $          | 102,156                       |            
|                                                                                      | Accounts receivable - net of
      allowance for doubtful accounts of $300,000 and $67,675,
      respectively                         |                             |            | 1,206,472                     |            
|                                                                                      | Inventories                                                                                                                            |                             |            | 441,151                       |            
|                                                                                      | Prepaid expenses and other current
      assets                                                                                        |                             |            | 258,780                       |            
|                                                                                      | Refundable income taxes                                                                                                                |                             |            | 105,551                       |            
|                                                                                      | Deferred income taxes                                                                                                                  |                             |            | 97,425                        |            
|                                                                                      | Net assets of discontinued
      operations                                                                                            |                             |            | 6,391,000                     |            
|                                                                                      |                                                                                                                                        |                             |            |                               |            
|                                                                                      |                                                                                                                                        | Total current assets        |            |                               | 8,602,535  
|                                                                                      |                                                                                                                                        |                             |            |                               |            
|**Property, Plant and
      Equipment** at cost,   less accumulated
      deprecation |                                                                                                                                        |                             | 889,991    |                               |            
|                                                                                      |                                                                                                                                        |                             |            |                               |            
|**Other
    assets**                                                                  |                                                                                                                                        |                             | 3,565,037  |                               |            
|                                                                                      |                                                                                                                                        |                             |            |                               |            
|                                                                                      |                                                                                                                                        | $                           | 13,057,363 |                               | $          
|                                                                                      |                                                                                                                                        |                             |            |                               |            
|LIABILITIES AND
      STOCKHOLDERS' EQUITY                                            |                                                                                                                                       
|**Current
      Liabilities**                                                         |                                                                                                                                        |                             |            |                               |            
|                                                                                      | Notes payable                                                                                                                          |                             | $          | 18,276,246                    |            
|                                                                                      | Accounts payable                                                                                                                       |                             |            | 1,391,700                     |            
|                                                                                      | Accrued expenses                                                                                                                       |                             |            | 2,788,878                     |            
|                                                                                      |                                                                                                                                        |                             |            |                               |            
|                                                                                      |                                                                                                                                        | Total current liabilities   |            |                               | 22,456,824 
|                                                                                      |                                                                                                                                        |                             |            |                               |            
|                                                                                      |                                                                                                                                        |                             |            |                              
|**Convertible Notes
      Payable**                                                   |                                                                                                                                        |                             | 10,978,369 |                               |            
|                                                                                      |                                                                                                                                        |                             |            |                               |            
|**Other Long-Term
      Liability**                                                   |                                                                                                                                        |                             | 944,238    |                               |            
|                                                                                      |                                                                                                                                        |                             |            |                               |            
|**Deferred Income
      Taxes**                                                       |                                                                                                                                        |                             | 144,537    |                               |            
|                                                                                      |                                                                                                                                        |                             |            |                              
|                                                                                      |                                                                                                                                        |                             |            |                               |            
|**Stockholders' Deficit:**                                                            |                                                                                                                                        |                             |            |                               |            
|                                                                                      | Common stock, $0.01 par value;
      authorized 75,000,000Shares; issued and outstanding 7,891,963 and
        9,611,443, respectively |                             |            | 78,920                        |            
|                                                                                      | Additional paid-in
capital                                                                                                             |                             |            | 18,191,200                    |            
|                                                                                      | Accumulated deficit                                                                                                                    |                             |            | (39,736,525                   | )          
|                                                                                      |                                                                                                                                        |                             |            |                               |            
|                                                                                      |                                                                                                                                        | Total stockholders' deficit |            |                               | (21,466,405
|                                                                                      |                                                                                                                                        |                             |            |                               |            
|                                                                                      |                                                                                                                                        | $                           | 13,057,563 |                               | $          
|                                                                                      |                                                                                                                                        |                             |            |                               |            

See notes to condensed consolidated financial
statements

-3-



---

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

|                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                    |  | Three Months
      Ended |            | Nine Months
      Ended |  
|----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------- |  | ------------------------ | ---------- | ----------------------- | -
|                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                    |  |                          |            |                         |  
|                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                    |  | June 25,2000             |            | June 24,2001            |  
|                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                    |  |                          |            |                         |  
|**Continuing Operations:**                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                          |  |                          |            |                         |  
|**Net Sales**                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                       |  | $                        | 3,573,724  |                         | $
|**Cost of Goods Sold**                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                              |  |                          | 1,409,141  |                         |  
|                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                    |  |                          |            |                         |  
|**Gross Profit**                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                    |  |                          | 2,164,583  |                         |  
|                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                    |  |                          |            |                         |  
|**Operating Expenses:**                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                             |  |                          |            |                         |  
|Research and development                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                            |  |                          | 818,748    |                         |  
|Selling, general and
              administration                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                   |  |                          | 1,670,593  |                         |  
|Restructuring costs                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                 |  |                          |           |                         |  
|                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                    |  |                          |            |                         |  
|Total Operating Expenses                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                            |  |                          | 2,489,341  |                         |  
|                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                    |  |                          |            |                         |  
|**Operating Loss**                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                  |  |                          | (324,758   | )                       |  
|                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                    |  |                          |            |                         |  
|**Other Income (Expense):**                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                         |  |                          |            |                         |  
|Interest
    expense                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                |  |                          | (1,030,919 | )                       |  
|Forbearance expense                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                 |  |                          | (253,500   | )                       |  
|Other, net                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                          |  |                          | 1,479      |                         |  
|                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                    |  |                          |            |                         |  
|**Loss Before Income Taxes**                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                        |  |                          | (1,607,698 | )                       |  
|**Income Tax Expense
      (Benefit)**                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                              |  |                          |           |                         |  
|                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                    |  |                          |            |                         |  
|**Loss from Continuing      
Operations**                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                           |  | $                        | (1,607,698 | )                       | $
|****Discontinued
Operations:**Estimated loss
      from            disposal of discontinued
    operations
    
    
    (615,000
    )
    
    
    
    
    (2,175,000
    )
    
    Loss before cumulative
      effect of change in             accounting principle
    
    
    (2,222,698
    )
    
    (4,232,039
    )
    
    (8,288,229
    )
    
    (10,545,189
    )**Cumulative Effect of Change
      in     Accounting Principle**
    
    
    
    
    
    
    
    
    
    
    
    (1,605,000
    )**Net
      Loss**
    
    $
    (2,222,698
    )
    $
    (4,232,039
    )
    $
    (8,288,229
    )
    $
    (12,150,189
    )**Earnings (Loss) Per
      Share:**Continuing operations
    
    $
    (0.27
    )
    $
    (0.49
    )
    $
    (1.01
    )
    $
    (1.29
    )Discontinued Operations
    
    
    (0.10
    )
    
    
    
    
    (0.36
    )
    
    Effect of Accounting Change
    
    
    
    
    
    
    
    
    
    
    
    (0.20
    )Net Loss
    
    $
    (0.37
    )
    $
    (0.49
    )
    $
    (1.37
    )
    $
    (1.49
    )Weighted Average Common Shares
    
    
    6,053,259
    
    
    8,723,412
    
    
    6,053,243
    
    
    8,169,862Effect of Dilutive Options
    
    
    
    
    
    
    
    
    
    
    
    Basic and Dilutive Weighted Average    Shares Outstanding
    
    
    6,053,259
    
    
    8,723,412
    
    
    6,053,243
    
    
    8,169,862** |  |                          |            |                         |  
|                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                    |  |                          |            |                         |  
|**Discontinued
Operations:**                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                        |  |                          |            |                         |  
|Estimated loss
      from            disposal of discontinued
    operations                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                        |  |                          | (615,000   | )                       |  
|                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                    |  |                          |            |                         |  
|Loss before cumulative
      effect of change in             accounting principle                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                   |  |                          | (2,222,698 | )                       |  
|                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                    |  |                          |            |                         |  
|**Cumulative Effect of Change
      in     Accounting Principle**                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                   |  |                          |           |                         |  
|                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                    |  |                          |            |                         |  
|**Net
      Loss**                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                  |  | $                        | (2,222,698 | )                       | $
|                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                    |  |                          |            |                         |  
|**Earnings (Loss) Per
      Share:**                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                |  |                          |            |                         |  
|Continuing operations                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                               |  | $                        | (0.27      | )                       | $
|Discontinued Operations                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                             |  |                          | (0.10      | )                       |  
|Effect of Accounting Change                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                         |  |                          |           |                         |  
|                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                    |  |                          |            |                         |  
|Net Loss                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                            |  | $                        | (0.37      | )                       | $
|                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                    |  |                          |            |                         |  
|Weighted Average Common Shares                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                      |  |                          | 6,053,259  |                         |  
|Effect of Dilutive Options                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                          |  |                          |           |                         |  
|                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                    |  |                          |            |                         |  
|Basic and Dilutive Weighted Average    Shares Outstanding                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                           |  |                          | 6,053,259  |                         |  
|                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                    |  |                          |            |                         |  



**See notes to condensed consolidated financial statements

-4-

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

|                                                                                                            |                                                                                               | Nine Months
      Ended                                   |                                                
|----------------------------------------------------------------------------------------------------------- | --------------------------------------------------------------------------------------------- | --------------------------------------------------------- | -----------------------------------------------
|
|**Cash Flows From
      Operating Activities:**                                                             |                                                                                               |                                                           |                                                
|                                                                                                            | Net loss                                                                                      |                                                           | $                                              
|                                                                                                            |                                                                                               |                                                           |                                                
|                                                                                                            | Adjustments to reconcile
      net loss to net cash   used in operating
    activities:       |                                                           |                                                
|                                                                                                            |                                                                                               | Depreciation and
      amortization                       |                                                
|                                                                                                            |                                                                                               | Loss from disposal of
      discontinued operations       |                                                
|                                                                                                            |                                                                                               | Cumulative effect of
      change in accounting principle |                                                
|                                                                                                            |                                                                                               | Other                                                     |                                                
|                                                                                                            | Changes in current
      assets and liabilities net of effects  of businesses
      divested: |                                                           |                                                
|                                                                                                            |                                                                                               |                                                           | Accounts receivable                            
|                                                                                                            |                                                                                               |                                                           | Accounts receivable -
    other                
|                                                                                                            |                                                                                               |                                                           | Inventories                                    
|                                                                                                            |                                                                                               |                                                           | Prepaid expenses and other current
      assets
|                                                                                                            |                                                                                               |                                                           | Accounts payable                               
|                                                                                                            |                                                                                               |                                                           | Accrued expenses                               
|                                                                                                            |                                                                                               |                                                           | Accrued income taxes                           
|                                                                                                            |                                                                                               |                                                           |                                                
|                                                                                                            |                                                                                               |                                                           | Total
      adjustments                        
|                                                                                                            |                                                                                               |                                                           |                                                
|Net cash used in operating activities                                                                       |                                                                                               |                                                           | (1,093,681                                     
|                                                                                                            |                                                                                               |                                                           |                                                
|**Cash Flows From
      Investing Activities:**                                                             |                                                                                               |                                                           |                                                
|                                                                                                            | Proceeds from sale of
      businesses, net of expenses                                       |                                                           |                                                
|                                                                                                            | Acquisitions of
      business, net of acquisition costs                                      |                                                           |                                                
|                                                                                                            | Additions to property,
      plant and equipment                                              |                                                           |                                                
|                                                                                                            | Payment of accrued
      acquisition costs                                                    |                                                           |                                                
|                                                                                                            |                                                                                               |                                                           |                                                
|                                                                                                            | Net cash provided by
      investing activities                                               |                                                           |                                                
|                                                                                                            |                                                                                               |                                                           |                                                
|**Cash Flows From
      Financing Activities:**                                                             |                                                                                               |                                                           |                                                
|                                                                                                            | Payments of
    notes payable                                                                 |                                                           |                                                
|                                                                                                            | Proceeds from debt, net
      of debt issuance costs                                          |                                                           |                                                
|Payments of other long-term
      liabilities                                                               |                                                                                               |                                                           |                                               
|Proceeds from sale of warrants to purchase
      common stock       and beneficial
      conversion feature |                                                                                               |                                                           |                                               
|Proceeds from issuance of common
      stock                                                                |                                                                                               |                                                           | 11,463                                         
|                                                                                                            |                                                                                               |                                                           |                                                
|Net cash provided by (used in)
      investing activities                                                   |                                                                                               |                                                           | (40,519,184                                    
|                                                                                                            |                                                                                               |                                                           |                                                
|**Net Increase
      (Decrease) in Cash and Cash Equivalents**                                              |                                                                                               |                                                           | (1,076,345                                     
|                                                                                                            |                                                                                               |                                                           |                                                
|**Cash and Cash
      Equivalents, Beginning of Period**                                                    |                                                                                               |                                                           | 1,086,708                                      
|                                                                                                            |                                                                                               |                                                           |                                                
|**Cash and Cash
      Equivalents, End of Period**                                                          |                                                                                               | $                                                         | 10,354                                         
|                                                                                                            |                                                                                               |                                                           |                                                
|**Supplemental
      Disclosure of Cash Information:**                                                      |                                                                                               |                                                           |                                                
|Income taxes paid (refunded)                                                                                |                                                                                               | $                                                         | (117,054                                       
|Interest paid                                                                                               |                                                                                               |                                                           | 6,309,867                                      
|                                                                                                            |                                                                                               |                                                           |                                                
|**Non-cash Investing Activities:**                                                                          |                                                                                               |                                                           |                                                
|Promissory note received in sale of business                                                                |                                                                                               | $                                                         |                                               
|1,714,285 shares of common stock issued to acquire business                                                 |                                                                                               |                                                           |                                                

See notes to condensed consolidated financial
statements

-5-

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

**1. BASIS OF
PRESENTATION**

The financial statements for the three months and nine
months ended June 24, 2001 and June 25, 2000 are unaudited 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.
0-19717), which included financial statements for the years ended September 24,
2000.

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 24, |         | June 24,
|                       |  | 2000          |         | 2001    
|                       |  |               |         |         
|                       |  |               |         |         
|*Raw Materials*        |  | $             | 281,199 |         
|*Work in Process*      |  |               | 40,422  |         
|*Finished Goods*       |  |               | 119,530 |         
|                       |  |               |         |         
|*Total*                |  | $             | 441,151 |         
|                       |  |               |         |         

**3. DISCONTINUED OPERATIONS**

*In November 2000, the Company completed the sale of WPI
Instruments, Inc. and WPI Magnetec, Inc. to an investor group led by WPI
Instruments management for approximately $6.1 million in cash and a $1.0 million
promissory note, subject to final purchase price adjustments. The proceeds from
the sale were applied to the outstanding bank debt and permanently reduced the
outstanding bank loans by $5.0 million.*

**4.  ACQUISTION**

In May 2001, the Company completed the acquistion of
Diversified Software Industries, Inc. an independent software developer. In
connection with the acquisition, NEXIQ Technologies issued 1,714,285 shares of
common stock in exchange for all the outstanding shares of Diversified Software.
In addition, NEXIQ Technologies granted nonstatutory stock options to acquire
1.0 million shares of NEXIQ common stock to certain employees of Diversified
Software. The acquisition was accounted for as a purchase with excess purchase
price over the estimated fair value of net assets acquired of approximately $3.9
million. The Company has not completed the final allocation of the components of
intangible assets, and has assigned the excess principally to goodwill. Accordingly, the
purchase price allocations are estimates and could change upon the completion of
asset valuations, which are on-going as of the date of this
filing.

The following pro forma results of operations reflect this
transaction as if it had occurred on September 27, 1999. The pro forma data does
not purport to be indicative of the results that would actually have been
reported if the transaction had occurred on such date
(unaudited):



-6-

---

|                                                                         |  | Three Months
      Ended |            | Nine Months
      Ended |  
|------------------------------------------------------------------------ |  | ------------------------ | ---------- | ----------------------- | -
|                                                                         |  |                          |            |                         |  
|                                                                         |  | June 25,2000             |            | June 24,2001            |  
|                                                                         |  |                          |            |                         |  
|Net Sales                                                                |  | $                        | 3,986,727  |                         | $
|Loss before cumulative effect
      of    change in accounting principle |  |                          | (2,868,633 | )                       |  
|Net loss                                                                 |  |                          | (2,868,633 | )                       |  
|                                                                         |  |                          |            |                         |  
|Earnings (Loss) Per Share:                                               |  |                          |            |                         |  
|Loss before cumulative effect
      of    change in accounting principle |  | $                        | (0.37      | )                       | $
|Net loss                                                                 |  |                          | (0.37      | )                       |  

**5.  LONG-TERM DEBT**

*In November 2000, the Company completed the Term B
Financing under the Convertible Note Agreement. Under the terms of the Term B
Financing, the Company received $5.0 million in cash in exchange for the
following securities: warrants to purchase 571,000 shares of common stock at
$1.75 per share and Term B Convertible Note with a principal value of $5.0
million. The Term B 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 B Convertible Note is convertible into common stock at the option of the
holder or the Company, under certain conditions, at $1.75 per
share.*

*In January 2001, the Company received $5.0 million in cash
upon completing the Term C Financing under the Convertible Note Agreement in
exchange for issuing the following securities: warrants to purchase 571,000
shares of common stock at $1.75 per share (initially valued at $0.9 million) and
a $5.0 million Term C Convertible Note with terms identical to the Term B
Convertible Notes (initially valued at $0.3 million).*



*In addition, the Company has allocated a portion of the
proceeds from the Term C Financing to the beneficial conversion feature of the
Term C Convertible Note. The Company has recorded a beneficial conversion
feature of $3.8 million in additional paid in capital in connection with the Term C
Financing resulting in a discount on the Term C Convertible Note. The discount
is being amortized over the period ending July 2003.*



-7-

---

**6. NET LOSS PER COMMON SHARE**

Basic earnings per share ("EPS") is calculated by dividing income 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 and nine month periods ended June 24, 2001, options and warrants to purchase 5,217,000 and 4,224,000 shares of common stock, respectively, were outstanding and were not included in the computation of diluted EPS because the effect would have been anti-dilutive. For the comparable three and nine month periods ended June 25, 2000, options and warrants to purchase 1,157,000 and 1,025,000 shares of common stock, respectively, were outstanding and were not included in the computation of diluted EPS because the effect would have been anti-dilutive.

**7. RECENT ACCOUNTING
PRONOUNCEMENTS**

In July 2001, the Financial Accounting Standards Board
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.

-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 June 24, 2001 and the Form 10-K for the year ended September 24,
2000, 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 24,
2000. 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 $3.4 million for the third quarter of fiscal
2001 decreased 5.4% from sales of $3.6 million for the third quarter of fiscal
2000. For the first nine months of fiscal 2001 the Company reported sales of
$9.8 million, 8.3% lower than sales of $10.7 million for the first nine months
of fiscal 2000. The decrease was primarily due to a decline in product sales to
its former principal distributor.*

Cost of sales of $1.4 million for the third quarter of fiscal 2001 resulted
in a gross profit of 59.5%, compared to a gross profit of 60.6% for the same
period of fiscal 2000. Cost of sales of $4.0 million for the first nine months
of fiscal 2001 resulted in a gross profit of 59.3%, compared to a gross profit
of 60.3% for the same period of fiscal 2000. The decrease in the Company's gross
profit percentage in the first nine months of fiscal 2001 was primarily
attributable to a change in mix of products sold.

*Research and new product development
expenses were $2.3 million, 66.6% of sales, and $5.8 million, 59.1% of net
sales, for the fiscal quarter and the nine months ended June 24, 2001,
respectively. For the same fiscal quarter and nine month period of fiscal 2000,
research and new product development expenses were $0.8 million, 22.9% of sales,
and $2.3 million, 21.6% of sales, respectively. The increase was attributed to
the development e-Technician, a web-based remote diagnostic and "telematics"
platform for commercial vehicles and the acquisition of Diversified Software
Industries, Inc.*

***Selling, general and administration expenses were $2.2 million and
$1.7 million for the third quarter of fiscal 2001 and 2000, respectively, and
$6.0 million and $5.9 million, for the nine months of fiscal 2001 and 2000,
respectively. As a percentage of sales, selling, general and administrative
expenditures were 64.9% and 46.7% for the fiscal 2001 and 2000 third quarters,
respectively, and 61.2% and 55.2% for the nine months of fiscal 2001 and 2000,
respectively. The changes in selling, general and administrative expenses in
fiscal 2001 are primarily attributable to an increase as a result of the
acquisition of Diversified Software offset in part by a reduction in executive and
administrative personnel and costs related to consultants and advisors incurred
in connection with the debt negotiations with the bank syndicate.*

*The Company's operating loss for the
third quarter of fiscal 2001 and 2000 was $2.4 million and $0.3 million,
respectively. For the nine months ended June 24, 2001 and June 25, 2000 the
Company's operating loss was $6.0 million and $3.5 million, respectively. The
increase in the operating loss was primarily due to the increase in research and
new product development costs.*

-9-

*****The Company's other income (expense) was ($1.8) million for the
third quarter of fiscal 2001 compared to ($1.3) million in the third quarter of
fiscal 2000. For the nine months ended June 24, 2001 and June 25, 2000 other
income (expense) was ($4.5) million and ($2.6), respectively. The increase in
the Company's interest expense in 2001 compared to 2000 is primarily the result
of increased debt related to continued operations as well as an increase in the
overall effective interest rate from 2000 to 2001.*

*The Company recognized an estimated
loss on disposal of discontinued operations of $0.6 million in the third quarter
of fiscal 2000. The loss was primarily attributable to a higher than anticipated
loss on the sales of its rugged handheld computer and terminal businesses and
the operating results of the discontinued operations and higher than anticipated
interest expense.*

**LIQUIDITY AND CAPITAL RESOURCES**

***As of
June 24, 2001 the Company had a working capital deficit of $13.0 million
compared to $13.9 million deficit at September 24, 2000. Net cash used in
operating activities totaled $7.7 million and $1.1 million for the nine months
ended June 24, 2001 and June 25, 2000, respectively.*

*As of June 24, 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 July 31, 2000, the Company completed
the Term A Financing. Under the Term A Financing, the Company issued the
following securities in exchange for $12.6 million in cash and notes with
outstanding principal of $1.5 million: 1.8 million shares of common stock;
warrants to purchase 1.6 million shares of common stock at $1.75 per share; and
$14.1 million principal value of Term A Convertible Notes. The Term A
Convertible Notes, which mature in three years, bear interest at an annual rate
of 10.75%, payable in cash or in additional notes at the option of the Company.
The Term A Convertible Notes are convertible into common stock at the option of the holder or the
Company, under certain conditions, at $1.75 per share.*

***Term B Financing - In November 2000, the Company completed
the Term B Financing under the Convertible Note Agreement. Under the terms of
the Term B Financing, the Company received $5.0 million in cash in exchange for
the following securities: warrants to purchase 571,000 shares of common stock at
$1.75 per share and Term B Convertible Notes with a principal value of $5.0
million. The Term B Convertible Notes mature on July 31, 2003, bear interest at
an annual rate of 10.75% payable in cash or in additional notes at the option of
the Company. The Term B Convertible Notes are convertible into common stock at the option of the
holder or the Company, under certain conditions at $1.75 per
share.*

***************Term C Financing - In January 2001, the Company received $5.0
million in cash upon completing the Term C Financing. The securities issued and
the terms thereof are identical to the Term B Convertible Notes discussed
above.*****

*On August 9, 2000, the Company amended its credit facility
agreement with a syndication of banks. The terms of the modified agreement
provide a $6.5 million revolving line of credit and term notes that expire on
July 31, 2001. As of June 24, 2001, borrowings outstanding under the agreement totaled $13.2
million, consisting of $3.1 million under the revolving line of credit and $10.1
million of term notes. Interest on all borrowings is payable monthly at prime
(6.75% at June 24, 2001) plus 1.75%.*

*The Company has requested and is
presently in the process of negotiating the terms of further extension of its
credit facility with the banks. In addition, managment is pursuing an increase in its borrowing capacity under the credit facility. If the Company is not successful in extending its credit facility and in increasing its borrowing capacity, management plans to pursue other sources of debt and equity financing. There can be no assurance that the Company will be successful in obtaining additional financing or amending and extending the credit facility.  If the Company is not successful in extending the credit facility or obtaining alternative financing to repay borrowings under the facility, management would consider all of the options then available, including a bankruptcy filing.*

As of June 24, 2001, the Company has a $0.4 million note
payable to a bank assumed in connection with the acquisition of Diversified
Software. The note bears interest at 9%, is secured by a $0.3 million
certificate of deposit and is due August 6, 2001. The Company has requested and is presently in the process of negotiating the terms for the extension of the note. There can be no assurance that the Company will be
successful in negotiating the terms for the extension of the note.

RECENT ACCOUNTING
PRONOUNCEMENTS

In July 2001, the Financial Accounting Standards Board
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.

-10-



---

**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 at June 24, 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 June 24, 2001, the Company performed sensitivity analysis to assess these risks and concluded that the effects of hypothetical changes of 100 basis points in average interest rates would not be expected to materially affect the Company's financial position, results of operations or cash flows.



-11-

---



******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

*On
May 18, 2001 the Registrant filed a report under Item 2 of Form
8-K              to
report the acquisition of Diversified Software Industries, Inc.*

*On
May 31, 2001 the Registrant filed a report under Item 4 of Form
8-K              to
report a change in independent accountants.*

*On
July 25, 2001 the Registrant filed a report under Item 7 of Form
8-K              in
connection with the acquisition of Diversified Software Industries,
Inc.*



-12-

---



*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)

|                     |  | 
|-------------------- |  | 
|                     |  | 
|Date: August 8, 2001 |  | 
|                     |  | 
|Date: August 8, 2001 |  | 





-13-

---